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John Quiggin

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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Right wing tribalists: A lost cause

by John Quiggin on April 30, 2014

Rightwing tribalism seems to be the topic du jour, or maybe I’m noticing it more having just done a long-planned post on the topic. Here are some recent examples

and relatedly

  • Digby in Slate on Southern white males as a voting bloc unremittingly hostile to the Dems on tribal grounds (my thoughts on this here)

Over the fold, I’ve reprised the piece (from a 2007 review of Clive Hamilton’s book Scorcher) when I first realized the central role of tribalism, as opposed to ideology or economic self-interest, in contemporary rightwing politics. Rereading it, I’m happy with most of the analysis, though obviously, with my characteristic over-optimism and shortening of time-frames, I did not anticipate the full tenacity of rightwing resistance on this issue.

What can be done about rightwing tribalism? There’s no point in traditional strategies of compromise and bargaining. The right don’t hate policies, they hate the people and groups they see as proposing those policies. So, as Bouie observes, the moment Obama adopts a policy favored by the right, they turn against it.

The strategy of trying to frame issues in rightwing terms, pushed by Lakoff and others, is similarly hopeless: it’s not the issues, but the people that are the problem. There’s one big exception to this: if they issue can be framed as Big Government vs the little guy, as in the cases of NSA surveillance and, more interestingly, of attempts by utilities to suppress rooftop solar power using ALEC-backed legislation, it’s possible to make common cause with at least some on the right, who hate “the guvment” even more than liberals and environmentalists. But that’s only true of a minority of the right, and a handful of issues.

Most of the time, none of these strategies will work. The only thing that will work is persuading rightwing tribalists to abandon their tribal identity, and persuading non-tribalists of conservative inclinations that they should not ally with this group. And of course, waiting for time and demography to take their course, as has already happened to a substantial extent.

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Tu Quoque

by John Quiggin on April 21, 2014

I’ve written many posts and articles making the point that the political right, in most English speaking countries[^1] has been taken over by a tribalist post-truth politics in which all propositions, including the conclusions of scientific research, are assessed in terms of their consistency or otherwise with tribal prejudices and shibboleths.

Very occasionally, intellectuals affiliated with the political right (conservatives and libertarians) will seek to deny this, arguing that isolated instances are being blown out of proportion, and that the right as a whole is committed to reasoned, fact-based argument and acceptance of “inconvenient truths’ arising from the conclusions of scientific research[^2], [^3].

But, far more often their response takes the form of a tu quoque or, in the language of the schoolyard, “you’re another”. That is, they seek to argue that the left is just as tribalist and anti-science as the right. Favored examples of alleged left tribalism included any rhetoric directed at rightwing billionaires ( Murdoch, the Kochs and so on). The standard examples of alleged left anti-science are GMOs, nuclear power and anti-vaxerism, but it is also sometimes claimed that US Democrats are just as likely as Republicans to be creationists.

I’ll argue over the fold that these examples don’t work. What’s more important, though, is what the tu quoque argument says about those who deploy it, and their view of politics. The implied claim is that politics is inherently a matter of tribalism and emotion, and that there is no point in complaining about this. The only thing to do is to pick a side and stick to it. What passes for political argument is simply a matter of scoring debating points for your side and demolishing those of the others. So, anyone who uses tu quoque as a defence, rather than seeking to dissuade their own side from tribalist and anti-science rhetoric, deserves no more respect than the tribalists and science deniers themselves, who at least have the defence of ignorance.

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Monday photoblogging: Lakes

by John Quiggin on April 21, 2014

IMG_0823

IMG_0824

Lakes Eacham and Barrine in the Atherton Tablelands, Queensland

Salon has a couple of interesting articles about millennials. Tim Donovan focuses on the plight of young people without college education who are suffering the combined effects of long-term growth in inequality and the scarring that comes from entering the worst labor market in at least a generation[^1]. Elias Isquith has a piece debunking Rand Paul’s prospects of pulling the millennial vote (I’ve seen a few of these lately, which may or may not mean anything), which includes the following observation

Despite the fact that a whopping 51 percent of millennials believe they’ll receive no Social Security benefits by the time they’re eligible, and despite the fact that 53 percent of millennials think government should focus spending on helping the young rather than the old, a remarkable 61 percent of young voters oppose cutting Social Security benefits in any way, full stop.

