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John Quiggin

Pirates! (Militarism whack-a-mole #73)

by John Quiggin on May 2, 2016

Making the case against militarism is very reminiscent of climate denial whack-a-mole. Demolish one spurious argument, and you’re immediately presented with another. For example, my post showing that the economic benefits of “keeping sea lanes open” could not justify more than a trivial proportion of current naval expenditure, got hardly any substantive responses (apart from tiger-repelling rocks), but a great many saying “what about the pirates?”.

I’ve done the numbers on this one, and they look pretty clear-cut. There are a bunch of estimates on the web of the annual cost of piracy ranging from $1 billion to $16 billion a year.

This seems implausibly high. The amount actually stolen by pirates or paid as ransoms is far smaller, less than a billion a year at its peak, AFAICT. Looking in detail, there’s a fair bit of double counting here (both actual losses and the insurance premiums which offset them are counted, for example), and the high-end numbers typically include some estimate of the cost of naval deployments on anti-piracy patrols. In particular. Still, in the spirit of fair play, I’ll go with $10 billion.

Turning to the US Navy* budget, it’s currently over $150 billion a year. That supports a fleet of 272 “deployable battle force” ships, implying an annual cost of over $0.5 billion per ship. So, the annual cost of piracy is the same as the cost of about 20 ships. To put it another way, reducing the fleet by one ship, and scaling down anti-piracy operations accordingly would have to increase global piracy by 5 per cent to yield a loss to the global shipping industry greater than the savings to the US (I leave aside the question of why the global shipping industry is such an important recipient of US foreign aid).

Having played military whack-a-mole many times before I can anticipate the responses in my sleep. So, I’ll open the comments threads, resist the temptation to take part, and whack the inevitable moles in a later post.

  • The US spends more than other developed countries, but I don’t think the others get any more ship for their shilling, capability-adjusted.

** I’ve corrected some errors in the data I used in the original version. But the discussion made it pretty clear that the objections aren’t to the numbers but to the whole idea of weighing benefits and costs in anything to do with military expenditure.

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A data point on minimum wages

by John Quiggin on April 28, 2016

I’m currently working on a section of my Economics in Two Lessons book dealing with minimum wages in the context of predistribution policies, so I thought I would compare Australia with the US, where the idea of a $15/hour minimum wage is currently a hot topic. In Australia there are two kinds of minimum wage. The PPP exchange rate is estimated at $A$1.30 = $US, which is fairly close to the market exchange rate at present, so I’ll give both $A and estimated $US equivalents

The standard minimum wage for workers aged 21 or over is $A17.29 hour ($US13.30) applying to employees under standard award conditions. These include four weeks annual leave, sick leave, employer contributions to pension plans and so on.

More comparable to the situation of US minimum wage workers are “casual” workers, employed on an hourly basis. Casual workers get a loading of at least 25 per cent, bringing the wage up to at least $A21.60 an hour ($US16.60), to compensate for the absence of leave entitlements. In addition, they have entitlements including:

  • “Penalty” rates for weekend and night work (usually a 50 per cent loading, 100 per cent on Sundays)
  • For workers employed on a regular basis, protection against unfair dismissal.

The policy question is: what impact have these high minimum wages had on employment and unemployment. That’s too big a question to answer comprehensively, but we can look at the obvious data points: the official unemployment rates (5.7 for Oz, 5.5 per cent US) and the 15-64 employment population ratios (72 per cent for Oz, 67 per cent US). So, it certainly doesn’t look as if the Australian labor market has been crippled by minimum wages.

Note: I’ll respond in advance to the widespread misconception that Australia is a special case due to mineral resources. Mining accounts for about 2 per cent of employment in Australia, and (because most mines are owned by multinationals) its contribution to Australian national income is also so, probably around 5 per cent.

  • Workers aged 18 get about 70 per cent of the adult minimum, equivalent to around $US11.50 for casuals. But the great majority of US minimum wage workers (about 80 per cent) are 20+.

Over the fold, an extract from my book-in-very slow-progress, Economics in Two Lessons. I’m getting closer to a complete draft, and I plan, Real Soon Now, to post the material so far in a more accessible form. But for the moment, I’ll toss up an extract which is, I hope, largely self-sufficient. Encouragement is welcome, constructive criticism even more so.

