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John Quiggin

Job search, 40 times a month

by John Quiggin on August 1, 2014

I got lots of very helpful responses to my recent post on the search theory of unemployment, here and at Crooked Timber. But it has occurred to me that I haven’t seen any answer to one crucial question: How many offers do unemployed workers receive and decline before taking a new job, or leaving the labour market? This is crucial, both in simple versions of search theory and in more sophisticated directed search and matching models. If workers don’t get any offers, it doesn’t matter what their reservation wage is, or what their judgement of the state of the market. Casual observation and my very limited experience, combined with my understanding of the unemployment benefit rules, is that very few unemployed workers receive and decline job offers, except perhaps for temporary work where the loss of benefits outweighs potential earnings. Presumably someone must have studied this, but my Google skills aren’t up to finding anything useful.

And, on a morbidly humorous note, it’s a sad day for conservative politicians when efforts to bash the unemployed actually cost them support. But that seems to be the case for the LNP government in Australia with their latest plans, both expanded work for the dole and the requirement for 40 job applications a month. I’ll leave it to Andrew Leigh to take out the trash on work for the dole (BTW, his new book, The Economics of Almost Everything is out now).

The 40 applications requirement has already been the subject of some amusing calculations. I want to take a slightly different tack. Suppose (to make the math simple) that the average job vacancy lasts a month. There are roughly five unemployed workers for every vacancy, so meeting the target will require an average of 200 applications per vacancy. The government will be checking for spam, so lets suppose that all (or a substantial proportion) of the applicants take some time to talk about how they would be a good fit with the employer and so on. Dealing with all these applications would be a mammoth task. One option would be to pick a short list at random. But, there’s a simpler option. In addition to the 200 required applications from unemployed people, most job vacancies will attract applications from people in jobs. A few of them may be looking for an outside offer to improve their bargaining position with their current employer (this is a big deal for academics), but most can be assumed to be serious about taking the job and in the judgement that they have a reasonable chance of getting it. So, the obvious strategy is to discard all the applications except for those from people who already have jobs. What if there aren’t any of these? Given that formal applications are going to be uninformative, employers may pick interviewees at random or may resort to the informal networks through which many jobs are filled already.

Trying to relate this back to theory, the effect of a requirement like this is to negate the benefits of improved matching that ought to arise from Internet search. By providing strong incentives to provide a convincing appearance of looking for jobs for which workers are actually poorly suited, the policy harms both employers and unemployed workers who would be well suited to a given job.

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Uncle Tom’s Cabin

by John Quiggin on July 28, 2014

The concept of self-ownership came up in discussion as a result of my passing slap at Nozick in the post on Austrian economics and Flat Earth geography. I’ve been planning posting on some related issues, but I realise there are some critical points I need to clarify first, most notably on the relationship, if any, between self-ownership and property rights.

I’m inclined to the view that there is no such relationship, or more precisely that our inalienable rights over our own bodies represent a constraint on the legitimate scope of property rights, rather than forming a basis for such rights. But, there’s lots that I know I don’t know about this, and, presumably, more that I don’t know I don’t know.

The problems for me start with language. As far as I know, no one has ever remarked on the title of Harriet Beecher Stowe’s anti-slavery classic Uncle Tom’s Cabin. Yet the core of the book is that Tom owns neither the cabin nor himself: both are the property of his owner. And that brings up another striking feature of language (at least English). We use the possessive case to refer to Tom’s owner, but, obviously the owner was not Tom’s possession whereas, legally, the reverse was true.

The abolition of slavery hasn’t resolved the contradictions here: for wage workers, it’s natural to divide the hours of the day into “company time” and “my time”, while for house workers the common complaint is the absence of any “time of my own”.

So, some questions to start off with

First, how universal is the linguistic conflation of the possessive case with possession in the sense of ownership (Wikipedia suggests that there may be some exceptions, but the distinctions described are not precisely the ones I mean). And, if there is such a linguistic universal, what conclusions should we draw from it?

