Club Troppo

You’ve read about the floods, you’ve given to the flood relief appeal and now you need a break. So instead of talking about the distribution of water, let’s talk about the distribution of income. Thanks to Christopher Joye it’s been a hot topic over the past week.

People are getting too worked up about income inequality argues Christopher. In a piece for The Drum he writes:

I don’t think there is anything wrong at all with a rise in income inequality if one assumes that: (a) we have equality of opportunity; (b) we are committed to combating extreme poverty; and (c) we are vigilant in protecting those members of the community who are fundamentally and irreversibly disadvantaged through, say, mental or physical disabilities. In fact, I think we should be focussed on dealing with (a), (b) and (c) rather than drumming up hysterics about inequality. It turns out that Dr Leigh’s own research backs up this view.

Matt Cowgill isn’t convinced. At his blog We are all Dead he argues that inequality of opportunity is unsustainable without some limits on inequality of outcomes. He writes:

Over time, vast inequality of outcomes erodes equality of opportunity. Wealth, privilege and connections are handed down through generations. Last generation’s meritocrats … become this generation’s entrenched, quasi-aristocratic elite, able to secure their children’s place in the hierarchy by paying for them to attend expensive schools, or by buying them houses or providing start up capital for entrepreneurial ventures.

As Ilya at Beats and Pieces writes, Christopher responded by posting "an uncharacteristically angry-sounding response to Matt Cowgill’s analysis". In this response Christopher insisted that "if you have talent combined with patience and persistence, there are few real barriers to progress in contemporary Australia (again, there are clearly exceptions found amongst various minorities)."

Other bloggers soon joined the debate. Both Ilya at Beats and Pieces and Alister Air link to Paul Krugman’s recent New York Times column on economics and morality. Krugman writes:

(Continued)

Given it’s still the offseason, I thought we might want to revisit an passtime of a previous time. When I was a child in the 90s, during the Keating era, there was a fairly pointless question (they never bothered to actually debate it); Is Australia part of Asia? Whilst the question did have implications for membership in various diplomatic clubs, here it was usually framed as part of culture wars inanity. For me, finding the implications rather mild, it’s mainly an academic diversion.

And the problem, as I see it, isn’t determining where Australia belongs, or whether belonging in one category precludes belonging in others (like “The West” or “The Anglosphere”). It’s working out what “Asia” is anyway. Can we really come up with a non-arbitrary definition that includes every country we usually call Asia without including Australia?

The most basic definition is geographic. Things within certain bounds are “Asia”. Things outside it are not Asian. This is the basis for the map at right. There’s obvious problems here though. Oceans are big, so drawing a border at say, the Pacific (excluding North America) or the Indian Ocean (excluding Antarctica), but if you can jump the Malacca straits or the Richard Green Sea [fn1] or any of the other innumerable straits and seas that separate islands from the continental mass, why suddenly say that the Timor Sea or Torres Strait is too far, let alone the tiny rivulet of the Suez Canal? And if you can cross the Himalayas, taller than any other, why balk at the modesty of the Urals, or the Caucasus mountains. If there was something beneath it all, as is literally the case with plate tectonics, we might have something, but there is a mass of plates underneath “Asia”, Australia shares a plate with parts of Indonesia (“Asian” by common consent) and almost all of Europe and all of China is on a single plate.

So geographically there is little case for excluding Australia from Asia, and even less for excluding Europe. To exclude them would be to determine that Asia is defined by whatever boundaries we draw, and on that basis we may as well include Mars.

Even so, the map is too broad for the debate of my childhood. They weren’t asking how Australia related to Tajikistan (with whom we do not have an embassy) or the “Asia” referred to by the ancient Mediterraneans (which made more sense given the limited geographic knowledge of the times) – now better known as “The Middle East”. What the 90s debates referred to was more likely something called “East and South East Asia”. The “Asia” closest to us. (Continued)

On Sunday I ate at a Filipino restaurant. This was a first; prior experiences of Filipino food had been solely at friends’ houses. Restaurants were simply just not around. In fact, some googling seems to indicate there may be less than 10 in the entire state of NSW.