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I, for one …

by John Quiggin on April 19, 2016

This para, presented matter-of-factly in the middle of a New York Times piece about the Repub convention bringing older strategists out of retirement, surprised more than, perhaps, it should

Paul Manafort, 67, all but disappeared from American politics in recent decades to advise international leaders, including strongmen like Ferdinand E. Marcos, the former dictator of the Philippines, and Viktor F. Yanukovych, the deposed former president of Ukraine. Now, though, Mr. Manafort, who worked for the Ford campaign 40 years ago, is the lead convention strategist for Donald J. Trump

Combined with the link back to Joe McCarthy, I feel a bit as if we have moved on to some alternative reality timeline (I remember a great one, where Nixon won in 1960, and an author is trying to pitch the actual history of the 60s as an alternate reality story – can anyone point to this).

Keeping sea lanes open: a benefit cost analysis

by John Quiggin on April 8, 2016

Whenever I raise the observation that navies are essentially obsolete, someone is bound to raise the cry “What about the sea lanes”. The claim that navies play a vital role in protecting trade routes is taken so much for granted that it might seem untestable. But it turns out that most of the information needed for a benefit cost analysis is available. Unsurprisingly (to me at least), the claimed benefit of keeping sea lanes open doesn’t stand up to scrutiny. I’ve spelt this out in an article in Inside Story, reprinted over the fold.

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Gaps and holes

by John Quiggin on April 6, 2016

Press coverage massive leak of papers from hitherto unheard of (by me, at any rate) Panama law firm Mossack Fonseca has, unsurprisingly, focused on the world leaders, celebrities and fixers whose financial affairs have been revealed in an unflattering light. As regards the financial system as a whole, the New York Times draws a fairly typical conclusion

Above all, the Panama Papers reveal an industry that flourishes in the gaps and holes of international finance.
Really? This description suggests that those involved are obscure minor players in the system, of the sort who might be expected to deal with dodgy law firms in tax havens. The real business of global finance is undertaking by upstanding financial institutions with transparent practices.

But writing this down is enough to see that it is silly. As usual in such cases, we find familiar names: HSBC, UBS, Credit Suisse,and RBS and so on. And of course this is just one firm in one tax haven. The absence of major American banks reflects, in large measure, the fact that they prefer tax havens other than Panama, where there is a high degree of US state countrol.

Again as usual, the line is that this is all in the past, and that the banks have cleaned up their act. But the criminal charges keep on coming. This is scarcely surprising when no major bank has been shut down, even for the most egregious wrongdoing, and where only a handful of bank employees have faced jail time over frauds that total well into the hundreds of billions.

As I’ve argued in the past, activities like tax avoidance/evasion and regulatory arbitrage aren’t peripheral flaws in a financial system primarily concerned with the efficient global allocation of capital. They are the core business, without which the profits of the global financial sector would be a tiny fraction of the $1 trillion or so now reaped annually. The burden of supporting this financial sector is a major factor in the secular stagnation now evident in most developed economies.[^1]

The financial globalization that began in the 1970s has not produced an efficient global financial market with a few gaps and holes. The gaps and holes are the market.

[^1]:Since it’s bound to be raised, the costs of financial globalisation to the developed world can’t be offset by considering rapid growth in China and India. These countries have, until recently, maintained tightly regulated financial systems, and have had plenty of criticism for it. Of course, that has resulted in plenty of corruption and misallocation of capital, but the sector simply hasn’t been enough to produce a large drag on growth. That’s clearly changed, in China at least, so it will be interesting to watch the consequences.

Parallel universes

by John Quiggin on March 11, 2016

Of the 20 years or so that I’ve been observing climate change policy, global developments over the past year have been the most hopeful I can remember, particularly as regards electricity generation

  • The Paris Conference was a big success, at least relative to expectations
  • Coal-fired power stations are shutting down around the world
  • China has reduced its coal use for two years in a row
  • India has increased its coal tax, and greatly expanded use of renewables

Whether emissions reductions will be big enough and fast enough remains to be seen, but at least we are going in the right direction.

As far as climate science is concerned, the string of temperature records broken recently has killed any idea that we are in a ‘pause’ or ‘hiatus’. Even the favorite source of deniers, the satellite data from UAH, is now showing a new record. The only remaining issue is the second-order debate over whether there was a pause or perhaps slowdown at some point in the first decade of the 2000s.