Second, have political philosophers looked at the question in this light: that is, on the relationship between the broad use of the possessive to denote relationships of all kinds and the particular use to denote property ownership. If so, what is the relationship between self-possession and self-ownership?

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Austrian economics and Flat Earth geography

by John Quiggin on July 27, 2014

One of the striking features of (propertarian) libertarianism, especially in the US, is its reliance on a priori arguments based on supposedly self-evident truths. Among[^1] the most extreme versions of this is the “praxeological” economic methodology espoused by Mises and his followers, and also endorsed, in a more qualified fashion, by Hayek.

In an Internet discussion the other day, I was surprised to see the deductive certainty claimed by Mises presented as being similar to the “certainty” that the interior angles of a triangle add to 180 degrees.[^2]

In one sense, I shouldn’t be surprised. The certainty of Euclidean geometry was, for centuries, the strongest argument for the rationalist that we could derive certain knowledge about the world.

Precisely for that reason, the discovery, in the early 19th century of non-Euclidean geometries that did not satisfy Euclid’s requirement that parallel lines should never meet, was a huge blow to rationalism, from which it has never really recovered.[^3] In non-Euclidean geometry, the interior angles of a triangle may add to more, or less, than 180 degrees.

Even worse for the rationalist program was the observation that the system of geometry (that is, “earth measurement”) most relevant to earth-dwellers is spherical geometry, in which straight lines are “great circles”, and in which the angles of a triangle add to more than 180 degrees. Considered in this light, Euclidean plane geometry is the mathematical model associated with the Flat Earth theory.

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Hazlitt, Keynes and the glazier’s fallacy

by John Quiggin on July 24, 2014

I’ve been working for quite a while now on a book which will respond to Henry Hazlitt’s Economics in One Lesson a book that was issued just after 1945 and has remained in print ever since. It’s an adaptation of the work of the 19th century French free-market advocate Frederic Bastiat for a US audience, specifically aimed at refuting the then-novel ideas of Keynes.

My planned title is Economics in Two Lessons. In my interpretation, Hazlitt’s One Lesson is that prices are opportunity costs[1]. My Second Lesson is that, in the absence of appropriate government policy, private opportunity costs (market prices) won’t reflect social opportunity costs. Here’s a central piece of the argument, responding to Hazlitt’s exposition of Bastiat’s glazier’s fallacy.

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The unravelling of the global financial system

by John Quiggin on July 19, 2014

I have a piece in The National Interest, looking at various recent events including the latest round of the Argentinian debt crisis, in which a New York court ruled in favor of a group of ‘vulture’ investors, led by a New York billionaire, and the agreement of the US Department of Justice and Citibank, involving a financial settlement to avoid a lawsuit over bad mortgage deals and CDOs in the pre-crisis period.

My central observation is that while legal forms are being observed, these are obviously political processes, with outcomes reflecting relative political power rather than any kind of neutral application of the law. So, the international financial system is part of international power politics: it matters a lot that Citibank is a US bank, while BNP Paribas is French and so on. This is very different from the picture of a global, as opposed to international, financial system. Suhc a systemt, independent of, and standing in judgement on, national governments seemed to be emerging in the 1990s, but broke down in the financial crisis, when banks ran to their national governments for support.

As an illustration, I found this ad put out by the ‘vultures’. Try interchanging “US” and “Argentina” throughout and assuming an adverse judgement by an Argentinian court against the US government.

ATFA-Full-Image

Condemned by history (crosspost)

by John Quiggin on July 17, 2014

After some farcical manoeuvres, the Australian Senate has passed the Abbott governments legislation repealing the carbon price/tax/trading scheme (it’s a bit complicated). I hope and believe that this outcome will be reversed in due course, but those who brought it about will stand condemned by history.

