Recently I’ve taken greater interest in using Facebook than I have in the past. Its a nice way of keeping up with the conversation of life. If you do read this blog, and are reasonably active on Facebook, please join me by searching for me from your Facebook home page.
I’ll definitely continue with this blog – which now enters its 7th year*. But sometimes a quick response or an immediate bit of fun is what I feel like doing and for that Facebook is ideal. Sometimes, too, I don’t want to necessarily direct the conversation but rather listen. (535)
I am interested in connections between religion and animal ethics. The Bible is ambiguous on the issue – at times lording humans over non-humans (we are, after all, the “Sons” of God!) and at times showing compassion. St Francis (one of the great figures of Catholicism who does inspire me) prayed to the birds! I am been studying other religions a bit and there is obviously, in many cases, both ambiguity in teaching and a gulf between teaching and practice. Islam displays a number of these characteristics but the emphasis on the formalities of the Halal ritual often fails to account for the Prophet’s concern with intrinsic animal welfare. I am pleased that debates on animal rights and the humane treatment of animals is now actively occurring within Islam. Look at the link. (342)
I find Malcolm Gladwell’s economic reasoning to be uninspired, glib, piffle*. But it is immensely fashionable and, I have read, he commands huge consulting fees. He is successfully taken to pieces here over his recent David and Goliath claims. Those who are disadvantaged can win. Err…yeah.
*To be fair I haven’t read any of his books in total – I can’t get through them. They are tedious and glib. (230)
It is difficult to tackle corporate criminals and dishonest behaviour generally when you yourself lie over expense accounts. The hypocrisy is too raw. PM Tony Abbott has spent $23,000 of taxpayer money attending sporting events in recent years. His argument? Any sort of travel is “business-related” since you meet people. That the Labor Party is equally culpable of such dishonest behaviour is no reason for the Coalition to think it is OK.
The direct costs of such behaviour are bad enough but the indirect demonstration effects are worse. What is the motive for honesty when well-paid politicians feel entitled to cheat on allowances and then to lie about it? Reduced faith in political leadership – already at a rock-bottom low in Australia – is an additional indirect social cost. For politics to work citizens should have some minimal level of trust in politicians. (747)
Mr Abbott is sending out signals that he wants to quickly – by the end of this year – reach a free trade agreement with China. It is generally dumb to announce in advance in a bargaining situation that you wish to settle quickly. It provides incentives for the other side to seek to exact extra concessions and means you get less. Abbott has even pre-announced he will accept a “pared-back” deal. This isn’t smart. The patient side in a bargaining situation will get a bigger share of the surplus.
When a small country negotiates a trade agreement with a large country most of the gains are likely to go to the large country anyway. But Abbott’s impatience as it is being conveyed to Australian negotiators (and to the Chinese) weakens Australia’s position. (728)
I read too much serious stuff. Condensed economic or other arguments that I have to read for work – the sort of stuff that furrows your brow and makes you feel your age. For pleasure I am now reading Paul Barry’s cheeky “Breaking News: Sex, Lies & The Murdoch Succession”. It is well-written and interesting. I have always had a soft spot for Barry’s cheekiness and, indeed, for Rupert Murdoch because he is a super-smart businessman. The Barry book shows that that is about all he is. After reading Barry I think Murdoch is a pathetic, dangerous person. I don’t trust his progeny either.
Rupert Murdoch is a powerful, successful creep. He will probably emerge as a victor too. (439)
New Scientist summarizes the recent State of the Oceans Report.
“We know the oceans are warming. We know they are acidifying. And now, to cap it all, it turns out they are suffocating, too. A new health check on the state of the oceans warns that they will have lost as much as 7 per cent of their oxygen by the end of the century.
The health of the oceans is spiralling downwards far more rapidly than we had thought, exposing organisms to intolerable and unpredictable evolutionary pressure…
(There is) a “deadly trio” of linked global threats. The first is global warming: surface sea water has been warming almost as fast as the atmosphere. The second is acidification – a result of the water absorbing ever more CO2 from the atmosphere. The third is deoxygenation…..
… acidification is beginning to affect marine creatures (but) …. low oxygen has a greater effect than acidification”.
The oceans are losing oxygen partly because warmer water holds less oxygen, and partly because warming is greatest at the surface, creating a buoyant surface layer that mixes less with colder layers below. This creates oxygen-poor deep water that could suffocate life on the seabed….
