Club Troppo

I have no doubt about it. Labor will be returned with an increased majority.

With one week to go, the election campaign has descended to a level of debate at which rational argument is irrelevant. There’s little point in having a reasoned position on greenhouse policy, offshore processing or the efficacy of fiscal stimulus measures, if either (1) the parties are in agreement anyway, or (b) the parties’ most emphatic claims are nothing more than generic scaremongering, for example that Labor/Coalition policies will push up the cost of living, raise interest rates, or threaten jobs. It’s only a short step up from “Gillard/Abbott! Ooogaboogah!”

The contest is of interest only as a sporting spectacle. On that basis, I announce the following competition.

Predict the result of the election for the House of Representatives. Responses should be entered in the comments thread for this post. You should specify which party/parties will win government, and the extent of the majority. At present, for example, the composition is: ALP: 83, Coalition parties: 63, Independents: 4. So the Government has a majority of 16.

Update: The amount pledged for predictions accurate within five seats is now $100 $150 $200.
Update II: The deadline is extended to Thursday Friday. Have a stab, if you haven’t already.
(Continued)

The delightfully named Ben Spies-Butcher of the CPD writes in support of the Henry Review’s proposals for the income tax system as opposed to a flat tax. In a nutshell, he feels that the Henry Review’s scheme offers great efficiency benefits by simplifying the tax system and reducing high and uneven effective marginal tax rates for low income earners without losing “the progressivity, or fairness, of the tax system by giving large tax cuts to those at the top.”.

It is a bit confusing to me that social democrats rely so heavily on the fairness argument for progressive income tax. Sure it is central to their own values, but I think it overlooks the good reasons to think that a properly designed progressive system can be quite efficient.

Short of sin and Pigou taxes, where the “distortion” is beneficial, and rent taxes that have no distortion, revenue is best raised where distortion is minimised. Income taxes clearly have the potential to distort, but this potential is not equal at all income levels. The elasticity of labour supply is far greater at the lower end of the income scale, and thus income taxation becomes far less distortionary as income increases, allowing higher taxes with little ill effect. (Continued)

Books at 30% off in Borders – here.

The floods in Pakistan have resulted in about 1,600 deaths, with many more expected (even disregarding the possibility of a cholera outbreak), and have stranded or displaced about 12 million people. The worst aspect seems to be that this is just a taste of what’s to come, if the disaster is essentially a consequence of global warming.

It’s hard to get the story straight on this. The link with glacial melting has been made in the Pakistani press, for example by Adil Zareef in The News, and in an AAP report citing ‘glaciologist’ Iqbal Khan. But news reports in general, including those in the Australian media, tend to mention only the monsoon.

Ironically, as far as glacial melting concerned, most of the focus in international reporting has been on the mistaken claim in the IPCC Report that the Himalayan glaciers might disappear by 2035. This is unfortunate if the real story is that a substantial volume of glacial ice will indeed melt in the next thirty years. If that happens we will see floods like the current one on a regular basis, followed by catastrophic drought as the process runs its course and meltwaters cease to fill the rivers in the dry months.

According to Orville Schell, reviewing the latest literature in the New York Review of Books in May:

..what makes glacial melt so critical, even when it is a relatively small percentage of a river’s annual flow, is the timing at which it occurs. If these flows come during the rainy monsoon season, they may lead to floods. But if they come during the hot, dry spring and fall months, the so-called “shoulder seasons” just before and after the monsoon, they keep the volumes of river water more constant and are welcomed. For such rivers as the Ganges, Indus, and Kabul, meltwaters can account for as much as 70 percent of spring and fall flows.

(Continued)

I was asked at a Departmental seminar today whether the eleciton of a Coalition Government would set back Government 2.0.  I said I didn’t know, but that even if it did not have as much support from an incoming government as it has had in this term, the main tasks ahead of us were cultural, that the heavy policy lifting had taken place and that I couldn’t see that work being undone by a change of government, though the atmospherics can be important this early in a transition to greater use of Web 2.0 in government.

Anyway, the facts as I see them are as follows:

The two strongest and most vociferous supporters of Government 2.0 in the Ministry of the now ended Rudd/Gillard term of Government were Tanner and Falkner. Of them Tanner’s support was more tech savvy and Falkner’s was more classically based around freedom of information and integrity in Government. As I said on Radio National a week or so ago, I’m very dissappointed that they’re going.  They’ll leave a big hole, but the agenda is bigger than both of them and will go on.

Of the ALP politicians that will remain in Parliament, Joe Ludwig is supportive within the ministry.  Rudd himself was also keen – he revved his own Department up on it and had agreed to launch the Taskforce – but his office pulled the plug to focus on doing battle with Turnbull over Ute-gate. But of all the politicians in Australia the backbencher Kate Lundy is the pre-eminent Govermnent 2.0 aficionado in the Australian Parliament bar none. Indeed, she’s recognised as one of the world’s leading promoters of government 2.0 in politics.  I’ve privately done what I could to promote Kate’s fortunes within this government and am happy to say so publicly. Somehow she got dropped from the ministry on the transition to government. I hope she’ll fare better under the new leadership and if she does it will be a great thing for Government 2.0.