At the same time, following the US election, I’ve been paying more attention than usual to rightwing blogs, most of which run climate denialist pieces fairly regularly. Given that nearly all the major US coal companies are now bankrupt, and that coal-fired electricity is declining rapidly, I’d have expected a lot of “wrecking ball” pieces on the supposed damage to the economy (in reality, the effects are small and mostly offset by the expansion of renewables) now that mitigation policies of various kinds are taking effect.

But I don’t see anything like that. Rather, most of the articles I’m reading are claims of victory in the debate over both science and policy. Here’s a fairly typical example, with the title “Is the Climate Crusade Stalling?

We really do live in parallel universes.

Repeal Taft-Hartley

by John Quiggin on March 9, 2016

Assuming that the US Presidential election is between Trump and Clinton (or, for that matter, Sanders) the voting bloc that’s most obviously up for grabs is that of working-class whites[^1]. Relative to expectations, working class whites have done worse under neoliberalism/market liberalism than almost any other group in the population. So, they ought to be more solid than ever against the right. But it’s easy for tribalists like Trump to blame migrants and minorities for the losses that working class whites have suffered.

What’s needed to turn this around, I think, is something, in Trump’s words “yuge”. My suggestion is repeal of the Taft-Hartley Act. Way back in 1948, Taft-Hartley prefigured anti-union laws that were passed throughout the English-speaking world[^2] from the 1970s and have spread even further since then. Its repeal would, at a minimum, be a huge symbolic step. [click to continue…]

The three party system

by John Quiggin on February 29, 2016

Warning: Amateur political analysis ahead

Looking at the way politics has evolved over the past 25 years or so, in the English-speaking world and beyond, I have developed an analysis which is certainly not original, but which I haven’t seen set down in exactly the way I would like. Here’s the shorter version:

There are three major political forces in contemporary politics in developed countries: tribalism, neoliberalism and leftism (defined in more detail below). Until recently, the party system involved competition between different versions of neoliberalism. Since the Global Financial Crisis, neoliberals have remained in power almost everywhere, but can no longer command the electoral support needed to marginalise both tribalists and leftists at the same time. So, we are seeing the emergence of a three-party system, which is inherently unstable because of the Condorcet problem and for other reasons.

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Peak paper

by John Quiggin on February 22, 2016

I’ve recently published a piece in Aeon, looking at the peak in global paper use, which occurred a couple of years ago, and arguing that this is an indication of a less resource-intensive future. Over the fold, a longer draft, with some links.
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A question about group selection

by John Quiggin on January 29, 2016

I’m doing some work on evolutionary models of game theory and need to understand the debate about group selection. It seems pretty clear that the great majority of evolutionary biologists reject the idea of group selection, but I haven’t found an adequate (to me) explanation of why they do so. A crucial problem for me is that the literature seems, without exception as far as I can see, to conflate group selection with co-operation and altruism. But the problem of group selection arises in non-cooperative settings, provided they are not zero-sum.

To illustrate the problem I’m struggling with, suppose that two previously isolated species meet as a result of some change. In one species (peacocks), competition between males for mates takes the form of elaborate, and energetically costly, displays. In the other species (penguins) males compete by providing food to their mates. In all other respects (diet, predators and so on) the two are similar. In particular, they are competing for the same food resources. It seems obvious to me that the penguins, with their more efficient social arrangements, are going to outbreed the peacocks and eventually drive them to extinction.

It seems to me there are only two possibilities here
(a) My reasoning is wrong, and we can’t judge which species, if either, will dominate; or
(b) Even though it involves one group being selected over another, this isn’t what is meant by group selection

I’d really appreciate some help on this. I’m happy to have thoughts from anyone, but I’d most like to hear from actual experts with contact details (mine are on the sidebar, or obtainable through Google).

Unknown knowns

by John Quiggin on January 26, 2016

In September 2002, according to Politico magazine, Donald Rumsfeld received a report (mostly declassified in 2011) stating that the intelligence on Saddam Hussein’s putative weapons programs was essentially worthless. For example, the report says:

Our knowledge of the Iraqi (nuclear) weapons program is based largely—perhaps 90%—on analysis of imprecise intelligence
The report was seen by Paul Wolfowitz, then Deputy Defense Secretary and now an adviser to Jeb Bush, but wasn’t shared with President George Bush, or with other members of the Administration, such as Colin Powell. And despite his musings about known and unknown unknowns (unsurprisingly the subject of some sardonic comment in the Politico piece, Rumsfeld showed no doubt in his public pronouncements about the supposed weapons.

