John Q

As I was reminded in comments last time, snarking about libertarians is not a very productive substitute for writing well-argued posts about The Way Forward for Social Democracy, or writing my nearly-due examiners report for that PhD thesis, or revising my article on climate change on discounting, or getting the yard under control. But if I was capable of responding to that kind of reasoning, I wouldn’t be a blogger would I. So, in lieu of something useful, here’s a thought that occurred to me.

Among the more plausible candidates for an Actually Existing Libertopia, the US in C19 (with asterisks) is pretty prominent. Also, on the basis of fairly thin historical evidence, the Iceland of the sagas. It seems to me that these examples have one crucial point in common that hasn’t received much attention
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Henry’s post linking to Charlie Stross reminded me of one I was planning to do on the question – why has there never been a serious attempt at a real libertarian utopia? Most other utopian ideologies have inspired at least someone to attempt a practical implementation. On the face of it, libertarianism seems ideally suited to the belief in a fresh start, with no messy pre-existing claims. All sorts of ideas have been floated – island buyouts, sea-steading, co-ordinated moves to New Hampshire and so on, but none has gone anywhere. The only explanation I’ve seen, that libertarians are too independent and ornery to organise a utopia doesn’t convince me.

Thinking about the discussion we had though, it strikes me that there is a simple explanation: Actually Existing Libertarianism (see below) offers a better economic deal for nearly all libertarians than any feasible version of Galt’s Gulch. Once you do the math on going Galt, it’s not hard to see why no self-respecting libertarian would actually do it.

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A question that comes up at CT quite a bit is: who has benefited from the massive increase in US income inequality over recent decades. I finally got around to chasing down Congressional Budget Office data (derived from tax records for the period 1979 to 2005), and the answer, in short is:
* The top 1 per cent roughly doubled their share of both pre-tax income (9 per cent to 18 percent) and after-tax income (7.5 per cent to 15 per cent)
* The rest of the top 10 per cent slightly increased their share (from about 20 to about 22 per cent)
* The next 10 per cent held their share (about 15 percent)
* The remaining 80 per cent of households saw their share drop (from 58 per cent to 48 per cent of post-tax income, with the biggest drops coming at the bottom. The bottom 40 per cent of households now get a smaller share of post tax income (14 per cent, down from 19) than the top 1 per cent.
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After the usual hassles, UQ School of Economics finally has its own videoconference facility, an IP-based Tandberg system, which should (fingers crossed) be interoperable with other standards-based systems. I just did my first conference, and it worked very well. Unfortunately, we are still waiting for an upgrade that will let me run a presentation at the same time as appearing on video. But I’m confident of ultimate success, so I’m now announcing that I’m available to give seminars and talks on a wide range of topics to anyone (subject to time and timezone constraints!) who would like to organise a videoconference. Email me j.quiggin at uq.edu.au if you are interested.

The choice of cover design for a book is always a tricky process, at least for authors like me who are more comfortable with text than images. A while back Eszter dealt with the problem by crowdsourcing the cover for her book Research Confidential.

I got lots of input from readers here on the text and title of Zombie Economics, but I left the cover design to the professionals, and I’m glad I did. Here’s the cover, based on a horror comic and here,at the Princeton University Press blog, is a discussion of how it came about.

There was one anxious moment when we discovered that the design included a reference to a chapter (on central bank independence) that I’d deleted at a late stage in the process. But the designer came up with a clever tweak that changed the reference (to refer to financial markets) without affecting the impact of the design.

This is the first book I’ve done since I took up blogging (I use to say blogs kill books, but this book grew out of the blog) and the process has left me with renewed respect for the range of skills that are involved in turning an idea and a rough draft into a book.

I’ve been too absorbed by my book projects and by Australian politics (of which more soon) to pay a lot of attention to the forthcoming US elections, but it seems to be widely projected that the Republicans could regain control of the House of Representatives. What surprises me is that no-one has drawn the obvious inference as to what will follow, namely a shutdown of the US government.
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The idea that Obama (or rather, the wisdom of crowds in anticipating the election of a socialist-Islamist Obama administration) caused the recession is getting another run, this time from Nobel[1] prizewinner Ed Prescott. I haven’t been able to track down more than a precis of Prescott’s argument, but I assume it’s similar to the version put forward by Casey Mulligan. I had a go at this in my Zombie economics book [2], and here on CT, so, I thought I would link to it here, to give a bit of context to the current flap.