In the Coalition I can’t say I know anyone who is strongly supportive of Government 2.0. Certainly I don’t recall anyone coming forward while the Government 2.0 Taskforce was sitting, in the way that Kate Lundy did. But Opposition members are busy people.  So I’m hoping readers and those close to Coalition and Green parliamentarians, or those parliamentarians themselves might point out who amongst them are the champions of Government 2.0, and what might be expected of them.

Hello all, your friendly Ozblogistan Overlord here.

Last week I wrote briefly about slowness being caused by attempts to debug a comments plugin used by several Ozblogistan blogs — Brian’s Latest Comments — in the context of Larvatus Prodeo. It transpires that LP’s database of comments was too large to process without causing errors and slowdowns. During the week I worked on various modifications; these ‘work’ in that they have the correct behaviour and don’t crash, but in actual use they have proved to be unacceptably slow.

Consequently I have asked our blogs to deactivate the offending plugin for a few weeks. Our busiest, Catallaxy Files and Larvatus Prodeo, have done so, which should for now improve performance for everyone.

Why have I asked them to deactivate it for a few weeks? Because yours truly is moving to Darwin to take up a new job. I won’t have my usual computer for 3 weeks, according to the removalists. Once I am settled in I have another plan of attack to try, but until then I will not be in a position to easily fix things. Until then, enjoy the blogging.

We have competing paid parental leave schemes in this election, and voters are going to choose between them.But the kind of scheme desired depends a great deal on why you would want a paid parental scheme at all. Whilst details of the different schemes are available in the media, there’s little discussion of motivation to help a reader to decide which is best for a given purpose, only what is best for speculative electoral reasons.

Broadly I can see three  philosophy based (rather than self interest) motivations.

The Rights Motivation Having a baby is a universal right and if people cannot afford to take the time off work that is necessary to have a baby, the state should enable them to do so.

The Pro-Natalist Motivation We need more babies. This may be because we want to offset the aging population, or because we desire population growth. Since population growth can also be achieved by immigration, a pro natalist position may also be the result of desiring a more easily assimilated source of population growth. In short, a parental leave scheme is desired so it can make having babies more attractive to parents by both reducing the opportunity costs faced by a period where no wages are earned and subsidising the cost of the baby produced.

The  Equality Motivation The time taken off will inevitably fall partially on women (since she has to give birth) and then almost always the period of extreme infancy through the choices of the parents (conditioned by culture and economics). It is unfair that a mother cannot earn money by selling her labour in this period whilst a father can, so the state should compensate her for the unfairness of biology and cultural norms.

If we consider each of these motivations they have different implications for a given scheme.

The Rights motivation is fairly simple. A scheme need only make it possible to have a baby, not more attractive. Having a baby may not be possible for those who cannot draw on savings or access credit (you can’t borrow against a baby usually) to pay for the basics of life when not earning a wage. (Continued)

I’m in broad agreement with this piece by Chris Dillow.

Jonathan Calder asks a good question: why has political radicalism become synonymous with wanting to see a permanent and massive public debt?
Let me deepen the puzzle. In three ways, the left should be more concerned about government debt than many on the right:
1. The left tends to be more sceptical about the rationality of financial markets. They should therefore take less comfort in the fact that bond yields are low, for fear that market opinion might turn quickly. This argues for cutting public spending in a considered, orderly way, for fear of having to make emergency cuts if sentiment does change. (Of course, governments could monetise borrowing rather than tap bond markets, but the costs and benefits of doing this shouldn’t be a left-right issue).
2. Government debt is analogous to climate change – both are burdens we impose upon future generations. If you’re concerned about climate change – and the left tends to be more so than many on the right – then you should also be concerned about government debt*.
3. Big government is no friend of the working class. What’s wrong with cutting public debt if it means ending the subsidy to arms companies that is military procurement? Why not slash spending on an organization that seems to have degenerated into a gang of thugs? Why not nationalize the banks and use some of their profits to reduce government debt?
On these grounds, we’d expect the many on the left to want to reduce government debt. So why aren’t they?
I think it’s because these factors are outweighed by another. What distinguishes left from right is that the left is more sceptical of the right about the self-righting capacity of capitalism. The left therefore thinks that cuts in public spending will not crowd in exports or business investment, but instead depress the economy, which will hurt workers disproportionately.
But this raises a question. What if we had more adequate insurance mechanisms – either more generous unemployment benefits or Shiller-style macro markets – which better cushioned workers from recession? Would some on the left then be less supportive of public debt, because the weight of factors 1-3 would increase relative to the costs of jeopardising economic growth?
* Of course, it could be that climate change is a left-right issue because the left believes capitalism must have all sorts of bad effects, whilst the right believes this is impossible.  But leave this aside.

