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John Quiggin

For quite a few years now, I’ve been working on a response to Henry Hazlitt’s Economics in One Lesson, a defence of free-market economics first published in 1946, but still in print and popular among libertarians. Hazlitt, as he says, is essentially just reworking Bastiat’s analysis of opportunity cost, represented by the broken window parable. What I’m trying to do is take the idea of opportunity cost seriously, and apply it across the board, including to issues of income distribution and property rights. It’s obvious (to me, at any rate) that any allocation of property rights to one or more people has an opportunity cost, namely the benefits that could be realised if the property rights were allocated to someone else. This is a live issue when property rights are being created explicitly right now, as they are with various kinds of intellectual property. But it is just as relevant when we come to consider the historical origins of property. I’ve spent a fair bit of time debating the question of whether property rights have a basis (say, in natural law) for existence independent of the states or governments that typically define and enforce them. I don’t want to talk about that issue right now, but it explains why I’m taking an interest in (I think) the most prominent proponent of natural law in relation to property, John Locke.

It’s a long time since I read Locke and, at the time, I was mostly concerned with Hume’s objection that

there is no property in durable objects, such as lands or houses, when carefully examined in passing from hand to hand, but must, in some period, have been founded on fraud and injustice.

That’s true of course. But rereading Locke[^1] I now conclude that he is not offering a theory of original acquisition, but rather one of expropriation, designed specifically to justify the “fraud and injustice” to which Hume refers.

(Update: Read to the end of comments, around 90, for references to the current literature, showing that the link between Locke and the need to justify expropriation in the context of American colonisation was even more direct than suggested in this post) [click to continue…]

Rank Delusions

by John Quiggin on April 9, 2015

That’s the title of a piece I had in the Chronicle of Higher Education in February. CHE is paywalled, but they kindly agree to let me republish here, after a suitable interval. The article (or at least a near final version) is over the fold.

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The inevitability of red tape

by John Quiggin on April 7, 2015

Following up on Eric’s response to the Paul Campos piece blaming administrative bloat for rising tuition, I thought I would repost this piece from my own blog (feel free to ignore, or respond to, the opening allusion to Oz politics).

I have a piece in The Guardian pointing out that the Abbott government’s Red Tape Reduction program is basically cover for a couple of big measures benefit the mining and gambling industries.

A bigger question raised by the piece: why does bureaucracy and red tape seem to grow without limits? Anyone who has ever worked as an academic, faced with a proliferation of pro-vice-chancellors, executive deans and multiple layers of hierarchy has certainly asked this question, and there’s nothing unusual about academics. The uselessness of administrators is the central theme of the comic strip Dilbert, popular in offices around the world.

The obvious explanations are
(a) stupidity; and
(b) administrative bloat benefits administrators and they are the ones who make the decisions

I don’t think either of these works adequately. Stupidity is certainly common, but the phenomenon is too pervasive to be explained in this way. As regards administrative self-interest, the problem is that senior executives could potentially gain a lot by cutting mid-level bureaucracy, and many have tried (remember ‘flatter organizations’ and ‘lean and mean’).

My own hypothesis is that every big mistake (for example, an undetected embezzlement or a mishandled episode of harassment) produces a permanent bureaucratic response designed to prevent a recurrence. This is very costly to reverse (who wants to deal with the first big embezzlement just after they downsized the accounting department) even if it would, in some sense, be less costly to put up with occasional failures. Moreover, for both good and bad reasons, I think we are, as a society, becoming less tolerant of institutional failures across a wide range of activities (systematic wrongdoing by financial institutions is a major counterexample but, I think, exceptional). So, we have more checks and balances, and more bureaucrats to enforce them.

I made this observation in comments on Chris’ ideal theory post, and got some pushback, so I thought I’d take a look back at the data
US Households in Poverty, 1959-2013

Both the number and the percentage of families in poverty dropped sharply during the 1960s when the “War on Poverty” was being waged actively, and remained near their all-time lows through the Nixon and Carter years until 1979, when the Volcker recession hit, followed by the election of Ronald Reagan. These events can reasonably be said to mark the point at which the government unequivocally changed sides.

