Club Troppo

“I must admit to having no compence in economics whatsoever” wrote Robert Manne in the Introduction to The New Conservatism in Australia (1982). He proceeded to demonstrate the truth of that admission by turning his face against economic reform and advocating the kind of policies that locked Japan into recession for more than a decade. There were some signs that he learned something over the years but it is apparent from his introduction to the “Is Rudd Right” series of essays in the May Monthly that he has reverted to his natural state.

The five contributors are Eric Hobsbawn, Charles Morris, John Gray, Dean Baker and David Hale.

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I don’t ask for much from Troppodillians (well apart except from jobs, business advice, money and subjects for experiments).

As part of my requirements for a unit on Software Quality & Measurement at UWA, I’ve developed two different procedures for calculating monthly mortgage repayments. Now I need to trial them on various people and see how well they perform (or how badly).

Since power corrupts, and admin privileges corrupt absolutely, I thought I would ask for volunteers from the Troppo audience to take part in my experiment.

It is quite simple and should take no longer than a few minutes for most Troppo readers. In return you receive my undying (but anonymised) gratitude and a promise to report on the fascinating findings in a few weeks time.

To take part, follow this link.

Update: some people have trouble downloading the file with Acrobat saying “The file is damaged and cannot be repaired.” This seems to happen in Firefox but not IE.

Workarounds: you can right-click and “Save As”, or use Internet Explorer.

I’m not sure why this is happening, but I’ll look into it.

I should also note that I don’t need you to fish out your own mortgage details — numbers are provided for you to crunch.

Mark Blaug (1937- ) was born in the Netherlands, raised in the US and became a naturalised Briton in 1982. He made far reaching contributions to a range of topics in economic thought. In addition to work on the economics of art and the economics of education, he is best known for his work in history of economic thought and the methodology of economics.

His books.

He wrote a lengthy memoire in an essay titled “Not only an economist – autobiographical reflections of a historian of economic thought.” This is on line at Questia.

Henry George and Marx

I owe the decision to study economics to the influence of the writings of Henry George and Karl Marx. In 1944 I was 17 years old and attending Peter Stuyvesant High School in New York City. I enrolled for a course in Commerce, and in the last week of the term the teacher took some of the better students, which included me, to a special lecture at a nearby Henry George School.

He was intrigued but not entirely convinced by Progress and Poverty but next he encountered the pamphlets of Lenin and Stalin and then the weightier tomes of Marx and Engels which “completely bowled” him over, so he became an avowed follower of Marx.
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Every cycle of monetary policy seems to bring forward some piece of confused thinking that somehow turns up centre stage.  It’s not as if monetary policy is easy – given the inevitable level of ignorance and the long and variable lags in the effect of monetary policy. But central banks  have to make difficult decisions – like courts.  And then they have to justify them. And it’s tricky. And though I have the greatest respect for their predicament I recall asking when the RBA last reduced rates in a recession in the early 1990s, I asked why, once we were confident that we’d slowed the economy down, we didn’t lower rates faster.  I was told that it takes a long time for interest rates to work so we were lowering them gradually. (The obvious analogy is being on the Titanic and seeing the iceberg.  The rudder takes a while to have much effect, so we just move it s l o w l y to its new position.)

The more recent version of this is ‘keeping your powder dry’ holding off on using your ammo.  With the greatest respect to Rory Robertson, here he is buying into this line explaining how the RBA’s policy of leaving rates where they are is justified if things turn up in the future.  And  . . .  also if they turn down. 

If the RBA really had wanted to deliver a further substantial drop in key lending rates, it would have cut its cash rate more forcefully.  Bigger cash rate cuts may well turn out be necessary down the track, but for now the RBA is happy to sit and wait and watch, either hoping for better times ahead or saving its ammunition for darker days, or more accurately – both.  That is,the RBA is hoping for the best but remains prepared for the worst.  Like the rest of us!

I attended a graduation last week, and submitted to my usual ritual of explaining, to everyone who asked, why I sat in the stalls in mufti rather than on the dais in academic regalia.

Some of my colleagues inform me that they hate graduations, either because they are bored by them, or because they hate ceremony or ceremonies or both. That isn’t my problem. I don’t mind ceremonies, I believe in graduations, and I think it’s important for academics to attend. As a colleague said years ago, how could we consider putting the students through all those hoops for three years, and then tell them at the end that we’re not interested that they’ve finished? After the ceremony, it’s fun mingling with the students, meeting their parents, reminiscing, and discussing their future plans. (Continued)

There’s lots of crowing by opponents of the right in both Australia and the US that the right are in grave trouble.  It always looks that way.  And in Australia it does look like oppositions spend a lot of time out of power.  But there’s always a lot of luck involved. Howard was cruising to a loss in 2001 before the audacity of Howard’s hope with the Tampa and Sept 11 turned things around. Now John Quiggin says that the Libs can’t go anywhere if they don’t get more credible on greenhouse. 

Likewise everyone’s laughing at the Republicans and Bruce Bartlett tells us they’ve got to get themselves together and get back into that middle ground. 

