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John Quiggin

No true war is bad?

by John Quiggin on October 13, 2019

On Facebook, my frined Timothy Scriven pointed to an opinion piece by classics professor Ian Morris headlined In the long run, wars make us safer and richer It’s pushing a book with the clickbaity title War! What is it Good For? Conflict and the Progress of Civilization from Primates to Robots.”. Timothy correctly guessed that I wouldn’t like it.

Based on the headline, I was expecting a claim along the lines “wars stimulate technological progress” which I refuted (to my own satisfaction at any rate) in Economics in Two Lessons”. But the argument is much stranger than this. The claim is that war, despite its brutality created big states, like the Roman empire, which then delivered peace and prosperity.

For the classical world at 100 CE or so, the era on which Morris is an expert, that argument seemed pretty convincing. As the famous Life of Brian sketch suggests, Roman rule delivered a lot of benefits to its conquered provinces.

The next 1900 years or so present a bit of a problem, though. There have been countless wars in that time, and no trend towards bigger states. On the contrary two or three dozen states (depending on how you count them) now occupy the territory of the former Roman Empire.

You could cut the number down a bit by treating the European Union as a new empire, but then you have an even bigger problem. The EU was not formed through war, but through a determination to avoid it. Whatever you think about the EU in other respects, this goal has been achieved.

Morris avoids the problem by a “no true Scotsman” argument. He admits in passing that the 1000 years of war following the high point of Rome had the effect of breaking down larger, safer societies into smaller, more dangerous ones, but returns with relief to the era of true wars, in which big states always win. That story works, roughly, until 1914, when the empires he admires destroyed themselves, killing millions in the process.

After that, the argument descends into Pinker-style nonsense. While repeating the usual stats about the decline in violent deaths, Morris mentions in passing that a nuclear war could cause billions of deaths. He doesn’t consider the obvious anthropic fallacy problem – if such a war had happened, there would not be any op-eds in the Washington Post discussing the implications for life expectancy.

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The third lesson ?

by John Quiggin on October 9, 2019

Another review of Economics in Two Lessons has come out. It’s by David Henderson and appears in Regulation, published by the Cato Institute (link to PDF). There’s a blog post with extracts here.

Unsurprisingly, given the source, it’s mainly critical of the analysis, but still has some kind words about the book. This para gives the flavour

Quiggin is a good writer who lays out much of the economics well. His analysis of rent control and price controls in general is a thing of beauty. Along the way, though, he makes small and big mistakes. He also shows by omission that the book, to be complete, badly needs a third lesson, on why government works so badly even when it intervenes in cases where markets work badly.

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At Five Thirty Eight, Maggie Koerth-Baker has yet another article bemoaning the way partisanship biases our views. Apparently, one side, based on eyeballing, thinks the earth is flat, while the other, relying on the views of so-called scientists, or the experience of international air travel, regards it as spherical, or nearly so.

In the past, before the rise of partisanship, we would have agreed on a sensible compromise, such as flat on Sundays, spherical on weekdays, and undetermined on Saturdays. Moreover, there was a mix of views, with plenty of Democratic flat-earthers, and Republican sphericalists.

Of course, there is no way to resolve questions of this kind, but apparently, ““warm contact” between political leaders” will enable us to agree to differ, which would be a big improvement, at least until we decided whether to risk sailing over the edge of the world.

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Cum/ex

by John Quiggin on September 24, 2019

Looking for a different story in the business pages of The Guardian, I happened across a headline stating The men who plundered Europe’: bankers on trial for defrauding €447m. That attracted my attention, but the standfirst, in smaller print, was even more startling

Martin Shields and Nick Diable are accused of tax fraud in ‘cum-ex’ scandal worth €60bn that exposes City’s pursuit of profit

I think of myself as someone who pays attention to the news, but I had missed this entirely. Google reveals essentially no coverage in the main English language media. There’s a short but helpful Wikipedia article and that’s about it. The scandal has been described as the ‘crime of the century’, but it’s just one of many multi-billion dollar/euro heists, with the GFC towering above them all.