The idea that “Social security won’t be around long enough for me to collect it” is a hardy perennial, and thinking about it led me to the following observation:

It’s now possible for someone to have spent their entire working life believing that Social Security would not last long enough for them to receive it, and now to have retired and started collecting benefits. This belief has been prevalent at least since the early years of the Reagan Administration when it was pushed hard by David Stockman, and I’m going to date it to the first big “reform” of the system in 1977. Someone born in 1952, who entered the workforce in 1977 at the age of 25, would now be turning 62 and eligible to collect Social Security. [click to continue…]

I’m very grateful to Ingrid for setting up this discussion of capabilities. I enjoy the general discussions of social and political issues we have here at CT, but this is one of many venues for such discussion (among the best, I think, but I would say that). What’s truly unique for me is the opportunity to discuss the issues raised by my own academic work in an environment that is totally different from those offered by the economics profession.

As has already been mentioned, most of the discussion of capabilities has concerned poor/developing countries. Moreover, most of it has been qualitative rather than quantitative. One consequence is that, although the idea of capabilities has been around for a while now, its impact on the policy process in developed countries has been modest at best.

My own work on capabilities, represented by an article[1] published last year in the Journal of Health Economics has also had a modest impact, but for very different reasons. While not strictly quantitative, it’s mathematical, more so than the average reader of JHE tends to be comfortable with, and its direct relevance to policy is limited by the fact that we are, at least to start with, not addressing distributional issues.

The main objective is to explore the idea that capabilities can provide a basis for allocating health care resources based on the QALY (Quality-Adjusted Life Year) measure. in previous work, we looked at the “welfarist” idea that policy should be based on maximizing lifetime expected utility. It turns out that, considered purely as a technical problem, this can’t be done, except in very special cases. The appeal of capabilities is that they provide a non-welfarist (or at least ‘extra-welfarist’ in that it is more than a simple expected utility maximization) rationale for policies involving scarce resources like health care.

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The tooth fairy and the traditionality of modernity

by John Quiggin on February 15, 2014

Salon magazine reports another instance of CP Snow’s observation that all ancient traditions date from the second half of the 19th century. This time, it’s the Tooth Fairy. As you would expect, the Tooth Fairy turns out to be a codification and modification of a bunch of older local practices, many involving a mouse or rat.

This seemed like a good time to rerun one of my posts that stirred up plenty of trouble at the time, making the point that we are “now living in a society that’s far more tradition-bound than that of the 19th Century, and in some respects more so than at any time since at least the Middle Ages”.

I’ll just add that CP Snow was writing in the 1950s, pretty much equidistant between the late 19th century and the present day, strengthening my observation that the “invention of tradition” is now something of a traditional concept (though the phrase itself, due to Hobsbawm and Ranger, is a mere 30 years old).
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Macroeconomics made easy?

by John Quiggin on February 10, 2014

In my book, Zombie Economics, I started the account of macroeconomics with the observation

Macroeconomics began with Keynes. Before Keynes wrote The General Theory of Employment, Interest, and Money, economic theory consisted almost entirely of what is now called microeconomics. The difference between the two is commonly put by saying that microeconomics is concerned with individual markets and macroeconomics with the economy as a whole, but that formulation implicitly assumes a view of the world that is at least partly Keynesian.

Long before Keynes, neoclassical economists had both a theory of how prices are determined in individual markets so as to match supply and demand (“partial equilibrium theory”) and a theory of how all the prices in the economy are jointly determined to produce a “general equilibrium” in which there are no unsold goods or unemployed workers.

I went on to observe how the pre-Keynesian approach had been revived by the “New Classical” school, and how the apparent convergence with “New Keynesian” economics had been shown to be illusory after the failure of Dynamic Stochastic General Equilibrium models to deal with the 2008 financial crisis and the subsquent, still continuing, depression.

With all of this, though, I still never thought of academic macro, in either saltwater or freshwater form, as being a simple reversion to the pre-Keynesian notion of general equilibrium, with no concern about aggregate demand or unemployment, even in the short run. It turns out that, at least for a large segment of the profession, this is quite wrong. I’ve just received a book entitled Big ideas in Macroeconomics: A nontechnical view by Kartik Athreya, an economist at the Richmond Federal Reserve who made a splash a few years back with a piece entitled Economics is Hard. Don’t Let Bloggers Tell You Otherwise, which, unsurprisingly, did not endear him to bloggers. As a critic of mainstream macro, I’m briefly mentioned, and I just got a review copy.

The new book is an attempt to simplify things, and indeed it has proved enlightening to me and also to Herb Gintis who contributes a blurb on the back, commending it as an accessible and accurate description of the dominant way of thinking about macroeconomics.

The easiest way to see why the book is so striking is to list some topics that do not appear in the index (and are not discussed, or only mentioned in passing, in the text). These include: unemployment, inflation, recession, depression, business cycle, Phillips curve, NAIRU, Taylor Rule, money, monetary policy and fiscal policy.

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