But he’s arguing the case from a British point of view.  Few countries have been through the idiocy of our populist fiscal rectitude, and so in our case, I can be very sympathetic to Chris’s arguments – it is indeed odd that the left is associated with fondness for public debt when as Milton Friedman points out, public debt in sufficient quantities is one sure way to ensure small government (for him this was a debating point against the left, just as his arguments against realism in economic modelling was a rhetorical move in defending perfect competition – in both cases his disciples have taken his insights rather further than he was intending, the Republicans making straight for small government by jacking up debt as fast as they can – when they’re in office you understand, when they’re opponent is in office the crazy deficit spending just has to stop! – the fresh water economists assuming any damn thing they like (the Great Depression was a spontaneous holiday? – no problem). But I digress. . . .

The thing is, as I’ve argued ad nauseam here and elsewhere general dispositions towards more or less debt are pretty stupid – like general dispositions to higher or lower exchange rates.  It depends on the circumstances, and that’s why we need institutional development like more official independent advice to governments on the fiscal stance, and the quality and cost effectiveness of its capital spending.

Given the massive ignorance, not just of you’re average Joe (Sorry I think that’s now ‘Joe Six-pack’) but of experts, I think we should be particularly on the lookout for ‘no-brainer’ reforms.  Simple things that we can do than generate gains and for which it’s very difficult to imagine substantial costs.  For a long time I’ve thought that so much resources in the financial sector go into trying to get the scoop on others – trying to beat other investors to the punch to buy or sell assets before the news spreads to others that it’s a major source of inefficiency.  If so there’s something that one could do fairly simply.  One could only trade every now and again, say for a couple of weeks every three months on a stock exchange and require all listing firms to have a high degree of information out in the marketplace before markets opened.

A bit radical? Well yes, I wouldn’t try the experiment in quite such a bold way. I expect such a change would generate far more gains than losses, but I can’t prove it.  And it’s undoubtedly the case that markets being open 24/7 enable various risk management strategies that may be important for the real economy.  But one might move in this direction more incrementally in two ways that I think would produce far more gains than losses.

1. Where there’s evidence of insider trading – for instance where there are major and unexplained movements in the share-price in directions which are understood after some company announcement, a firm should be put onto a regime in which their shares are not traded in some substantial period before any major announcement that can be anticipated – like results.
2. The race for priority has escalated to such a ridiculous degree that a huge number of hedge funds and trading houses have moved important IT facilities as physically close to exchanges as possible.  The incentives driving this wasteful race for priority could be dealt with, with minimal downsides it seems to me with staggered randomised priority.  Buyers and sellers would send in orders as they do now.  But they would go into one minute batches.  Thus whether your order arrived in the first or the last second of a one minute segment of time, it would go into the pool of buyers and sellers in a random order for that minute (one might delay it by a minute also just so there are no remaining benefits from relocating your IT to slightly improve your chances every now and then of ‘making the cut’ into an earlier minute block.) Thus every minute the system would spew out matches and generate pricing information as it does now.  So you get rid of some rising costs, and it’s hard to believe that you wouldn’t have all the benefits of trading that we enjoy today.

Postscript: It is in the interests of the exchanges themselves to bring about PSR (That’s Periodic Staggered Randomisation for the uninitiated) as explained in this subsequent post.

Here I cite this article by Annabel Crabb [fn1]. Here she defends the fact that all questions asked at press conferences are race calling in nature on the fact that policy literature isonly given to journalists at the beginning of the conference, and that the harried journos just don’t have time to digest it. Then follows a lengthy piece of discussion about press conferences.

The response is obvious. Was there no time for the journos to digest enough to even describe the policies before the nightly news/the morning paper or the self appointed flexible deadlines of the online world?

Was there no time to write a story that included any policy detail, only time enough to write vacuous race calling in the hours before the deadline?

Was there no space the day after to describe policies that will affect the country for years because they’re in a pointless race to nowhere against competitors to be the first with nothing?

Or was it because the space was needed for stories about the absence of a story, such as speculation about Lindsay Tanner leaking things?

It’s professional failure enough to be unable to ask a question on policy, but not to even be able to describe what the policies are in any detail (let alone critqueing them) based on demands of a self inflicted media cycle, and to fill papers/broadcasts invariably with race calling is abysmal.

What are they doing with all that time after the conference when they’re not reading the policy? Thankfully Annabel provides the answer. They seem to be thinking, and writing at great length on press conferences, the press gallery and self justification. Omega Journalism. They might be bored by policy, but my god, are they absolutely fascinated by themselves.

[fn1] I’d say Inaneable, but that’s the standard of wit that got her employed by the ABC. I have pretensions to something more.