It remains to be seen how the trial will turn out, but it’s already clear that, as usual, the banks have got away with it. The bank most closely involved in the scam, HypoVereinsBank in German has set aside €200 million euros to cover its potential liability. That’s less than 1 per cent of the tax avoided or evaded (the lawyers will be fighting out which, for some time, but the effect on ordinary citizens is the same).

The crucial point here isn’t the failure of the law to punish wrongdoing.

What matters is that crooked deals of this scale suffice for a complete explanation of the growth of the global financial sector since the 1970s. The point of the financial sector is not to allocate capital more efficiently, but to undermine the regulatory and tax systems that are supposed to make the economy work properly. Unsurprisingly the huge financial boom has been accompanied by miserable productivity growth, repeated business collapses and massive growth in inequality.

The only way to fix the problem is to shrink the financial sector to a tiny fraction of its current size, and tightly regulate what remains. The rational route to achieve this would start with the kinds of reforms being proposed by Elizabeth Warren. But we may be stuck with a messier path, in which courts tire of giving slaps on the wrist to recidivist banks and start shutting them down.

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Passports and Brexit

by John Quiggin on September 9, 2019

I was looking over this post from 2016, on the consequences of a relatively successful Brexit

I’m finding it hard to see that anything will happen to justify the massive effort involved. The Poles and other EU citizens whose presence was the biggest single justification for Brexit won’t go away. On the contrary, it seems pretty clear that all EU citizens will get permanent residence, even those who arrived after the Brexit vote. Even with a hard Brexit, the benefits of consistency with EU regulations will be overwhelming. The terms of any trade deal with non-EU countries won’t be any better than the existing EU deals and probably worse.

Even symbolically, what’s going to happen? Typically, national independence is marked by a ceremony where the flag of the imperial power is lowered, and the new national flag is raised. But, from what I can tell, the EU flag is hardly ever flown in the UK as it is. The same for national currency, passport, official languages and all the other symbolic representations of nationhood. So, after a successful Brexit, Britain will be a little poorer and more isolated than before, but otherwise largely unchanged. Will that count as success in the eyes of those who voted to Leave. I don’t know.

Most of that still looks about right. But as commenters at the time pointed out, I was wrong about passports. One of the big things Leavers disliked about the EU was the replacement of the blue British passport with EU burgundy. It turns out that the colour change wasn’t compulsory, and the reintroduced blue passports will be printed in France, but at least that is a symbolic win for the Brexiteers.

On the other hand, how does this fit with the oft-repeated claim that Leave voters were “left behind” “stayers”? To be nostalgic for blue passports, you would presumably need to have undertaken a fair bit of international travel before 1988, when they were replaced. That experience, combined with the assumption that Britain is far superior to the EU, sounds like the profile of a stereotypical well-off, middle-aged or older, Tory voter. And, as far as I can tell, it was this category that provided the core support for Leave. That’s consistent with Trumpist voting most places in the English speaking world.

Could the Queen sack Johnson? Would she?

by John Quiggin on September 2, 2019

Having vague ideas of Parliamentary supremacy, I’m struck by reports that Boris Johnson could simply ignore a vote of no-confidence, and remain office to push through a No Deal Brexit, even in the face of legislation prohibiting such a course of action. As far as I can tell, these arguments are based on the premise that Parliament must nominate an alternative, and the assumption that neither Corbyn nor anyone else would prove acceptable to a majority. (Update: On more careful reading of the linked article I see that the new boss, Cummings, saying that Johnson could, for which I read would, ignore a vote for a new PM).

That might be true, and then again it might not. The question that occurs to me is whether Johnson could also ignore a vote in favour of a new PM, and if so, what could be done about it? One possibility is that the Queen could dismiss him, and invite the new PM to form a government, which would presumably hold immediate elections.

