Club Troppo

Yep, its getting yucky down there in the Gulf. From Nasa’s Earth Observatory.

On June 12, 2010, oil from the still-leaking Deepwater Horizon well was particularly visible across the northern Gulf of Mexico when the Moderate Resolution Imaging Spectroradiometer (MODIS) on NASA’s Aqua satellite captured this image at 1:55 p.m. Central Daylight Time. Oil appears to have reached beaches and barrier islands in Alabama and the western Panhandle of Florida.

Close to the location of the well, the oil appears gray, but to the northeast, it is bright silver. The increased brightness does not necessarily mean the oil is thicker or more concentrated there; it may simply be that the oil is located in the sunglint region of the image—the spot where the Sun’s reflection would appear if the water surface was as perfectly smooth as a mirror.

Normally, waves blur the Sun’s reflection, diffusing its brightness. Oil smoothes the water surface, making it a better mirror. When the slick appears in that part of the image, viewing conditions are ideal, and the patches and ribbons of oil are extremely bright. When the oil slick is not in the sunglint part of the image, however, it may be imperceptible against the dark background of the ocean.

The large image provided above is at MODIS’ maximum spatial resolution (level of detail). Twice-daily images of the Gulf of Mexico are available from the MODIS Rapid Response Team in additional resolutions and formats, including a georeferenced version that can be used with Google Earth.

Australia’s unemployment rate may be back to where it was in the late 1970s but the structure of our labour market and our society is very different. For example, in the late 1970s almost 70 per cent of men aged 25 to 34 were married and working full-time. Today it’s less than 50 per cent.

(Continued)

James Farrell has very kindly asked me to post my thoughts on the Australia vs Germany World Cup Finals tie to be played tomorrow morning.

So far, for me, the tournament has got off to a relatively entertaining start. The opening game between South Africa and Mexico was a promising beginning: a fast, skillful and open match. Argentina vs Nigeria was similar with the bonus of Messi in sparkling form (and of course some lovely sideline flicks from the incomparable Diego).

First things first though. FIFA has done it again with the ball! Players aren’t confident in hitting it. It flies too long and doesn’t curl. It seems to me that they are concentrating on keeping it low to avoid it skying away. I’ve felt it in a shop. It’s light and is covered with a rough skin, perhaps to help players bend it? This is just ridiculous. If FIFA wants a new ball, they should just tell Adidas to produce the Champions League ball and name it and wrap it however it likes!

Secondly, the stadia look terrific, especially the one for the opening game.

On to Australia. We are in a tough group with three teams of contrasting styles. Germany plays a similar game to us: very tight, with attacking tending to flow down the wings. Serbia’s has a very cerebral and technical style that can really hurt us. And I would imagine that Ghana’s game will be very similar to the way South Africa and Nigeria play:physical and fast but skillful with attacks coming quickly and from all directions.

Before our qualifiers, I said that we could be good for a point against Germany. They didn’t impress in the qualifiers and provided we could defend well, and closed them down in midfield, our two styles would nullify each other.

But we haven’t played well in our friendlies. I know that they are only that, and we have had some star players injured, but what you want to see is a team that has cohered. And we haven’t.

You only have to compare us now to our side under Guus just before the previous Finals. He had definitely, and very quickly, blended a tight unit. The team pretty much picked itself and had been playing together successfully for a while.

And a good soccer team is not best described as a machine, but as an organism whose functioning is dependent on an almost unconscious continual feedback loop among its vital components, the players. This understanding takes talent and time to fashion, and a coach’s primary role is to try to create this out of his squad. (This is how the Golden Team of Hungary was fashioned and what Guus did with South Korea in 2002.)

This takes us to Pim. And it is this cohesion that he has failed to achieve as evidenced in our generally unconvincing qualifiers in the World and Asia Cups.

He seems more an auditor, than a coach, ticking boxes on some pro forma checklist from a coaching manual. He certainly lacks the fire and gusto of Guus (remember Guus on the sidelines defending his team in the match against Japan). Pim seems to take little joy from his role in a match, with the same dour expression even after a good passage of play. I don’t think I’ve ever seen him kick or juggle a ball, and all soccer players, no matter how old or in what role, love the ball (q.v. Diego again).

To wrap up, I think Australia will put up a brave fight. We are mentally tough and I wouldn’t overrate the Germans. But the following is a list of the issues that we may have.