Which is strange considering the population of Australians of Filipino ancestry. The 2006 census gives 92300 people who speak Tagalog at home. This compares to 53900 speakers of Turkish. And Turkish eateries are ubiquitous.

Ethnic restaurants are one of the standard features of  the experience of immigration. Why has it not occured with the Filipinos?

I asked the proprietor.  He said that there were “a few out west” (this was in Dee Why) that served lower quality cut of meat with “more bone and gristle” to Filipino diners that “mainstream” customers wouldn’t like. He had chosen Dee Why, and was using modified ingredients to appeal to mainstream diners.[fn1]

I didn’t press the point (the place was quite busy) but I found this unsatisfactory. After all, the “few out west” appears to be a couple in Lidcombe and Blacktown, which is where  there are larger populations of Tagalog speakers, but that is still astoundingly few compared to other ethnicities, including smaller ones. Why the discrepancy?

I’m generally wary of  explanations that involve preferences since they seem like non-explanations to me – they appeal to something (tastes) that are only observable in terms of the consumption patterns you’re seeking to explain in the first place, and it’s a poor explanation that explains a phenomenon based on the phenomenon itself. That said, they are particularly weak in this instance. To attribute diners of a non Filo background with a lack of taste for Filo food is to mistake the causality with other cuisines. There, ethnic cuisines became popular with the broader population only after the restaurants were founded to serve diners familiar with the food. It is only after exposure from these restaurants that the cuisines enter cookbooks and TV shows and get bastardised packet mixes in the supermarket. Even now, most cuisines will have restaurants that predominately are patronised by people of that ethnicity. This is true of Vietnamese or of the massively proliferating choice of regional Chinese cuisines (it’s more than Cantonese!); strikingly it’s still true of the very widely popular Italian. But these restaurants exist nonetheless. So it’s difficult to attribute the lack of establishments to non Filo preferences. The alternative is to say that the Filipino population is far smaller that other ethnic groups or has a special disinclination to eat their own cuisine at a restaurant. The first is easy to refute, the second seems absurd.

So I think the answer must be supply based. (Continued)

I think Adam Smith thought of modern commercial society as gradually diffusing power throughout the society and both creating and enabling a world in which decision making became more decentralised and people’s autonomy, productivity and virtue grew together. In average and in the long run. Which reminds me of this study.

Does Management Matter? Evidence from India
Nicholas Bloom, Benn Eifert, Aprajit Mahajan, David McKenzie, John Roberts

A long-standing question in social science is to what extent differences in management cause differences in firm performance. To investigate this we ran a management field experiment on large Indian textile firms. We provided free consulting on modern management practices to a randomly chosen set of treatment plants and compared their performance to the control plants. We find that adopting these management practices had three main effects. First, it raised average productivity by 11% through improved quality and efficiency and reduced inventory. Second, it increased decentralization of decision making, as better information flow enabled owners to delegate more decisions to middle managers. Third, it increased the use of computers, necessitated by the data collection and analysis involved in modern management. Since these practices were profitable this raises the question of why firms had not adopted these before. Our results suggest that informational barriers were a primary factor in explaining this lack of adoption. Modern management is a technology that diffuses slowly between firms, with many Indian firms initially unaware of its existence or impact. Since competition was limited by constraints on firm entry and growth, badly managed firms were not rapidly driven from the market.

So there you have it, modern management gets information flowing and enables greater decentralisation of decision making.

I’ve had a sick feeling in the pit of my stomach ever since the final stages of the 2008 campaign. I remembered the upsurge in political hatred after Bill Clinton’s election in 1992 — an upsurge that culminated in the Oklahoma City bombing. And you could see, just by watching the crowds at McCain-Palin rallies, that it was ready to happen again. The Department of Homeland Security reached the same conclusion… One of these days, someone was bound to take it to the next level. And now someone has.