The number of households in poverty has risen steadily since then and is now higher than in 1959, the year for which the poverty level was first defined by Mollie Orshansky. The poverty rate has remained consistently higher than in the 1970s, except for a brief deep at the peak of the late-1990s boom.
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A pig in a poke

by John Quiggin on March 2, 2015

I’m doing some work on the proposed Trans Pacific Partnership Agreement, currently being negotiated in secret by diplomats and business representatives from 12 countries. Two facts of interest
(a) Australia’s Trade Minister Andrew Robb is claiming that a final agreement might be reached by mid-March. While this looks over-optimistic, it implies there is a near-final text
(b) Obama has sought “fast-track” negotiating authority, but there is no sign that this is going to happen soon, given that quite a few Democrats oppose the deal outright, and many Republicans are hostile to anything that would give Obama more authority.

The idea of “fast track” is that the Administration cuts a deal and Congress is bound (by having agreed to the fast-track rules) to give it a Yes/No vote, with no amendments. The assumption (I think) is that, if amendments were permitted, they would proliferate to the point where the legislation would fail to implement the agreement with other parties, who might then back out. Of course, the result is that Congress is, in effect, buying a pig in a poke. Given the unlikelihood of an outright rejection of such a massive deal, they have to accept whatever Obama puts before them. The flip-side is can no individual Congressperson has to explain why they didn’t seek protection for whatever local ox might be gored by the deal: they can respond that they had no choice.

My question is: Suppose that the final text is agreed and made public before fast-track authority is granted. What would be the chances of Congress agreeing to a Yes/No vote, and what difference would it make? There are a lot of issues to be raised here about international relations, trade agreements and US politics, none of which I have a clear feel for. So, I’d be interested to hear what others think.

Anti-anti-anti-science

by John Quiggin on February 28, 2015

I’ve been meaning to write this post for a while, and Paul Krugman has given me a nice jumping off point with this column on how to respond to economists (including highly credentialled ones) who push zombie ideas such as the threat of imminent hyperinflation. As Krugman notes, providing evidence-based criticism, whether politely or rudely, has no impact on people who have strong reasons for wanting to believe something. This is even more true on topics like climate change than it is on economics. [click to continue…]

Who blinked?

by John Quiggin on February 24, 2015

So, the latest round of the Greek debt crisis has ended in a typical European combination of delay and compromise, much as Yanis Varoufakis predicted a week ago. But in view of the obvious incompatibility of the positions put forward, someone must have given a fair bit of ground. The Greeks wanted continued EU support, and an end to the Troika’s austerity program. The Troika (at least as represented by German Finance Minister Schauble) wanted Syriza to abandon its election program and continue with the existing ND/Pasok policy of capitulation to the Troika.

Put that way, I think it’s clear that the Troika blinked. The new agreement allows Syriza to replace the Troika’s austerity program with a set of reforms of its choice, focusing on things like tax evasion. Most of Syriza’s election platform remains intact. Of course, it’s only for four months, and none of the big issues has been resolved. But four months takes us most of the way to the next Spanish election campaign, hardly an opportune time to contemplate expelling a debtor country from the eurozone with utterly unpredictable consequences.

If the negotations were a win for Greece (feel free to disagree!) how did it happen?

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Another Guantanamo conviction overturned

by John Quiggin on February 19, 2015

It didn’t get a lot of attention in the US Press, but it’s front page news on Oz that the Court of Military Commission Review has just overturned the conviction of David Hicks, one of two Australians tortured and held at Guantanamo Bay, and one of only six people convicted through the Military Commissions process (this is the third successful appeal). The NY Times ran a story (interestingly, in its “US” section), which covers the main points.

A while back, in a context I can’t exactly remember, I made the point, which seemed to me to be obvious, that all property rights are derived from states governments, and so it’s impossible to sustain a claim that state government interference with property rights is inherently wrong. It rapidly became apparent that this point is controversial in all sorts of ways, so I thought it might be worthwhile to work out where the main lines of disagreement run.

The great thing about a blog like CT is that, on (almost) any topic, lots of my co-bloggers and readers know more than I do, and most aren’t shy about saying so. So, please point me to the relevant literature (about my only reference point here is James C Scott).