1. Neill and Moore don’t seem to be working correctly together at the moment. We need to fix these holes in the middle of our defence.
2. Our midfield needs to be reshaped. Grella is not a central playmaker, a la Pirlo or Xavi. That is what you want there and Grella doesn’t have the vision. The only other option I can see that we have is to play Cullina there. Grella is better slotted into one of the other midfield roles.
3. Our play is too stereotyped with lots of meaningless square passes in the midfield, and we don’t play vertically enough and attack quicker and more incisively.
4. We miss Viduka to hold the ball, dribble and create scoring chances in attack.
5. We need Cahill and Bresciano to be more involved and creative.

Here’s hoping that Australia can start with a win. In soccer, everyone loves to beat Germany!

On today’s RN News, the ABC reported that Lindsay Tanner had told the Insiders program that Kevin Rudd would lead the ALP to the next election.  This was one of the six most important things to tell us at 10.00 am this morning. Why is that news? What was he supposed to say? “Actually Barrie, that’s a good question, we’re thinking the same thing, we might dump Kevin, but right now we’re just sizing up our options”.

The case for more independent fiscal policy has always struck me as bleedingly obvious. I still think it is kind of inevitable but we’re certainly taking our time.  The adventures of the last decade both here and in most other developed countries are a nice illustration of why it’s necessary. It was touch and go in many countries whether a fiscal stimulus would be pursued while the financial sector melted down and monetary policy sat in a liquidity trap.  But a fiscal stimulus helped make things less disastrous than they would otherwise have been.  But now the architects of those policies, each in their way being quite politically bold in implementing those policies, are now gone (Gordon Brown) or mired in populist rhetoric about how spendthrift they are and how urgent it is to rein in spending (Barack Obama).

Meanwhile in their countries, Krugman and others with a bit of Keynesian sense point out that the market doesn’t look like driving bond yields up any time soon.  And since growth is still dangerously weak, now is no time to pull back on the stimulus. (I’m not addressing these comments to the Australian situation where we’re obviously much further from any bond market concern about the government’s debt position and we look like we’re returning to economic health, though I’m a great believer in my own and everyone else’s ignorance on that score). Krugman has bemoaned the way in which this madness is taking over his own country.  But, as Clive Crook points out, that’s not really good enough. (Continued)

Several nations — including Brazil, Uruguay, Peru, and Colombia — have used subsidized programs to get personal computers into poor households. Governments have promulgated such programs despite little credible evidence that the technology improves children’s academic performance or their behavior. Euro 200, a program administered by the Romanian Ministry of Education, gave out approximately 35,000 vouchers toward the purchase of a home computer in 2008.

The Euro 200 program met with mixed results, according to NBER researchers Ofer Malamud and Cristian Pop-Eleches. The voucher program boosted the likelihood of households owning a home computer by more than 50 percentage points and led to increased computer use. On one hand, children in families that received a voucher scored significantly higher on tests of computer skills and cognitive ability than their counterparts without a voucher. On the other hand, children in families that received a voucher had significantly lower school grades in math, English, and Romanian than their counterparts without vouchers. The authors conclude that “providing home computers to low-income children in Romania lowered academic achievement even while it improved their computer skills and cognitive ability.”

Home Computers and Human Capital, NBER Working Paper No. 15814, by Ofer Malamud and Cristian Pop-Eleches

According to Will Wilkinson, "the U.S. welfare system is very generous". And compared to the welfare states of most African countries, that’s obviously true. But Wilkinson is comparing the US to the Nordic nations. So what’s going on?

It all starts with a Freakonomics post by University of Arizona economist Price Fishback:

Ask anyone. Who spends more on social welfare: the U.S. or Sweden and other Nordic countries? Nearly everybody will say Sweden. But the answer, at least as of the mid-2000s, might surprise you.

Fishback argues that it’s misleading to look at gross spending on social welfare. He argues that we ought take taxes into account as well. Nordic countries tax recipients of social welfare payments at a higher rate than the US. And on top of this, they levy higher consumption taxes.

After adjusting for the differences in taxation to get net public social spending relative to GDP, Fishback then suggests that we compare the net amount the US spends per capita with that of the Nordics. He concludes that:" If the adjustments for purchasing power are correct, net public social expenditures by government in America in 2003 ranked roughly in the middle of the Nordic countries."