It’s true that the shooter in Arizona appears to have been mentally troubled. But that doesn’t mean that his act can or should be treated as an isolated event, having nothing to do with the national climate.

Last spring Politico.com reported on a surge in threats against members of Congress, which were already up by 300 percent. A number of the people making those threats had a history of mental illness — but something about the current state of America has been causing far more disturbed people than before to act out their illness by threatening, or actually engaging in, political violence.

And there’s not much question what has changed. … It’s not a general lack of “civility”…, there’s a big difference between bad manners and calls, explicit or implicit, for violence; insults aren’t the same as incitement.

The point is that there’s room in a democracy for people who ridicule and denounce those who disagree with them; there isn’t any place for eliminationist rhetoric … that lies behind the rising tide of violence.

Where’s that toxic rhetoric coming from? Let’s not make a false pretense of balance: it’s coming, overwhelmingly, from the right. It’s hard to imagine a Democratic member of Congress urging constituents to be “armed and dangerous” without being ostracized; but Representative Michele Bachmann, who did just that, is a rising star in the G.O.P.

And there’s a huge contrast in the media. Listen to Rachel Maddow or Keith Olbermann, and you’ll hear a lot of caustic remarks and mockery aimed at Republicans. But you won’t hear jokes about shooting government officials or beheading a journalist… Listen to Glenn Beck or Bill O’Reilly, and you will.

Of course, the likes of Mr. Beck and Mr. O’Reilly are responding to popular demand. … But even if hate is what many want to hear, that doesn’t excuse those who pander to that desire. They should be shunned by all decent people.

Unfortunately, that hasn’t been happening: the purveyors of hate have been treated with respect, even deference, by the G.O.P. establishment. …

So will the Arizona massacre make our discourse less toxic? It’s really up to G.O.P. leaders. Will they accept the reality of what’s happening to America, and take a stand against eliminationist rhetoric? Or will they try to dismiss the massacre as the mere act of a deranged individual, and go on as before?

If Arizona promotes some real soul-searching, it could prove a turning point. If it doesn’t, Saturday’s atrocity will be just the beginning.

Not two weeks gone – and this:

Labor needs a comeback. Fast. Julia Gillard’s dogged insistence she will return the budget to surplus in 2012-13 is growing old.

So she should tighten fiscal policy. You wouldn’t want a policy with a three year horizon to ‘grow old’ now would we?

Words fail me.

As I sometimes do I was tapping away on a blog post and then thought I’d like to give it greater exposure. So I didn’t press ‘publish’ and then pitched it to the Age who liked the idea. So I worked away to convert the post into a column – they’re fairly different things (for me anyway).  So here’s the column. It was published today in the Age and picked up by the SMH I’m pleased to say. And, not that it’s all that fascinating, but just for the hell of it, I’m writing this in the window I wrote the original post   in before I pressed ‘save draft’ rather than ‘publish’. So if anyone’s inteerested in the contrast between the blog post and the column of the post, the original post is below the fold. (Sorry for the lack of a fold earlier in the piece.

On his journey to the Lodge Kevin Rudd argued that one of his opponents’ political philosophers, Friedrich Hayek held the twin beliefs that people are naturally selfish and that this was a good thing. Ironically Hayek believed the converse – that our evolution in small bands on the African Savannah had produced a species that was naturally given to group solidarity. And Hayek thought that was a bad thing – an obstacle to building a free modern society.

A brief glance at our world, both today and through history confirms our natural tendency to solidarity. With brief interludes in ancient Athens and Rome, it took until the sixteenth century before, in the teeth of generations of religious war in Reformation Europe the penny dropped that society might function without unanimous agreement about the nature of God and the universe: As Elizabeth I put it – providing Englishmen were loyal and law abiding she need not look into their souls.