The complete SOTO report is here. (491)
I read in NewScientist that the US Fish and Wildlife Service are crushing and destroying 6 tonnes of illegally-poached elephant ivory. The obvious response as an economist to this action is that it might be better to sell the ivory on the open market thereby deflating its price and reducing incentives for further illegal poaching. This possibility is mentioned in the NewScientist argument but is rejected because it creates a precedent for legal sale. That doesn’t really make sense since there are legal sales already. NewScientist contends however that selling it in large quantities would blur the line between legal and illegal sales. I don’t see this either. Finally it says that demand is so strong that legal sales would lead to the elephant population being wiped out. That would be a terrible consequence but that prospect can hardly be worsened by reducing the incentives to poach.
I can think of reasons for not selling it off. You might be seeking to establish the moral norm that it is wrong to trade in such products and enhanced legal sales might thwart that. You might also be attempting to disrupt the industry that processes such products to encourage shifts to other products. Legal provision might enhance dependence on ivory. If the ivory was sold then a sensible auxiliary policy would be to dramatically increase the costs to poachers by increasing penalties.
Elephants are being killed primarily for their ivory these days so one possibility might be to tranquillise, capture and de-tusk them. Their remain strong incentives for poor people to hunt them for bushmeat and to kill them because of human cultivation/animal habitat conflicts. Governments then argue with respect to the latter that the elephants must give way because our first duty is to our fellow humans. I don’t agree with that – it is speciesist and inconsistent with valuing things at the margin. There are plenty of humans in Africa but it natural biodiversity that is under threat. Humans should make their life decisions – including choice of family size – on the understanding that they don’t have the intrinsic right to trample on the rest of nature. That’s true even if they are poor. (679)
An entirely hypothetical situation I am thinking about raises the following parable.
A firm employs someone who earns $100,000 per year and he/she produces each year in revenues $400,000 – the value of their marginal product. There are no other significant variable costs. In the face of cost pressures the firm sacks him/her to save the $100,000. The assumption is that the firm will replace him/her with someone cheaper or more productive in terms of generating revenue or that the firm can lump his/her duties on the back of other people employed without reducing overall productivity.
I cannot fault the reasoning here. Its along the line that improvements are always possible. The key word here is possible. If the employee being sacked is productive, hard-working and performing well relative to others in his/her occupation it would seem to be a risky move. Indeed for the economics to work out there must be some inefficiency within the organisation. Sacking the worker seems particularly risky if there are many other similar workers in the firm doing analogous work who are not making surpluses at all. It is certainly a highly risky move if you make the sacking without considering issues of productivity, work-effort and if the estimates of possible cost-impacts are total codswallop. In this latter event the firm will end making flawed decisions that conflict with its own objectives. If they knew the information they were using was nonsense they would also be behaving in an unjust, dishonest way. Continue reading Cost-cutting (555)
Julie Novac is one of the more thoughtful IPA-Catallaxy people but she still can’t see past ideological blinkers in promoting the case for privatizing Australia Post. Why? Well because in many respects Australia Post is a natural monopoly – a firm that has technological advantages in the sense that its costs are sub-additive. It would cost more to provide postal services with 2 smaller postal businesses than with a single monopoly. Natural monopolies are characterised by substantial economies of scale and economies of scope.
The mail sorting activities are subject to huge economies of scale because of the use of capital intensive sorting technologies that only become efficient when they operate on a large scale. The activities of collecting, distributing and transporting mail are also subject to huge economies of scale and scope. You don’t want two posties delivering mail up your street – its a waste. Likewise you want collection and transport technologies centralised – it is wasteful to having two small trucks delivering mail to urban postal centres rather than one larger truck. There are not the same economies of scope with respect to parcels which is why private delivery services do make sense. The postie on his motorbike can’t carry a lot of heavy parcels so these are delivered separately.
Ms. Novac’s argument is that it would be easy to float Australia Post and split it up. That is true but not a good reason for privatizing it. Rational capitalists would pay less than its value as a monopoly because they would understand the sub-additivity issue. Australia Post would be less valuable privatized and would face higher costs. Thus the government would be replacing an asset with high value with one that would be worth less to them in present-value terms. In terms of improving the government’s fiscal position privatization would be a counterproductive move.
Australia Post also has important community service obligations (CSOs) such as providing access to everyone in Australia to letter services at a uniform charge irrespective of their geography. Bulk mail between major cities (a huge part of the overall letter market) provides substantial profits which fund these cross subsidies. It is very likely private firms would cream-skim the bulk mail and underservice the rest so that this CSO would be eroded. Doubtless Ms. Novac would like to dispense with such CSO obligations but generations of Australians and the entire mainstream of Australian politics does not.