It’s not merely that this is a bad policy, which will impose large and increasing costs (depending on how long it takes us to get back on track) on Australia and the world into the future. Even more damning is the fact that this action is entirely based on conscious lies, embraced or condoned by everyone who has actively supported it.

First, and most obvious, no one (least of all Tony Abbott) believes that the government’s “Direct Action” policy is a superior alternative to the carbon price, one that will deliver emissions reductions more rapidly and at lower costs. It is, as everyone knows, a cynical ploy put forward simply to allow the government to say that it has a policy.

In reality, Abbott and the rest want to do nothing, and the motives for this desire are entirely base. For a minority of the do-nothing group, it is simply a matter of financial self-interest associated with the fossil fuel industry. For the majority, however, it is the pursuit of a tribal and ideological vendetta. Their position is driven by Culture War animosity towards greens, scientists, do-gooders and so on, or by ideological commitment to a conservative/libertarian position that would be undermined by the recognition of a global problem that can only be fixed by changes to existing structures of property rights.

Most of these people would describe themselves as climate “sceptics”. There is no such thing. That is, there is no one, anywhere in the world, who has honestly examined the evidence, without wishful thinking based on ideological or cultural preconceptions, and concluded that mainstream science is wrong. Most “sceptics”, including the majority of supporters of the conservative parties, are simply credulous believers in what their opinion leaders are telling them. Those opinion leaders are engaged, not in an attempt to determine the truth, but in a cultural vendetta against their enemies, or in an ideologically-driven attempt to justify a predetermined do-nothing position1.

This is a sad day, but one that will come back to haunt those who have brought it about.


  1. That covers the vast majority in Australia. There are also some professional deniers who are just in it for the money and some driven by personal pathologies like (for example, the reflexive contrarianism of Richard Lindzen). 

Zombie DDT ban myth reanimated

by John Quiggin on July 14, 2014

A large part blogging, for me, has consisted of attempts at zombie-slaying: finding ideas that have been refuted by the facts, but that remain undead. Zombies are hard to kill, but one I thought had been permanently dealt with – the myth that Rachel Carson brought about a worldwide ban on DDT, leading to millions of deaths from malaria. Although quite a few people helped to show that this wasn’t true, the lion’s share of the credit, at least in the blogosphere, goes to Tim Lambert (who stopped blogging a while back, though his site still runs a montly open thread). Tim and I laid out the facts in a 2008 piece in the English magazine Prospect which made the following points

  • DDT has never been banned in anti-malarial use
  • The failure of DDT to eradicate malaria was due to resistance, promoted by overuse in agriculture and elsewhere, exactly as Carson warned. Bans on agricultural use of DDT helped slow the growth of resistance
  • The attacks on Carson were undertaken by tobacco industry lobbyists, seeking (among other things) to pressure the World Health Organization not to undertaking anti-smoking campaigns in poor countries

Our primary targets were Steven Milloy and Roger Bate’s Africa Fighting Malaria organization.

Whether due to our efforts or not, the DDT ban myth seems mostly to have died. Milloy, whose links to tobacco have thoroughly discredited him, seems to be out of the pundit business altogether. He still has an adjunct perch at the Competitive Enterprise Institute but his web page there shows only two opinion pieces since 2008. AFM is also quiescent – its website doesn’t show any research activity since 2011 and its staff all appear to have paying jobs in free-market thinktanks, suggesting a zombie organization.

But the zombie plague always recurs and just now I’ve seen (via Ed Darrell) another instance, oddly enough in an environmental-consumer magazine, Greener Ideal. The author, one Mischa Popoff is described as ” former organic farmer and USDA-contract organic inspector” and repeats the standard DDT myth before a segue into a defence of GMOs. But, as Ed Darrell points out, Popoff is being a bit cute here. DuckDuckGo reveals that he is in fact a Policy Advisor for The Heartland Institute and a Research Associate for The Frontier Centre for Public Policy (the latter being apparently a Canadian version of Heartland, as is the IPA in Australia. The site is down now, so I can’t check).

