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John Quiggin

Armistice Day (crosspost)

by John Quiggin on November 11, 2013

I usually write a post on 11 November, the anniversary of the armistice that brought a temporary end to the Great War that engulfed Europe in 1914 and continued, in one form or another, until the end of the 20th century. But nothing I write could match this from former Australian Prime minister Paul Keating. The core of the piece

The First World War was a war devoid of any virtue. It arose from the quagmire of European tribalism. A complex interplay of nation state destinies overlaid by notions of cultural superiority peppered with racism.

The First World War not only destroyed European civilisation and the empires at its heart; its aftermath led to a second conflagration, the Second World War, which divided the continent until the end of the century.

But all of it is worth reading and remembering, along with Keating’s 1993 speech at the funeral of the unknown Australian soldier.

I’m not going to take comments on this at CT, but you can discuss it at my blog.

The macro foundations of microeconomics

by John Quiggin on October 25, 2013

Twitter alerted me to an amusing exchange between Chris Auld, posting a list of “18 signs you’re reading bad criticism of economics and Unlearning Economics, responding with 18 Signs Economists Haven’t the Foggiest. UL suggests that Stephen Williamson manages an impressive 9 out of 18 in his review of Zombie Economics (my response here with more from Noah Smith.

Scoring myself against Chris Auld’s list, I’d say I’m in the clear. But quite a few commenters on Zombie Economics have made complaints along the lines of his point 1, that I focus too much on macroeconomics (and finance). The implication is that, even if macro is totally wrong, only a minority of economists do it, and microeconomists are in the clear.

This defense doesn’t work, at least not in general.

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A minor life-hack

by John Quiggin on October 22, 2013

I’m currently reading Scarcity by by Sendhil Mullainathan and Eldar Shafir. At this stage, I’m inclined to sympathise with the unnamed colleague who commented “There’s already a science of scarcity. It’s called economics”. So far, it’s mostly straightforward applications of the observation that time and attention are scarce resources, combined with some fairly familiar observations from behavioral econ on how people fail to optimise either the first-order problems of allocating a tight budget or the second order problem of allocating time and attention to the first-order problem (my terms here, not theirs). However, I’m only part way through, and the authors promise to show how their approach differs from the way in which economists would normally think about this kind of problem.

This post is about a specific and well known observation cited by Mullainathan and Shafir. Faced with paying $100 for an item that could be had elsewhere for $50, most people are willing to put in a fair bit of effort (say, driving for an hour) to get the lower price.[^1] On the other hand if the item costs $1050 and could be had for $1000, people with reasonably high incomes mostly pay up, instead of driving to the other store. This is obviously inconsistent with standard opportunity cost. [click to continue...]

The Port Huron statement and the Southern Strategy

by John Quiggin on October 20, 2013

A while ago, I listened to a fascinating talk by Erik Olin Wright about Envisioning Real Utopias, on which we held a book event a while back.1 He mentioned the Port Huron Statement, published by Students for a Democratic Society in 1962. I looked it up, and was struck by the fact that it envisaged, and welcomed, the political realignment later implemented by Richard Nixon as the Southern Strategy, and which still dominates US politics.

A most alarming fact is that few, if any, politicians are calling for changes in these conditions. Only a handful even are calling on the President to “live up to” platform pledges; no one is demanding structural changes, such as the shuttling of Southern Democrats out of the Democratic Party…. super-patriotic groups have become a politically influential force within the Republican Party, at a national level through Senator Goldwater, and at a local level through their important social and economic roles. Their political views are defined generally as the opposite of the supposed views of communists: complete individual freedom in the economic sphere, non-participation by the government in the machinery of production. But actually “anticommunism” becomes an umbrella by which to protest liberalism, internationalism, welfarism, the active civil rights and labor movements. It is to the disgrace of the United States that such a movement should become a prominent kind of public participation in the modern world — but, ironically, it is somewhat to the interests of the United States that such a movement should be a public constituency pointed toward realignment of the political parties, demanding a conservative Republican Party in the South and an exclusion of the “leftist” elements of the national GOP.

I don’t suppose the SDS activists thought that the combination of the Goldwater right and the Southern Democrats would form a majority coalition strong enough to dominate US politics for decades. Still it’s far from obvious that they were wrong in wishing for the emergence of a clear partisan division to replace the coalition politics of the time.2

Any assessment of the realignment is complicated by the shift to the right that took place throughout the developed from the 1970s onwards. The fact that this shift seems to be going into reverse in the US.3, while it is accelerating in Europe, may be in part the product of the great realignment. Oddly enough, precisely because partisan politics is so new in the US, the Dems seem to be more willing to engage in it than their Social Democratic counterparts in Europe (of course, they’ve been schooled in it by the Repubs for twenty years or so). And while the objective position of the Dems is still well to the right of European SocDems, they seem to be breaking with neoliberal ideas like the Grand Bargain at precisely the time the SocDems are (for the most part) capitulating to austerity.