That, pretty much, is what happened in Australia in 1975, though the government’s position was far more tenable than in the hypothetical that I’ve outlined above. The government had a majority in the House of Representatives (our equivalent of the Commons). However, the government was unpopular and the Senate (similar to the US Senate in most respects) refused Supply, creating a financial crisis. The Governor-General (representing the Queen) sacked the PM (Whitlam) and installed the Leader of the Opposition (Fraser) in his place. Fraser called an election and won.

I honestly have no idea whether if Johnston refused to go, he could be removed, by the monarch or otherwise. For that matter, could he get the Queen to prorogue Parliament indefinitely, and govern by decree? That sounds inconceivable, but maybe only in the sense of Vizzini in the Princess Bride.

It’s worth noting that the absence of a written constitution isn’t the critical issue here, or at least not to the extent often claimed. Australia has a constitution, but it’s silent on all the relevant issues (it doesn’t even mention the office of a PM).

That’s enough from me. Useful links and informed comments much appreciated.

Jimmy Carter gets advice about global warming

by John Quiggin on August 22, 2019

In the course of attempting to threadjack Harry’s post on advice to new students, a commenter made the often-repeated claim ““Forty years ago (1970’s) global cooling was all the rage!””. As it happens, just before reading this comment, I received a link to some files from the Jimmy Carter Presidential Library and Museum. It’s a daily log or similar, and starts with a response to someone named Frank Press who had written to Carter raising concerns about CO2 emissions and global warming. The advice given to Carter was as follows:

The issue raised by Press is not new. The experts all agree that more infor­mation is needed. The energy plan indicates that nearly $3 million was being requested for ERDA to study the long-term effects of co2. (James) Schlesinger feels that the policy implications of the issue are still too uncertain to warrant presidential involvement or poli­cy initiatives. Schlesinger is examining the issue in the preparation of the FY 79 budget, and will, at that time, have the full report of the NAS study and further results from ERDA.

That accords with my memory, but not, apparently that of numerous others. Both warming and cooling were discussed in the 1970s, but there wasn’t clear evidence either way. By the 1980s, it became clear that the trend was towards warming, though it took another decade or so to produce broad scientific agreement that greenhouse gas emissions were the most likely cause and another decade for this agreement to reach near-certainty.

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Cutting the financial sector down to size

by John Quiggin on August 18, 2019

That’s the provisional title I used for my latest piece in Inside Story. Peter Browne, the editor, gave it the longer and clearer title “Want to reduce the power of the finance sector? Start by looking at climate change”.

The central idea is a comparison between the process of decarbonizing the world economy and that of definancialising it, by reducing the power and influence of the financial sector. Both seemed almomst impossible only a decade ago, but the first is now well under way.

There’s also an analogy between the favored economists’ approach in both cases: reliance on price based measures such as carbon taxes and Tobin taxes. Despite the theoretical appeal of such measures, it looks as if regulation will end up doing much of the heavy work.

Give children the vote

by John Quiggin on August 17, 2019

Looking at the array of ignorant and vindictive old men attacking Greta Thunberg and other young climate activists, the case for lowering the voting age is just about unanswerable. Anything that could be urged in justification of stopping 16 year olds, as a group, from voting, is equally applicable to those over 60 (a group to which I belong). Over 60 voters are, on average, poorly educated (the school leaving age in Australia was 15 when they went through and I assume similar in most places), and more likely to hold a wide range of false beliefs (notably in relation to climate change).
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How do student evaluations survive ?

by John Quiggin on August 4, 2019

Among the few replicable findings from research on higher education, one of the most notable is that student evaluations of teaching are both useless as measures of the extent to which students have learned anything and systematically biased against women and people of color. As this story says, reliance on these measures could lead to lawsuits.

But why hasn’t this already happened. The facts have been known for years, and potential cases arise every time these evaluations are used in hiring or promotion: arguably every time the data is collected. And student evaluations are particularly popular in the US, where litigation is the national sport. Yet no lawsuits have yet taken place AFAICT.

Maybe the zeitgeist is changing. I was going to write this post before seeing the linked article, which turned up in my Google search. Any lawyers or potential litigants want to comment?