As long as Heartland lives, zombie ideas will never truly die.

In search of search theory

by John Quiggin on July 10, 2014

This is going to be a long and wonkish post, so I’ll just give the dot-point summary here, and let those interested read on below the fold, for the explanations and qualifications.

  • The dominant model of unemployment, in academic macroeconomics at least, is based on the idea that unemployment can best be modelled in terms of workers searching for jobs, and remaining unemployed until they find a good match with an employer

  • The efficiency of job search and matching has been massively increased by the Internet, so, if unemployment is mainly explained by search, it should have fallen steadily over the past 20 years.

  • Obviously, this hasn’t happened, but economists seem to have ignored this fact or at least not worried too much about it

  • The fact that search models are more popular than ever is yet more evidence that academic macroeconomics is in a bad way [click to continue...]

Sam Tanenhaus has a long piece in the NY Times, lamenting the failure of the latest attempt to convert the Republicans into a “party of ideas”. His star candidate for this role (one of only a handful of possibles) is Yuval Levin, and Exhibit A is Levin’s journal National Affairs, which he lauds for its mind-blowing wonkiness, in a way that’s impossible to summarise without parody. Here’s Tanenhaus

This was the sterile soil in which Levin planted National Affairs, which exudes seriousness of an almost antiquated kind. Each issue is the size of a small book, unleavened by illustration or even reported narrative. The typical Levin-assigned-and-edited article leads the reader through a forced march of acronyms and statistics and of formulations like this: “The Personal Responsibility and Work Opportunity Reconciliation Act (P.R.W.O.A.) replaced A.F.D.C. with a new program called Temporary Assistance for Needy Families. Under TANF, families can draw federal aid for only five years, to underline that welfare is supposed to be temporary. And where federal funding for A.F.D.C. had been open-ended, for TANF it is fixed, so that states must pay for any expansion of welfare.”

On it goes, article after article — “Taxes and the Family,” “Social Security and Work,” “Recasting Conservative Economics,” “Reality and Public Policy.” And yet with its stodgy prose, its absence of invective and red meat for the angry right, its microscopic circulation (6,000 subscribers, though some articles reach as many as 100,000 digital readers) and its one blogger who provides links to academic writings, National Affairs has become the citadel of reform conservatism.

Wow! an article that actually names a policy and describes its central features. It’s hard to believe that anyone still does this stuff. The tone is as if Tanenhaus had encountered a tribe in some remote wilderness engaged in ritual debates about tensor calculus.

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Tobacco International, Inc

by John Quiggin on July 1, 2014

In December 2012 the Australian Labor government introduced plain packaging laws for cigarettes. The effect was that cigarettes are supplied in drab olive/brown packages, with the main visual element being an (often disturbing) picture of the health effects of smoking. The tobacco industry (in co-ordination with the ubiquitous American Legislative Exchange Council) has fought tooth and nail to stop the laws, notably by ginning up trade disputes with Hong Kong and Ukraine, jurisdictions which have no significant tobacco trade with Australia and which (you might think) have more serious problems of their own to deal with. But so far, they have lost in every Australian court, including the court of public opinion. Despite a change of government, there’s no significant likelihood that the laws will be repealed or substantially modified.

Nevertheless, the leading Murdoch press outlet, The Australian, lovingly known here as the Oz, has launched a bizarre campaign, using secret tobacco industry data to claim that, by depressing prices, the laws have led to an increase in cigarette sales. These claims have been shot down in flames by the Australian Bureau of Statistics, the Treasury, and by health experts and bloggers, most notably Stephen Koukoulas .