  1. We seem to be missing the link on this, but here’s my opening contribution

  2. BTW, it seems bizarre to me, and to other non-US people I’ve talked to that the acryonym GOP is used to describe the Repubs, even by a group as hostile as the SDS. There’s no corresponding acronym for the Democrats – it would seem that DP and RP or just D’s and R’s would serve much better. Any thoughts on this? 

  3. As evidenced both by the renewed electoral success of the Democrats, and more tenuously, by a shift away from the idea of a market liberal “Grand Bargain” and towards a reassertion of support for the institutions of the New Deal (minus the accommodation with Southern racism). 

Why do we *still* have a Nobel Prize in economics?

by John Quiggin on October 14, 2013

Ingrid links to some fascinating discussion from Philip Mirowski of the role of Swedish domestic politics in the establishment of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, with emphasis on the way in which claims of “scientific” status for economics helped the claim of the Swedish central bank to independence from government.

In the broader context, it seems pretty clear that, if the idea had arisen even a few years later, it would have been rejected. In 1969, economics really did seem like a progressively developing science in which new discoveries built on old ones. There were some challenges to the dominant Keynesian-neoclassical synthesis but they were either marginalized (Marxists, institutionalists) or appeared to reflect disagreements about parameter values that could fit within the mainstream synthesis.

Only a few years later, all of this was in ruins. The rational expectations revolution sought, with considerable success, to discredit Keynesian macroeconomics, while promising to develop a New Classical model in which macroeconomic fluctuations were explained by Real Business Cycles. This project was a failure, but led to the award of a string of Nobels, before macroeconomists converged on the idea of Dynamic Stochastic General Equilibrium models, which failed miserably in the context of the global financial crisis. The big debate in macro can be phrased as “where did it all go wrong”. Robert Gordon says 1978, I’ve gone for 1958, while the New Classical position implies that the big mistake was Keynes’ General Theory in 1936

The failure in finance is even worse, as is illustrated by this year’s awards where Eugene Fama gets a prize for formulating the Efficient Markets Hypothesis and Robert Shiller for his leading role in demolishing it. Microeconomics is in a somewhat better state: the rise of behavioral economics has the promise of improved realism in the description of economic decisions.

Overall, economics is still at a pre-scientific stage, at least, as the idea of science is exemplified by Physics and Chemistry. Economists have made some important discoveries, and a knowledge of economics helps us to understand crucial issues, but there is no agreement on fundamental issues. The result is that prizes are awarded both for “discoveries” and for the refutation of those discoveries.

The crisis of 2011, in 2013

by John Quiggin on September 30, 2013

Since a shutdown of the US government now appears inevitable, I thought I would look back at a post from 2010, in which I predicted such an outcome, expecting it to come in 2010. As it turned out that was premature, but much of the analysis still stands up pretty well, notably including the final sentence

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The global party of stupid

by John Quiggin on September 21, 2013

Australia’s new conservative ministry has just been sworn in, and while it includes Ministers for Border Protection (that is, stopping refugees) and Sport, and even a minister for the centenary of the Anzac landings on Gallipoli in 1915, there are no longer ministers for science or higher education[^1].

This is part of a fairly consistent pattern. The US Republican Party recently vetoed the creation of an unpaid position of National Science Laureate. In Canada, the Harper government eliminated the position of National Science Advisor, among many other anti-science moves. All of this reflects the fact that scientific research on topics like climate change and evolution regularly reaches conclusions that conflict with the policy preferences or religious beliefs of rightwingers. [click to continue...]

Bookplugs

by John Quiggin on September 17, 2013

I’ll be at Brisbane’s Avid Reader bookshop this evening, helping at the launch of Pushing our luck: ideas for Australian progress, a new book of essays from the Centre for Policy Development. We’ve got a few years to reflect on policy ideas following the recent election win for the Murdoch-LNP, so this is a good time to get started.

While I’m at it, I’m going to mention a bunch of books I’ve read, and intended to write about, but haven’t had time (may do so later)

Earthmasters: Playing God with the Climate by Clive Hamilton, is about geo-engineering, often presented as the backstop alternative to reducing greenhouse gas emissions. As the title indicates, this book is an argument that reliance on geo-engineering is a recipe for disaster. I agree, though I think it’s clear that sometime this century we are going to have to find a way to achieve, in effect, negative emissions, that is a situation where human and natural processes take more CO2 and methane out of the atmosphere than they put into it. That’s not exactly geoengineering, but it is a conscious intervention to change the atmosphere, or at least return it to an earlier state

Battlers and Billionaires: The Story of Inequality in Australia by Andrew Leigh, economist and MP. A great book on the looming end of the “fair go” in Australia. I’d put more emphasis on the role of policy and less on technology than Andrew does, but that puts me in a minority among economists.