Cheap at twice the price

by John Quiggin on July 31, 2019

One of the vanished joys of academic life is the experience, after publishing an article, of getting a bundle of 25 or 50 reprints in the mail, to be distributed to friends and colleagues, or mailed out in response to requests from faraway places (if you live in Australia, everywhere is faraway), often coming on little postcards. Everything is much more efficient nowadays, and I just finished throwing away my remaining collection of reprints. But now, an electronic ghost of the reprint has come to visit.

Earlier this year, I contributed an article to a special issue of Globalizations on “The diffusion of public private partnerships: a world systems analysis”. This is a fair way outside my usual academic area of expertise, a fact which may be apparent to readers who know more about the topic than me, but I wanted to say something about Australia and New Zealand. I just got an email from the publisher offering 50 free e-prints . I don’t think my fellow economists will be much interested, and most would have library subscriptions anyway. So, I’m opening it up to my readers. As I understand it, the first 50 to download it get it for free. After that, anyone really interested can email me for a copy.

Update If you want a copy just click on the link

The R-word fifteen years on

by John Quiggin on July 20, 2019

Back in 2004, I wrote that

There is only one real instance of political correctness in Australia today and that is that you are never, ever allowed to call anyone a racist. It’s OK to say that Adolf Hitler was a racist, and that apartheid was racist, but the idea that any actual Australian could be a racist is utterly taboo.

Of course, the same was true in the US. But after two and a half years of an openly racist Trump Presidency in the US, the taboo seems finally to be open to challenge. Opinion writers and individual Democratic politicians have been calling out Trump’s racism for some time, but news reports have stuck with lame euphemisms like “racially charged”, or saying that “critics have called it racist”

In the wake of the House resolution condemning Trump latest racist tweets, the ground may have shifted, at least a little. Quite a few news organizations have used the R-word, in their own voice, to describe Trump’s “go back to where you came from” tweets, and others have tiptoed towards the line.

Most notably. CNN and Washington Post political reports are now referring to Trump’s racist tweets in matter-of-fact terms, noting that Trump sees them as politically advantageous and discussing the implications for the 2020 campaign. (Hat tip: Daniel Quiggin). 

There’s still quite a few steps to go before the taboo is ended. Even moving from “Trump’s racist tweets” to “Trump’s racism” will take a fair bit of courage. And so far only CNN has used the word routinely. The NY Times hasn’t even got past “widely seen as racist.” . (For that matter, it’s still calling Trump’s lies “falsehoods” to avoid feeding ” the mistaken notion that we’re taking political sides.”

This isn’t just a matter of rhetoric. It’s difficult to do any kind of political analysis clearly if one of the main political tendencies can’t be named. Trump’s re-election hopes depend to a large extent on motivating racist Republicans to vote and on peeling off the remaining racists from the Democratic Party. Try to make this obvious point without using the R word and you end up with obfuscation or worse, such as the use of”working class” as code for racism.  

Movers and stayers

by John Quiggin on July 18, 2019

A lot of discussion of immigration is framed around the distinction between movers and stayers. Until recently, most of what I’ve seen has framed “stayers” as those who see their economic interests as being threatened by competition from immigrants. To protect themselves, they want to restrict immigration, even if the consequence is to restrict the opportunities for “movers” from their own country. The harm to these “movers-out” is just collateral damage

But lately I’ve been seeing a different account, in which it’s the departure of the movers-out that is causing problems by reducing the supply of workers to provide services to, and pay taxes to support, the stayers (particularly, the old). In economic terms, the obvious solution would be to replace the movers-out with movers-in, but they are of the wrong religion, skin colour and so on, and are therefore rejected. That exacerbates visible economic decline, particularly in terms of the level of economic activity, even when income per person holds up or is sustained by transfer payments. This in turn produces support for Trumpism and its variants.