The campaign is interesting for a couple of reasons

  • First, the commentators wheeled out by The Oz to defend this ludicrous claim are (without exception as far as I can tell) also climate science denialists. This is part of a much broader pattern – nearly all of the climate science denialists who’ve been around long enough got their start in tobacco denialism, as did much of the thinktank apparatus
  • Second, although the campaign was regarded as a bizarre oddity in Australia, where the Oz has lost a lot of credibility with this kind of thing, it was immediately picked up in the UK where (unlike in Australia) plain packaging is still a live issue. It certainly looks as if the Oz is taking one for the team here – shredding its remaining credibility to no real purpose at home, in order to provide a vaguely plausible Australian source for tobacco hacks to cite abroad.

The 100 Years War

by John Quiggin on June 28, 2014

It’s 100 years today since a political assassination in the Balkans set in motion the Great War which, in one form or another, has continued ever since. In destroying themselves, and millions of their subjects, the German, Austrian and Russian empires brought forth Nazism and Bolshevism, which killed in the tens of millions. After 1945, the killing mostly stopped in the developed world, replaced by the threat of instant nuclear annihilation, which remained ever-present for decades and has by no means disappeared. Instead, the War moved to the Third World, and a multitude of proxy conflicts. The fall of the Soviet Union saw the renewed outbreak of the War in Europe, most bloodily in Yugoslavia and more recently in Georgia and Ukraine.

Meanwhile, the British and French imperial War plans, embodied in the (secret) Sykes-Picot treaty and the contradictory assurances offered to Jews and Arabs in the Balfour declaration and the McMahon-Hussein correspondence1, continue to work their evil consequences long after all the original participants have gone to their graves. Syria, Iraq and Israel-Palestine are all products of the Great War, as is modern Iran (the product of a revolution against British and later American suzerainty imposed after 1918).

And, after 100 years, nothing has been learned. The architects of the most recent catastrophe in Iraq are still respected commentators, as are the many historians and others who defend the conduct of the British-French-Russian imperial alliance in the 1914-18 phase of the Great War (most British and French apologists ignore or explain away the alliance with the most oppressive European empire of the day, but I imagine there are now Putinist historians hard at work producing defences of Tsarist war policy).

More fundamentally, despite 100 years of brutal and bloody evidence to the contrary, the idea that war and revolution are effective ways to obtain political ends, rather than catastrophic last resorts, remains dominant on both the right and the left.

Perhaps in another 100 years, if we survive that long, the world will have learned better.


  1. In addition to these, there was the secret Constantinople agreement with the Tsarist empire, and the Treaty of London and Agreement of Saint-Jean-de-Maurienne with Italy, none of which came into effect. These secret deals (and similar agreements made by the Central Powers) make it clear that all the major participants in the Great War were committed to the pursuit of imperial expansion, even as they all pretended to be defending themselves against aggression and pointed to the crimes of their enemies as justification for their own. 

Reverse engineering Ross Douthat

by John Quiggin on June 26, 2014

Responding to the latest attempt to breathe some life into the zombie of “reform conservatism”, Matt Yglesias noted a revealing silence on climate change. As he observed

The thought process that ended with this approach is easy enough to understand. Whether climate change is a massive conspiracy orchestrated by Al Gore, 99 percent of scientists, and a dazzling array of foreign governments or a genuine problem is hotly debated inside the conservative movement. Whether or not fossil-fuel producers should be hampered in their activities by regulatory concern about pollution, by contrast, is not controversial. For smart, up-and-coming conservatives to mention climate change, they would have to pick a side on the controversial issue. Do they sound like rubes by siding with the conspiracy theorists, or do they alienate the rubes by acknowledging the basic facts and the coming up with some other reason to favor inaction? The optimal choice is not to choose.

I made much the same point a year ago in response to Ramesh Ponnuru’s <a href=””http://www.nationalreview.com/corner/349428/missing-point-conservative-reform”>plaintive observation that “To be a good reformer [in liberal eyes] a conservative has to agree that the vast bulk of conservatives are insane.”