The Infinite Resource by Ramez Naam. This is the book that Bjorn Lomborg ought to have written, instead of the silly and deceptive “Sceptical Environmentalist”. Naam doesn’t pretend that the risk of environmental catastrophe is spurious or that markets will fix the problem by themselves, but nonetheless has an optimistic take on the scope for innovation to allow the human race to not only survive but thrive.

Occupy the Future a volume of short essays arising from the Occupy movement. Lots of useful resources here

Masters of the Universe:Hayek, Friedman, and the Birth of Neoliberal Politics by Daniel Stedman Jones. Not a new topic, but a lot of new information and analysis – well worth reading.

The New American Economy:The Failure of Reaganomics and a New Way Forward From 2009, interesting in itself and because Bartlett is one of the most notable examples of the intellectual trend of conversion from right to left, evident since the late 1990s, and reversing the pattern of earlier decades.

Merchants of Doubt by Naomi Oreskes and Erik Conway Another older book, but indispensable now that the merchants of doubt and delusion have gained political power here

Bankers, Bureaucrats, and Central Bank Politics: The Myth of Neutrality by Christopher Adolph. Makes the obvious but vital point that central bankers aren’t neutral bureaucrats. For many, central banking is a step towards, or an interlude in, a career in the financial sector, and the policies they advocate while in the public sector reflect this.

That hasn’t left a lot of time for fiction, but I think I have now read everything by the late and much-missed Iain Banks (including all the SF stuff written as Iain M. Banks).

What is it like to be a bug?

by John Quiggin on September 14, 2013

According to Calvin, at least, the same as to be a bat. But for the rest of us, it seems obvious that there is likely to be a qualitative difference between the subjective experience (if any) of a bug, and that of a bat. And, if true bugs don’t work for you in this example, there’s always the colloquial “bugs” such as bacteria and viruses, which presumably don’t have any experience at all.

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Another two-step

by John Quiggin on September 13, 2013

I’ve always been envious of John Holbo’s discovery of the two-step of terrific triviality, a manoeuvre we’d all seen, but never properly identified. I’d like to solicit names for a manoeuvre I run into all the time in debates over climate policy which goes along the following lines

A: The planet is doomed unless we abandon industrial civilization/adopt my WWII-scale emergency program

B (me): On the contrary,we could cut emissions by 50 per cent quickly and with minimal effects on living standards.1

A: What about cars, methane from ag production, air travel etc?

B: (me) We could cut vehicle emissions in half just by switching to the most fuel-efficient cars now on the market, methane by eating chicken instead of beef, air travel by videoconferencing and taking one long holiday in place of two short ones. The same for most other sources of emissions.2

A: That’s absurd. No one would ever stand for that.

So, does anyone have a name for this manoeuvre, or, alternatively, a defense of this kind of argumentation


  1. Actually, we need a 90 per cent reduction by 2050. That would be a bit harder, but once you accept the idea that we could greatly reduce emissions without harming living standards, we’re down to arguing about parameter values in economic models. All economic models yield the conclusion that we could decarbonize the economy over 40 years while still improving living standards greatly. 

  2. I’ll leave aside the question of whether it’s better to bring this about using prices (eg a carbon tax) or direct controls. My preferred answer is a bit of both, but either will work for the purposes of this example. 

Homeopathy and vaccination

by John Quiggin on September 11, 2013

I was working on a piece about how to respond to anti-vaccination beliefs, when it struck me that, in the absence of the germ theory of disease, vaccination looks a lot like homeopathy – you use a tiny amount of something that causes a mild version of the disease you want to prevent. I wondered whether the success of vaccination in the 18th century had any impact on the development of homeopathy. A very casual search suggests not, though there is something called homeopathic vaccination. Does anyone know more about this?

Assad and the ICC

by John Quiggin on September 7, 2013

I was going to write a long post arguing the case for a UNSC resolution to indict Assad before the ICC, but Google revealed that Edward Bernton at the Globalist had already written it. So, I’ll just add some notes over the fold

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An undeserving PM (crosspost from johnquiggin.com)

by John Quiggin on September 7, 2013

Unless there’s a sudden turnaround in the polls, Tony Abbott will become Prime Minister of Australia tonight. This will be the third time in my life that a Federal Labor government has been defeated, the other two occasions being 1975 and 1996. On both those occasions, despite substantial and enduring accomplishments, the government had made a mess of macroeconomic management, and the electorate, unsurprisingly, wanted to punish them. And, despite my strong disagreements with them (and with the way Fraser came to office), the incoming Prime Ministers had serious views on how best Australia’s future could be managed. Fraser has only improved since leaving office, making valuable contributions on the national and global stage. My evaluation of Howard, following his defeat, starts with the observation that he was ‘the most substantial figure produced by the Liberal party since the party itself was created by Menzies’.