This story comes up most clearly in relation to Eastern Europe (most notably Hungary) following accession to the EU, but I think it’s applicable to many rural areas in richer countries.
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A new two party system?

by John Quiggin on July 5, 2019

Recent elections (notably including those for the European Parliament) have shown the evolution of what I’ve called a three-party system, replacing the alternation between soft and hard versions of neoliberalism dominant since the 1980s. The three parties in this analysis are the (a) remaining elements of the neoliberal consensus, (b) Trumpists[1], and© leftists, defined as broadly as possible to encompass greens, feminist, social democrats, old-style US liberals, as well as those who would consciously embrace the label “Left”.

When I wrote in 2016, the biggest loser from this process seemed to be the kind of soft neoliberalism exemplified by Blair, and many of the European social democratic parties. But that was before Trump and Brexit.

The striking development of the past few years has been the capitulation of the mainstream rightwing parties to various forms of Trumpism. That’s most obvious with the US Republicans. And, while some advocates of Brexit may still hope for a free-market utopia, its pretty clear now that this is unlikely to happen. The continuing desire to get Brexit done at all costs is all about culture wars, with Leavers cast as the British people and Remainers as out of touch elites. The same pattern is evident in Australia, where free market policies have been abandoned in favour of culture wars, to the extent that the government is seriously considering building coal-fired power stations, just to make a point.

I’m not well enough attuned to the nuances of European politics to discuss developments at the national level. In aggregate, though, it seems clear not only that the mainstream conservatives are losing ground electorally, but that they are moving towards Trumpism.

This suggests that the current three-party system might rapidly resolve itself into a new two-party system: Trumpists against everyone else, with the remnants of the old neoliberal duopoly being forced to take sides. This is already happening to some extent.

In this context, it was striking to read a piece in the Washington Post, of all places, slamming the “economically conservative, socially liberal” centrism of Howard Schultz, and pointing out that

Centrism,” in other words, has become a byword for the politics of the business elite. Defined left to right, on an x-axis, it may approximate the center of the political spectrum. But on a y-axis that represents socioeconomic status, it sits at the very top.

It’s hard to say where centrists will end up. On the one hand, they mostly benefit from the regressive tax policies and weak regulation that Trumpists have carried over from hard neoliberalism. On the other hand, the Trumpists have abandoned free markets for crony capitalism, typically favoring well-connected national insiders, exemplified by the US First Family. That poses problems for global corporations and fans of globalized capitalism like Tom Friedman, who still yearn for the halcyon days of the 1990s.

As ought to be obvious, I’m still working this out, so I’ll leave it to commenters from here.

fn1. I previously called this group “tribalists”, which was problematic. The Key characteristic is the identity politics of a formerly unchallenged dominant group facing the real or perceived prospect of becoming a politically weak minority, as with white Christians in the US. As Trump and others have shown, this kind of politics leads naturally to support for demagogic dictators and would-be dictators.

Opportunity cost, MMT and public spending

by John Quiggin on June 29, 2019

I’ve been busy for the last week doing events for Economics in Two Lessons, so I didn’t have time to take part in the discussion arising from Harry’s post on alternatives to Sanders’ proposal to wipe out college debt.

In one way, that’s a pity because the key point of the book is the idea of opportunity cost – the true cost of anything, for us as individuals, and for society as a whole, is what you must give up to get it. More precisely, it’s the best alternative available to us.

Harry’s post was all about opportunity cost – what would be the best use of $1.6 trillion in public funds. However, the discussion was inevitably enmeshed in the complexities and inequities of US education, while comments making broader arguments about opportunity cost reasoning weren’t discussed in detail.

One of those broader arguments is the idea that, thanks to Modern Monetary Theory, there’s no need to worry about such questions. In the “chartalist” reasoning underlyng MMT, the fact that governments can issue their own sovereign currency means that there is no need to “finance” public spending by taxation; rather taxation is a tool used to manage aggregate demand so as to keep the economy fully employed but not at a point where excess demand creates inflation. That (essentially correct) position can easily slide into the (only subtly different, but radically mistaken) view that governments can spend money on anything they like with no need for any increases in taxes or cuts in other spending.

As I will argue over the fold, a correct version of MMT makes no such claim. Unfortunately, while avoiding the error themselves, a lot of MMT theorists have not shown much willingness to set their more naive followers straight.

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