This report ought to be (but won’t be) enough to discredit Rumsfeld and Wolfowitz once and for all. Given that they knew that the claimed legal basis for the war relied on spurious intelligence, both are guilty of the crime of a war of aggression. More to the point, in terms of US political debate, a Defense Secretary who sends thousands of US troops to their deaths in pursuit of a goal he knows to be illusory ought to be condemned out of hand.

On the other hand, does the report help to exonerate those who advocated war based on the spurious intelligence being pushed by Rumsfeld? Not to any significant degree. The fact that Rumsfeld was a four-flusher was obvious in December 2002, when Saddam denied having any weapons. As I observed at the time

In the standard warblogger scenario, the declaration was the trigger. Once it came out, the US would produce the evidence to show Iraq was lying and the war would be under way … Instead, Iraq is denying everything but the US is in no hurry to prove that Saddam is lying … The only interpretation that makes sense is that, despite all the dossiers that were waved about a few months ago – including satellite images of ‘suspect’ sites – the Administration doesn’t really have anything
Anyone who wasn’t already committed to war could have followed the same reasoning, and many did.

An inconvenient gun fact for Nicholas Kristof

by John Quiggin on January 17, 2016

Nicholas Kristof has a column in the NY Times, headlined Some Inconvenient Gun Facts for Liberals. The headline, though presumably not chosen by Kristof, is a pretty accurate summary of the article, which berates liberals for proposing various ineffectual gun control measures, and concludes:

Let’s make America’s gun battles less ideological and more driven by evidence of what works.
If Kristof wants to be taken seriously, he ought to acknowledge the actual evidence of what works, namely, measures that drastically reduce the number of guns and restrict their availability. I discussed the evidence a bit more in this post, with links.

Of course, such measures aren’t politically feasible in the US, and have to be disavowed by politicians seeking even limited progress. But if Kristof started by admitting this, he’d end up with a very different analysis than the one he’s putting forward. The primary criterion for any gun control policy in the US has to be to maximize the ratio of long-term harm reduction to political cost. I don’t have any particularly good ideas about political strategies. Still, it’s clear that Kristof’s operating assumption that sweet reason will be sufficient, or even helpful, is way off the mark.

The Great War of 1911 (updated)

by John Quiggin on January 7, 2016

I recently read Time and Time Again by Ben Elton. It’s about a time traveller who returns to 1914 Europe, aiming to prevent the assassination of Archduke Franz Ferdinand, and, therefore, the Great War. Of course, the war isn’t prevented, and it turns out that there are vast numbers of timelines flowing from the summer of 1914, all more or less disastrous. This has inspired me to draft an alternate history I’ve long had in mind, where the War starts in 1911, as a result of the Agadir crisis.

I’ve changed the dates of some actual events, and the outcomes of some internal political debates, to bring more aggressive leaders and policies to the fore. I’ve also borrowed one improbable event from an earlier war. Still, the result seems to me no more improbable than the actual genesis of the War, beginning with the fatal wrong turn by Franz Ferdinand’s driver. Feel free to disagree, or to fill in some details of your own.

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A Christmas post from 2004

by John Quiggin on December 26, 2015

Here’s a Christmas post from my blog in 2004. The theme is that nothing about Christmas ever changes, so it’s a repost of the same post from 2003. Looking back from 2015, the only change I can see is that the complaints about inclusive language to which I referred as “old stuff by now” have now become codified, as the “War on Christmas”.

I’ll add one new thought that the use of “War on Christmas” rhetoric reflects a larger problem for Christianists: should they be asserting their privileges as a majority (as in the demand that their particular holiday be recognised as primary) or demanding their rights as a minority (as in their unwillingness to accept equal marriage). The two strategies undermine each other.

In anticipation of at least a short break, let me wish a merry Christmas to all who celebrate it, and a happy New Year to everyone (at least everyone who uses the Gregorian calendar).

Read on for my unchanged Christmas message

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