Nothing of the sort can be said this time. The case put forward by the LNP is based entirely on lies and myths. These include the claims that

  • Labor has mismanaged the economy and piled up unnecessary debt and deficits
  • Australian families are ‘doing it tough’ because of a soaring cost of living
  • The carbon tax/price is a ‘wrecking ball’, destroying economic activity
  • The arrival of refugees represents a ‘national emergency’

None of these claims stands up to even momentary scrutiny.

Then there’s Abbott himself. After 20 years in politics, I can’t point to any substantial accomplishments on his part, or even any coherent political philosophy. For example, I’m not as critical of his parental leave scheme as some, but it’s totally inconsistent with his general political line, a fact that his supporters in business have been keen to point out. On climate change, he’s held every position possible and is now promising, in effect, to do nothing. His refusal to reveal policy costings until the second-last day of the campaign debases an already appalling process. He treated budget surplus as a holy grail until it became inconvenient, and has now become carefully vague on the topic.

Obviously, the fact that such a party and such a leader can be on the verge of victory implies that the Labor side has done something dreadfully wrong. It’s the oldest cliche in politics for the losing side to claim that the problem is not the policies but inability to get the message across. In this case, however, I think it’s true. Gillard lost the voters early on with stunts like a consultative assembly to decide on climate change policy, and never managed to get them to listen to her for any length of time. Rudd was doing well in communicating his vision from his return to the leadership until he called the election. He then wasted three weeks on small-bore stuff apparently aimed at securing minor party preferences. He seemed finally to have rediscovered his voice, in the last week of the campaign, but almost certainly too late.

Propping up dictators, and knocking them down

by John Quiggin on September 4, 2013

As we’ve discussed, bombing Syria seems like a bad idea, and its international legality is dubious at best. Still, it’s possible to make a case. The proposed action is directed against the military forces of a dictatorship that has killed thousands of its citizens, and Obama seems willing to comply with US law for once.

That would be a lot more convincing if it weren’t contradicted by the continued provision of aid to the military dictatorship in Egypt, following a coup against the democratically elected government. This is in direct violation of US law, and has emboldened the generals to engage in steadily more brutal repression.

There are some reports that the Administration is quietly suspending aid, or that it plans to do something after the Syrian bombing has been approved (or not). But there’s plenty of resistance as well, most notably from AIPAC.

As long as the US continues to prop up murderous dictatorships for geopolitical or economic reasons, it’s hard to take seriously the eruptions of moral outrage about those, like Assad’s, that have fallen out of favor. Obama may move on Egypt. But the US still supports autocracies throughout the region, most obviously Saudi Arabia and Bahrein, home of the 5th Fleet.

War and waste

by John Quiggin on August 29, 2013

Even by the standards of CT, I seem to be an extreme pacifist. That’s surprising to me, because I was a mainstream liberal internationalist 20 years ago, and I haven’t changed my views in any fundamental way. In particular, I don’t have any fundamental objection in principle to war, or even to constraints like the need for a UN resolution. I’ve just looked at the experience of those 20 years, and reconsidered earlier wars, and I’ve concluded that the consequences of war and revolution are nearly always bad. Even ‘successful’ wars cost more, in terms of lives and wasted resources, than the benefits they deliver.

I don’t particularly like being out on a limb, so I’m generally encouraged to find other people starting to think the same way. In particular, I was pleased to see this column by Matt Yglesias, making the point that Military strikes are an extremely expensive way to help foreigners with specific reference to Libya. I made exactly the same case at the time.

With a little more ambivalence, I read this piece by Tom “Suck. On. This” Friedman who observes that Middle East oil no longer matters, and concludes

Obama’s foreign policy is mostly “nudging” and whispering. It is not very satisfying, not very much fun and won’t make much history, but it’s probably the best we can do or afford right now. And it’s certainly all that most Americans want.
I don’t share the tone of regret (“Happy the land that has no history” is my view), but apart from that, Friedman is very close to the view I put in the National Interest a year ago, that there is no clearly defined U.S. national interest at stake in the Middle East and, more succinctly, in this comprehensive plan for US policy on the Middle East … [^1]

Even at the cost of lining up with Friedman, I’d be pleased if the idea that war is a mostly futile waste of lives and money became conventional wisdom. Switching to utopian mode, wouldn’t it be amazing if the urge to “do something” could be channeled into, say, ending hunger in the world or universal literacy (both cheaper than even one Iraq-sized war)?

[^1]: The joke doesn’t quite work as a link. You have to imagine the [click to continue] fold after the first para.