So does this mean that the US is as generous to the poor as countries like Sweden and Denmark? No. Nobody who’s looked at the data is saying that. Even Wilkinson notes that Americans below the 10th percentile do much worse than their counterparts in the Nordic countries.

To understand what’s going on, here are two things you should read — Lane Kenworthy’s post on Social spending and poverty and this comment by Peter Whiteford on Matt Yglesias’ blog.

Last week, the Minerals Council Australia (MCA) came up with a KPMG report (download here) that suggested that the newly introduced Resource Super-Profit Tax (RSPT) would lead to many future mining projects being non-viable. This is of course a cornerstone in their scare-campaign about this tax and I had a look at the report to see what they did.

A preamble to this is that the timing and source of this report raises an eye-brow. I first presumed that KPMG must have some very fast modelers in order to be able to come up with a whole report on the effects of a new tax on new mines within weeks of the budget announcement of this new tax. It would be a testimony to how fast markets can generate research if there is a quick dollar on offer for it. However, this appears not to be a case of fast modeling. The research was commissioned way in advance of the budget. This is somewhat extra surprising if you reflect on the fact that KPMG also modeled the long-term consequences of the RSPT for the Treasury, as part of the Henry Review! At the same time, in the last months of 2009, they were apparently already modeling extensions of their RSPT models on behest of the Minerals Council Australia. Large sections of the report are hence devoted to explaining the differences which read a little forced to me. You can smell the guilt.

I doubt any formal codes of conduct were broken in terms of conflicts of interest, but I find it a little dubious that the same modelers are able to sell the advise to the Treasury that the RSPT will have no adverse long-term consequences whilst simultaneously selling advise to the MCA that there might be some negative short-run consequences. It is hard to see how you can conscientiously serve two masters at once.

I have the following quick comments to make about the content before turning to the main issue:

- The report nowhere gives you the actual models and codes used for the calculations. I could not find the code books either on the KPMG website, linked to within the report, or on the website of the MCA. It is hence very much a ‘trust me, I know what I am doing’ piece. Since these were the same guys as that did the calculations for the Treasury, they probably did know what they were doing, but it would be nice to have independent access to the data and models, and I gather from the introduction that the MCA could give this information out if it wanted to.

- The report is highly selective in terms of what it chooses to calculate and highlight. It doesn’t tell us what the RSPT would do to the Net Present Values (NPVs) of all possible future projects, but only talks about the NPV of the second quartile of profitable projects. This is of course because the first quartile will go ahead anyway and the third quartile will probably see increases in NPVs due to the cost-sharing in the RSPT. It loads the dice towards the negative to focus on only 25% of all considered future projects.

- The report leaves out the effects of all existing projects, at least in its headline treatment. As Chris Richardson pointed out in his presentation on June 3^rd to the Minerals Council, existing projects will probably start to see more intensive mining activity because of the reduction in output-taxes associated with the RSPT increases the incentives to produce more at existing mines. This is also implicit in the KPMG report, but the finding that in the next 2 years mining activity should increase is not highlighted at all.

- Trying to make the argument that the RSPT leads to high overall taxes by international standards, the report compares effective tax rates under the new regime with existing tax rates elsewhere. The crucial questions are of course which commodities the comparisons are made to. In choosing comparison commodities, the report leaves out oil which is more heavily taxed than the mining industry would be under these changes (but where production and investment in oil exploration haven’t suffered in the slightest despite these high taxes!), but leaves it to a side-note on page 30 to mention this. Since mineral production is becoming more profitable, it is not at all strange to compare the future of mining with the present treatment of oil, since both involve exploration, investment, and production phases.

- The report itself mentions that long-term effects of the RSPT should be positive for mining activity (a similar point is made by Richardson).

- Computed internal rates of return look very healthy for all types of mining under the RSPT, something given little attention to.

- All these highly selective choices already make it clear that the report, and in particular the summary, is indeed not an objective appraisal but a piece of propaganda that was bought for a reason. The newspaper headlines ‘KPMG report shows miners are going to be ok the next 2 years and in the long-run’ clearly is not what the MCA wanted others to get from this report, even though such headlines would be warranted by it.

Then, to the true matters of substance.

(Continued)