All of which leads me to say . . .  Perhaps.

I haven’t noticed that it matters that much whether parties are credible to the policy elite.  If a government gets into trouble, they can get credible pretty quickly because the pressure comes on the other side.  For instance the Lib’s slipping and sliding on greenhouse looks weak right now.  But electricity prices haven’t started rising, firms haven’t started blaming the trading scheme for closing them down (whether it’s true or not).  And that’s when their shilly shallying can come in handy.  Because they can say “it wouldn’t have happened under our policies”.

And I recall the last US election.  For a time there it looked like McCain and Miss Credibility (Not) Sarah Palin were on their way to overtaking Obama’s lead.  Their mud was starting to stick and they were pegging Obama back.  And then the GFC really took off and McCain proceeded to handle things very badly – as did Palin.  Now those guys had about as little cred as you can imagine – on top of GWB’s extraordinary string of stuff ups. But they nearly made it over the line, and may well have done so if the GFC wasn’t so exquisitely timed.

So I’m afraid I think that, while it takes bad luck or bad government to lose an election, once a government is in trouble, Oppositions, even pretty hopeless ones can cobble together sufficient cred to survive a campaign of ‘he said – she said’ reporting and scramble over the line.  But I would concede that being in as great a disarray and discomfort as they are right now obviously doesn’t help their chances.

I enjoyed the launch of the John Button Prize in Melbourne last ‘Thursday night.  After the event I retired to a restaurant Button liked in Little Bourke St – The Shark Fin with two of his three sons, two of his three wives and two of what may be three grandchildren and some others. It was fun.  We swapped a few John Button Stories.  I told of the time in 1983 when as an idealistic young staffer with some good piece of news for the government, I said to Button “Shouldn’t we give this goal to the full forward to kick”. Button thought about it in silence for a while before responding “Half forward flanker’s got to kick a few”. 

And someone told the story of a woman saying to Button that his two eyes were a slightly different colour.  He replied with what I imagine was a combination of gruff humour and flirtatiousness “I’ve had wives who haven’t noticed that”.

Thatcherism is just another word for neoliberalism, says Kevin Rudd. It’s been almost two decades since Margaret Thatcher left office and her record has been obscured by mythology. Sure she took on the unions and sold off some public enterprises, but did she really "roll back the frontiers of the state"?

Despite more than a decade in power, Mrs Thatcher left office with tax revenues running at around 36.1 per cent of gross domestic product. In the same year, Australia’s social democratic government had tax revenues running at around 28.5 percent of GDP. And last year, the Australian treasury was bragging that Australia’s tax to GDP ratio was "substantially below the OECD average of 36.2 per cent".

Of course getting taxes down to the current OECD average was a significant achievement in 1980s Britain. According to Paul Pierson, the Thatcher government succeeded in reducing total public expenditure from 44.0 per cent to around 40.1 of GDP (while allowing expenditure to rise to 47.5 per cent in 1982). It’s true that 40 per cent is lower that 44 per cent, but it was far less than the reduction many of Mrs Thatcher’s supporters were hoping for.

In the 1994 book Thinking the Unthinkable Richard Cockett writes about the disillusionment of neoliberal activists like John Hoskins, Norman Strauss and Alfred Sherman:

Although Mrs Thatcher might have appeared to be radical, at the vital moment she had failed to grasp the nettle of institutional reform that might have foreshadowed a real return to economic liberalism; as it turned out, the levels of public spending (in real terms) in 1990 when Mrs Thatcher left office, had hardly changed from the year when she had entered Downing Street in 1979. Measured by this important yardstick ‘Thatcherism’ had thus made very little impact at all (p314-315).

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 I’m pretty downcast having read Glenn Stevens latest speech. It’s on the usual topic – the economy, its past fortunes and future prospects.  I don’t read these kinds of speeches much because I’m not an ‘economy watcher’ trying to predict the next GDP numbers and I have a strong aversion to tea-leaf reading.

Anyway, the fact that I read these kinds of speeches rarely might give me a bit more distance from your usual pundit.  I’m really quite taken aback by how one-dimensional the speech is.  I guess it’s not surprising that a speech by the RBA Gov is deep in the minutiae of the immediate fortunes of the macro-economy. Anyway if I get time, I’ll blog about the implicit vision of an ‘economy’ that seems to lie at the heart of Stevens’ speech embodied in the five points he makes at the end about what good things we might aspire to for the Australian economy.  But for now lets have a look at Stevens’ discussion of consumer confidence.  

Now I have to confess to feeling rather ambivalent about consumer confidence.  For the duration of the long boom I was hoping for consumer confidence to fall, because I think Australians need to consume a little less and save a little more or to put it another way, they need to import a little less and export a little more (or better still, import more and export a lot more) .* Right now, I agree that consumer confidence and consumer spending are our friends.  But only in the short term. In the longer term I’d hope we’d have a plan to rely less on them to maintain demand in the economy and more on investment and net exports.

So Stevens has this to say. (Continued)