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Has vaccination become a partisan issue?

by John Quiggin on February 8, 2015

Some recent statements by Chris Christie and Rand Paul1 have raised the prospect that vaccination, or, more precisely, policies that impose costs on parents who don’t vaccinate their kids, may become a partisan issue, with Republicans on the anti-vax (or, if you prefer, pro-freedom) side and Democrats pushing a pro-vaccine, pro-science line. Christie and Paul took a lot of flak from other Republicans and even Fox News, and tried to walk their statements back, so it seems as if it won’t happen just yet.

But there are some obvious reasons to think that such a divide might emerge in the future, and that Christie and Paul just jumped the gun. The outline of the debate can be seen in the ferocious response to Reason magazine’s endorsement of mandatory vaccination. And, while Reason was on the right side this time, they’ve continually cherrypicked the evidence on climate change and other issues to try to bring reality in line with libertarian wishes.

The logic of the issue is pretty much identical to that of climate change, gun control, and other policies disliked by the Republican/schmibertarian base. People want to be free to do as they please, even when there’s an obvious risk to others and don’t want to hear experts pointing out those risks.2 So, they find bogus experts who will tell them what they want to hear, or announce that they are “skeptics” who will make up their own minds. An obvious illustration of the parallels is this anti-vax piece in the Huffington Post by Lawrence Solomon, rightwing author of The Deniers, a supportive account of climate denial3.

As long as libertarians and Republicans continue to embrace conspiracy theories on issues like climate science, taking a pro-science viewpoint on vaccination just makes them “cafeteria crazy”. The consistent anti-science position of people like Solomon is, at least intellectually, more attractive.

Update Another issue that fits the same frame is speeding. Anti-science libertarians in Australia and the UK are strongly pro-speeding, but I get the impression that this isn’t such a partisan issue in the US, the reverse of the usual pattern where tribalist patterns are strongest in the US.


  1. Christie was just pandering clumsily, but Paul’s statement reflects the dominance of anti-vax views among his base and that of his father (take a look at dailypaul.com). 

  2. Of course, the situation is totally different in cases like Ebola and (non-rightwing) terrorism, where it’s the “others” who pose the risk. 

  3. The Huffington Post used to be full of leftish anti-vaxers. But the criticisms of Seth Mnookin and others produced a big shift – Solomon’s was the only recent example I could find. Similarly, having given equivocal statements back in 2008, Obama and Clinton are now firmly on the pro-vaccine side. 

Asset sales and interest rates (wonkish)

by John Quiggin on February 4, 2015

One of the strongest most politically effective arguments made for selling publicly owned assets, such as government owned corporations is that, by reducing debt, it will reduce the interest rate on government bonds. This is plausible enough, and not by itself a conclusive argument. The interest saving (including the benefit of lower rates on remaining debt) needs to be set against the loss of earnings. But it would be nice to know how large this saving might be.

The Queensland state election, just passed, provides something of a natural experiment. The LNP government proposed to sell $37 billion in public assets and repay $25 billion in debt ($18 billion associated with the enterprises to be sold, and $7 billion in general government debt. Going in with 73 of 89 seats, the LNP was almost universally expected to be returned. Instead, they lost their majority and will probably lose office. Although the result is not yet final, everyone is now agreed that asset sales are off the table.

So, we should be able to look at the secondary market for QTC bonds to see how much this surprise changed the interest rate demanded by bondholders (this is what’s called an “event study” in the jargon of academic finance). You can get the data from https://www.qtc.qld.gov.au/qtc/public/web/individual-investors/rates/interactive%20rate%20finder//

and I’ve included it over the fold (a bit of a mess as I can’t do HTML tables)

The data shows that interest rates have generally been tending downwards, as you would expect given the Reserve Bank’s much-anticipated cut. On the trading day after the election, rates on longer term bonds rose by between 0.05 and 0.1 percentage points (or, in the market jargon 5 and 10 basis) points. But all of that increase, and more, was wiped out the next day when the RBA confirmed its cut. Overall rates on QTC debt have fallen by around 0.25 percentage points since Newman called, and then lost, his snap election.

To sum up, the surprise abandonment of one of the largest proposed asset sales in Australian history caused only a momentary blip in interest rates on Queensland government debt, immediately wiped out by a modest adjustment in monetary policy at the national level.