Australia Post has been corporatised and the retail post office network outsourced. Australia Post still, of course, remains regulated. That isn’t a bad outcome. (833)
Steve Koukoulas points out in Business Spectator that the final budget of the Gillard Government was the most contractionary since 1971. The deficit was 1.7% lower in real terms than in the previous year. (Recall that the stance of fiscal policy is measured by the change in the deficit not its level). Government spending fell to 24.3% of GDP from 25.2% in the previous year. That is a substantial negative fiscal shock that will – if anything – push the economy towards lower levels of economic activity. I wouldn’t have thought this was the most appropriate policy but it puts a lie to the claim that the budget was excessively expansionary.
Indeed it is sometimes surprising that back to the Gorton, Coalition Governments have never cut fiscal spending in real terms. Over this period Labor has done this on 5 occasions including in 2012/13.
Again I pass no judgment on the wisdom of such policy stances.
Koukoulos points out (as has been, in fact, repeatedly pointed out) that Australian public sector debt is trivial and so on.
Labor was fiscally conservative. The Coalition, when it got big surpluses, spent them. (631)
In the AFR Friday I read an amazing story that seems so fantastic that it strains credibility. A province in northern Myanmar (Burma) mines jade primarily for the Chinese market. Up to 500,000 workers in these mines are kept addicted to Golden Triangle heroin by mine bosses who subject them to slave-like working conditions. An estimated 90% of the workers are HIV positive and individual syringes provided by the bosses are used for up to 800 injections each. (If syringes are shared on this scale it is surprising there would not be close to 100% infection rates. Can the Jade industry employ people on this scale?).
When I worked in Thailand in the 1980s I met many students from what is now Myanmar. They all shared one common characteristic – none wanted to return to their homeland. Most were seeking US Green Cards. Despite recent moves towards liberalisation this ‘Jade Scorpion’ story suggests not much has changed. (676)
This important scientific report (as with previous IPCC reports) contains a summary for policy-makers. I am reading it now. I am interested in the observation that climate change will intensify El Nino events although specific rainfall effects remain less specific than one might hope for. This is an important document for my own research so I will add what I think are interesting commentaries as they become available.
Update: I am pleased with Minister Hunt’s statement endorsing the report. He released a statement, saying: ‘‘The report’s findings reinforce the government’s bi-partisan support for the science and the targets set for emissions reductions.’’ I think he is wrong in supposing Coalition policies will work but am very pleased that he immediately affirmed the value of this report. Presumably at least some Coalition members must recognise the gravity of the implications of this report. Whatever silly things they do I hope there is the basis for dialogue.
The immediate news report from The Australian was better than I thought it might be though I’ll wait for the possible stream of idiot commentator responses tomorrow. Again the ratbag commentators at The Australian are presumably people with some brains. Could there be a rethink on their part?
Update: This article in the NYT captures succinctly the drama the world now faces. Just running out of time to take action. An excellent summary of what is new in the report at The Conversation. (299)
I have read a number of very negative reports on the Australian Art Exhibition in London. I have not seen it but a recurrent criticism is that it is too “representative” at the expense of quality. Commercial aboriginal art is described as “tourist tat” which, in my judgment, is a fair and accurate description although I’d add the adjective “expensive” to that. Many of the modern Australian painters are simply seen as lacking talent. Again I agree, the skill of the drip-and-splatter set is too narrow.
It is good that Australian culture cops it in the neck occasionally and good that we do not act in an overly defensive way to such criticisms. We are good enough as a nation to cop fair criticism and to live with criticism that might even be a bit unfair. (223)
This is the tragic tale of the wife of one of the Indians sentenced to hanging for rape and murder. Her life, and that of her son, is bleak given the actions of the father. Not because the father is a rapist but because she now has no husband to provide her with subsistence. It isn’t in itself an ethical consequentialist argument for not administering the death penalty – the future for the two would be equally bleak were the husband to be given a life sentence. But the abysmal ignorance and stupidity of modern India is itself on trial. Just laws require a just social system that protects the innocent.
When you read of the wife’s story and of the impossible situation of women in these parts of India you can understand why there were some negative social attitudes towards the rape victim and her partner. An unjust evil society. (234)
The sacking of three Departmental Secretaries and achieving the “voluntary departure” from Treasury of Martin Parkinson seems to me a bad idea for a Coalition that does not have an abundance of talent. That some of these people pursued policies that were sought by Labor is irrelevant – these men are skilled civil servants who serve whatever party is in power. Some had worked for the Howard Government. Indeed I don’t think their individual politics are relevant even where they could be identified. The key issue is how well they do their job and Ted Evans is right – this is a sad loss of talent.