In this NYT piece, Ross Douthat tries to respond to Yglesias. He ends up both confirming the point regarding climate change and illustrating the true nature of reform conservatism. [click to continue...]

Education and opportunity

by John Quiggin on May 22, 2014

I’ve got a piece up at the Chronicle of Education, with the title Campus Reflections (paywalled, but there’s a version at my blog) making the point that a higher education system is, in important respects, a mirror of the society that created it, and that it helps to recreate. If that’s true, it follows that the idea of education as a route to equality of opportunity, let alone equality of outcomes, is misconceived. This idea has always been popular among social democrats and even more so by advocates of ‘The Third Way’, who needed it to justify their abandonment of policies aimed at equalising outcomes.

Thinking about the point in this more general context, I’d want to qualify the ‘mirror’ claim a bit. There have been important instances where access to education has been substantially more egalitarian than access to resources in general, so that education did serve to promote equality of opportunity and perhaps also some equalisation of incomes (since it reduced the correlation between access to good jobs and ownership of wealth). The creation of universal public education systems in the 19th century was one example. These systems were far from being equal: they typically streamed students along class lines. But even giving working class kids the basics of literacy and numeracy was a big step forward, and there were opportunities for the bright and determined to do much better than that. The GI Bill in the US was another (if readers can point me to a good source of more detailed info on this I’d be grateful).

But, to the extent that education is a market commodity, it will be allocated on the basis of ability to pay. So, in the absence of a strong policy push in the opposite direction, unequal access to education for young people will reflect the unequal wealth and income of their parents. The US higher education system, like the health system, mirrors the outcomes of labor and capital markets pretty closely. It does a great job for the 1 per cent who go to the Ivy League Schools (and whose parents are mostly in or close to the top 1 per cent of the income distribution), does an adequate but expensive job for the next 20 per cent or so, and leaves everyone else to take their chances.

Piketty crossing the Delaware

by John Quiggin on May 18, 2014

Like lots of other readers of Thomas Piketty’s Capital, my big concern is not with the accuracy of the diagnosis and prognosis but with the feasibility of the prescription. Piketty’s proposal for a global wealth tax requires an end to the capacity of capital to escape taxation by exploiting the limitations of national taxations system, through tax havens, transfer pricing, artificial corporate structures and so on.

Given the limited record of success in past efforts to control global tax evasion and avoidance, Piketty is reasonably pessimistic about efforts in this direction. But the latest news from the OECD is remarkably positive. All members of the OECD (notably including evader-friendly jurisdictions like Austria, Luxembourg and Switzerland) have agreed to a system of automatic information exchange for tax purposes. Moreover, the “too big to jail” status of major banks engaged in facilitating tax evasion and money laundering, may finally be coming to an end.

On the face of it, the oft-repeated, but so far unjustified claim that “the days of tax havens are over“, may finally be coming true, at least for all but the wealthiest individuals. But the crackdown on individual tax evaders only points up the ease with which corporations (and individuals with the means to establish complex corporate structures) can avoid tax through a mixture of legal avoidance and unprovable evasion (for example, by illegal but unprovable internal transfers).

At the core of the problem is the ability to establish corporations in ways that make their true ownership impossible to trace. And, the jurisdiction most responsible for this is not a Caribbean island or European mini-state, but the “First State” of the US - Delaware, which has long been the preferred location for US incorporation by reason of its business friendly laws.

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Wealth: earned or inherited?

by John Quiggin on May 6, 2014

The efforts of the right to discredit Piketty’s Capital have so far ranged from unconvincing to risible (Chris picked up a particularly amusing one from Max Hastings in the Daily Mail, to which I won’t bother linking). One point raised in this four-para summary by the Economist is that ” today’s super-rich mostly come by their wealth through work, rather than via inheritance.” Piketty does a good job of rebutting this, but for those who haven’t acquired the book or got around to reading it, I thought I’d repost my own response, from 2012.

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