[1] Yes, yes, I know about the Sverige Riksbank. And winners of the economics prize aren’t the only ones to say silly things later on.
[2] Still on track for Halloween, and already taking pre-orders! Join the Facebook group here.

Some thoughts on the nature of the European crisis, which I’m writing up for an opinion piece. Comments much appreciated

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I’m still thinking about policy responses to the latest phase of the crisis, though I suspect events are moving faster than I can think about them. Anyway, I thought I would try a little arithmetic on the question of whether, and how, the fiscal hole opened up by the crisis could be filled[1]. The first question is Who Should Pay? The finance sector, taken collectively, was both the biggest beneficiary of the neoliberal era and also bears most responsibility for the crisis. But at most it will be possible to recoup some of the money that has already been spent on bailouts for the banks, not to mention what will have to be spent in Europe in coming months [2].

The big class of beneficiaries of the neoliberal era have been those in the top quintile of the income distribution, a class that includes me and a fair chunk of CT’s contributors and readers. Since no-one much thinks of themselves as “rich”, I’ll use the term “well-off”. Particularly in English-speaking countries, this group has benefited both from an increase in the inequality of market income and from less progressive taxation.

So, can the well-off be made to pay for the crisis, and should they?

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Perhaps, despite the sample of one and the obvious irrelevance of the opening anecdote (didn’t people miss important letters amid the junk mail back in the old days?), there is something to this NYT story about how the Internet is killing our attention span. But I can’t help imagining some grouchy old-timer saying something like “Damn cave paintings. In my day, we told stories about the sacred mammoth hunt, and you really had to use your imagination. Kids these days just want to stare at a wall all night. No wonder they can’t throw a spear straight”.

I’m working on a longish piece on how to pay for the global financial crisis, and it seems like a good idea to deal with some side issues separately. One of the standard post-crisis responses of governments, i has been to increase the age at which people become eligible for public old age pensions. This change is likely to flow through to other policies, for example by shaping the presumptions around the tax treatment of private retirement income.

I want to step away from these financial questions and ask the question: does it make sense, in general, for people to retire at older ages than in the past? For those who want the “shorter” version, my answer, on balance, is “Yes, at least in Australia”.

Update The qualification “at least in Australia” is more important than I initially thought. In particular (and surprisingly to me), the US has not had anything like the increase in conditional life expectancy seen in Oz – a gain of about 2 years since 1980 for the US compared to 6 for Oz (US source here, Oz here). Also, the Australian old age pension is flat rate (subject to a means test) and essentially the same as the disability support pension, which is the main source of support for people who are too old to work in physically demanding jobs. Again, it seems worth pointing out that the best solution here is to make the jobs better, by reducing working hours and improving conditions.

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Apropos of recent proposals to stop giving Miranda warnings to terrorism suspects, Glenn Greenwald observes[1]

, the reaction is still exactly the same to every Terrorist attack, whether a success or failure, large- or small-scale. Apparently, 8 years of the Bush assault on basic liberties was insufficient; there are still many remaining rights in need of severe abridgment. Even now, every new attempted attack causes the Government to devise a new proposal for increasing its own powers still further and reducing rights even more, while the media cheer it on. It never goes in the other direction.

This kind of policy “ratchet” is quite common, but I haven’t seen a fully satisfactory, or general, analysis of either the metaphor or the phenomenon.

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While we wait for the dust to settle following the 2010 election, I thought I’d repost this piece from the aftermath of 2005, suggesting that Labour should introduce electoral reform. My predictive record is a mixed one, but this piece looks pretty good, I think.
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I’m rushing to prepare to go into a lockup to write reports on Australia’s government budget, brought down tomorrow, so this post is a bit scatty, but it might raise some points for discussion regarding the European debt crisis.

* First, a general observation. In a typical bailout, the biggest beneficiaries are not debtors, but creditors. So creditors ought to be “bailed-in” and made to bear some part of the cost

* The Greek case is misleading, in implying that government profligacy is the primary cause of the crisis. In most cases, the problem is the same as in earlier rounds of the crisis, most obviously in Iceland – bad loans by private banks which their national governments feel impelled to rescue, but can’t afford to

* The idea that the euro precludes devaluation as a way out is a relatively minor part of the story. Given that debts are denominated in euros, devaluation to improve the trade balance would be only marginally effective. The real effect of the eurozone so far, has been to raise the stakes regarding default.

* Resolving the crisis requires a couple of measures at the European level
– monetary expansion by the ECB
– co-ordinated action to strengthen government revenue, both by an acceleration of the attack on tax evasion and by discouragement of tax competition within the eurozone

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