The gesture of giving marching orders to these people (and restating their announced removal of 12,ooo members of the public service by voluntary attrition) the very day the Coalition becomes government might create joy among those right-wing fanatics who despise civil servants but this is pure bigotry. To govern effectively the Coalition need to draw on the best of the public service and not promote an us-versus-them politicised view of the world. Today was a poor start.
The word “daft” here needs to be qualified. It is certainly daft in the restricted sense that it is a substantial non-means-tested handout made at a time when the Coalition is spreading stories about a deficit and debt crisis. Given that this crisis is largely a myth this type of objection probably isn’t that serious. It does however remain an expensive policy even if it is funded by a transfer from large Australian firms. The policy isn’t unconventional in the sense that, of the 34 countries in the OECD 33 have such parental leave policies. It is unconventional in the sense that it is exceedingly generous providing over 6 months a full $75,000 in benefits to a woman earning $150,000 per year. This is among the highest level of benefits provided in any country. The policy is daft in the sense that its non-means-tested character is inconsistent with the claimed stance of the Coalition to scale back middle-class welfare.
The main reason that I think this policy satisfies the criterion for being daft is that it creates a bias toward parents (generally mothers) simply because they have children. This is not a transfer made on the basis of need or poverty since it is not means tested. Most benefits go to those women who earn a lot. Having a child is not an unexpected burden for parents but a choice. Nor is it an economically sensible way of boosting “workforce participation”.
Transfers should be directed to the poor not to those who seek to have children. (456)
It is universally agreed by resource and environmental economists that the most efficient (= the cheapest) way of realising a given level of carbon emissions is to price these emissions. The reason is that then only those with lowest costs of cutting emissions will do so. This outperforms across-the-board regulations. This policy can take the form of a carbon charge (tax) or an emissions trading scheme (ETS). Ignoring some second-order effects these have equivalent effects on emissions when the ETS is designed to provide a price on carbon equivalent to the carbon tax. My marginal preference is for an ETS because then the level of cuts is firmly set and this level can ideally be tallied up in an international agreement that sets out globally who is doing what and who should do what. But there are arguments for a carbon tax as well – not much damage is done if the price isn’t set quite correctly att least temporarily since this drives emission flows not stocks.
All of these types of arguments, however, are second-order issues compared to the issue of not pricing carbon at all.
What about the Coalition’s “direct action” proposal to pay polluters to cut their emissions. In principle such a subsidy policy can have the same effect on emissions as a carbon tax. A bit of maths shows that the subsidy policy is in fact equivalent to a tax policy coupled with a transfer to the polluters equal to the level of tax multiplied by the emissions cut. For it to work properly the subsidies need to be awarded cost efficiently to those firms making the cutbacks. Continue reading Daft Coalition economics 2: Abolishing carbon charging (581)
Minister for Industry MacFarlane has told Australian miners to rapidly develop their undeveloped mining leases or risk losing them. This is daft economics. The decision to defer development of a site will not be taken if the site is profitable. The deferment will occur only if such things as labour costs are too high or if demand (as evidenced by commodity prices) is too weak. The miners got right behind the election of a Coalition Government but I wonder if they will come to rue the day. This “policy” – expropriation of assets that are currently under-utilised mining leases – would be far more damaging that a mining tax that scooped off excess profits during times of very high profitability. Perhaps MacFarlane is just letting off steam - it is difficult he would ever be able to implement such foolish actions. But there is really foolish intent here. If the effect of such announcements is to force the exploitation of currently unprofitable projects then MacFarlane will be inflicting social losses on the Australian community. (421)
The decision of Lawrence Summers to abandon his quest to chair the Fed is a good one. His past mistakes/conflicts of interest in opposing regulation of the finance sector should disqualify him and, in the end, it effectively did. Summers is untrustworthy in terms of apparent conflicts of interest and given his extreme right-wing politics his move to chair the Fed would endanger the US recovery.
Update: Here is The Nation on the same issue. I agree with all of these criticisms of Summers except for his alleged sexism. I’d condition my support for “free-trade” more than he did by excluding the export of pollution-intensive industries to poor countries simply because they have lowest willingness-to-pay to avoid it. It seems to me this is the wrong way of thinking about this issue. A summary: Continue reading Summers out (241)