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Queensland election

by John Quiggin on February 1, 2015

We just had an election in my home state of Queensland, and the outcomes will be of some broader interest, I hope. The governing Liberal National (= conservative) Party has (almost certainly) gone down to a surprise defeat, going from 78 of 89 seats at the last election to a probable 40 or 41 this time. The key issues were broken promises (particularly regarding job cuts) and government proposals for privatisation.

This can be seen either as a reversal or a repeat of the last election when the governing Labor Party went from 51 seats to 7. That election was also fought on broken promises and privatisation, but with the roles of the parties reversed (Labor had won an election opposing privatisation, then immediately announced it would go ahead).

Among the actual or potential ramifications

Looking internationally, the outcome can be seen as a defeat for the politics of austerity and maybe as an example to suggest that Pasokification can be reversed, under the right circumstances.

Finally, I’ll link to my analysis of the asset sales, which got a reasonably prominent run during the campaign. It probably didn’t change many minds, but it helped to counter the barrage of pro-privatisation propaganda.

A one-horse troika

by John Quiggin on January 27, 2015

I’m a lot further from the action than DD, but I’m still surprised his confidence in the judgement and resolve of the Eurocracy in the coming confrontation with Syriza. Whatever you think about Greece, the failure of austerity in the Eurozone generally is patently obvious. It has already been admitted by the IMF (at least in its research, if not by its political leadership) and just last week by the ECB, with the shift to massive quantitative easing and the abandonment of the (supposedly unbreachable) ban on financing government deficits. That leaves the European Commission as the only horse still pulling the troika hard in the direction of austerity.

But the European Commission is almost as discredited as austerity. Apart from the appalling Olli Rehn, there’s the problem of Jean-Claude Juncker, who faced unprecedented resistance before getting elected, only to be exposed as complicit in tax avoidance/evasion on a scale that makes the dodges of Greek doctors look trivial. I just can’t see the IMF and ECB risking utter disaster in support of a policy they no longer believe in, at the behest of a shambles like the Commission.

That leaves the possibility that the German government will exert its (assumed) veto power more directly [I don’t understand the nature of this power, and would be happy to be enlightened]. My guess is that Merkel won’t be willing to take the risk of lumbering Germany with the responsibility of destroying Europe (again).

Predictions for 2015

by John Quiggin on January 15, 2015

Prediction is very difficult, especially about the future, as Niels Bohr is supposed to have said. I’ve certainly found it so. Apart from the obvious possibility of being wrong, there’s the risk that others will misrepresent you. But, as long as you don’t take it too seriously, it’s helpful to frame discussion around a sharp prediction. So here are three for 2015

1. Peak Oil: I predict that global oil production (conventional and shale etc) will decline in 2015 and will never again reach the peak level of 2014. My reasoning is that 2014 supply can’t be sustained at prices below, say, $75, and (given a downward underlying trend in the developed world), 2014 demand won’t be reached again at prices above $75.

2. The End of Bitcoin: I’ve written in the past that “Bitcoins will attain their true value of zero sooner or later, but it is impossible to say when.” However, I now think the necessary conditions are in place for most holders of Bitcoins to recognise that their asset consists of used-up computation cycles with zero value. In particular, because mainstream merchants now accept Bitcoin (which they immediately sell), it’s possible for hardcore believers to dispose of their holdings without explicitly betting that the price will fall. Of course, the price won’t fall precisely to zero, but it should be well below $100 by the end of the year, and below $10 not long after that.

3. The Paris conference on climate change, will produce a half-baked compromise, which nevertheless represents progress towards stabilization at 2 degrees of warming: OK, this is pretty much a no-brainer, given that this is what we’ve been seeing ever since Kyoto in 1997, but I want to be sure of getting at least one right.

Consequentialist arguments for deontological claims

by John Quiggin on December 30, 2014

Thinking about various interchanges on the Internetz, a great many have the frustrating property that, while they appear to be couched in consequentialist terms, some or all of the participants are defending claims that they actually hold for deontological reasons[^1]. For example, a follower of Pythagoras (who, apocryphally, forbade the eating of beans) might appear in a discussion about beans and claim that we shouldn’t eat beans because

  • they cause flatulence
  • bean production is environmentally destructive
  • the bean industry is dominated by exploitative multinationals
    The problem for someone seeking to counter these arguments is that, even if they are all refuted, the Pythagorean will not agree that it is OK to eat beans.
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