It took more centuries for the idea of factions within government to be accepted and ultimately institutionalised. But still the revolution seems only half won. Amongst the carnival of dissent and struggle in the marketplace for money and ideas – which has brought humans as close as we have yet come towards a free, meritocratic society, most organisations are run as Good Queen Bess’s tyrannical dad, Henry VIII would have run them – by fiat, with dissent hushed up if it is tolerated at all.

Of course to get things done, organisations can’t be riven with faction, and indecision. But so too are polities. And just as a Catholic could be a loyal subject of Queen Bess, so dissent within a firm can respect its authority; its need for decision. Why shouldn’t it be possible for an employee – or for a board member, CEO or Chairman for that matter – to say something like this?

I opposed the dividend policy the company agreed on. I may do so again. But more people supported it and I support our firm’s need to make and stick by clear decisions.

(I’d apply the same standards to cabinet government but that’s utopian for the foreseeable future. The media’s feverish sensationalism would turn it into a circus.)

As James Suroweicki’s The Wisdom of Crowds observes, to be wise, a crowd must embody diversity of opinion and cognition, some preferably open means of capturing those insights over as wide a range as possible, and independence of individuals within the crowd. The more such qualities are lacking the more tenaciously organisations gravitate towards what Orwell called groupthink, reminding us that Suroweicki’s book was offered as a foil to the mid nineteenth century book Extraordinary Popular Delusions and the Madness of Crowds. That book’s topics included markets’ endlessly recurring cycles of euphoria and gloom, alchemy, the crusades and other human high points.

Groupthink and complacency feed on each other often preventing organisations from learning except in a crisis. Because, though little fault of our own we had a good financial crisis, our bureaucrats and banks rest assured of their own acumen.

As financial entrepreneur Christopher Joye blogs, England’s officials, through no more derelict than ours, had a bad crisis. And now its central bank is being ruthlessly honest in its soul searching. In contrast our own Reserve Bank’s reform appetite has been weak, its cosy husbanding of the major banks’ largely undisturbed. In cobbling together its timid banking competition package our Government boasted of how assiduously it worked with financial regulators. But wouldn’t anyone talk it through with the official insiders? For me it underlined the Government’s obliviousness to the wisdom available from further afield.

The cultivation of dissent and open discussion are also a recipe for ethical hygiene. I thought of this when listening to the ABC’s Background Briefing on the history of asbestos in Australia. Tasmanian firm Goliath Portland Cement’s former finance director Roger Martin was asked if Goliath knew of asbestos’s hazards back when he started in 1981. Martin replied that his then Chairman, Sir Henry Somerset wasn’t the kind of person who’d have countenanced such hazards to the employees. “It wasn’t that kind of company.”

Martin’s complacency was sincere. But he confessed his amazement when shown documentary evidence of Goliath’s managing director being informed of the hazards back in the 1960s. He’d sent a note to his counterpart at James Hardie whose personnel manager had responded when asked “The best advice you can give your friend [at Goliath] is to ignore the publicity. Dust is a fact. Denials merely stir up more publicity.”

How did actions of such high immorality occur in virtually every similar firm around the world? Under the cover of normality. They were perpetrated by people who’d have adamantly denied working for “that kind of company”. But had it been normal to express divergent views within the company, would no-one have spoken up to awaken the consciences of those who, as they observed the common decencies of everyday life, were groupthinking their way to criminal disregard for their fellows and, ultimately catastrophe for the company towards which they proudly boasted their loyalty?

So as a new decade begins, I’m proposing another Good Queen Bess moment. Organisations should develop cultures which encourage diversity, dissent and debate amongst the crowds within and where possible outside their walls. That way they can inoculate themselves against the grand folly of groupthink and aspire to the wisdom of crowds instead.

(Continued)

That was quick. It only took a week for media consensus on the retail campaign by Gerry Harvey and others, in contrast to the consensus on the campaign by mining companies.

Both represent campaigns by established and vested interests to serve their own interests whilst claiming it is in their own interest. Yet whilst the first was either quoted uncritically or eagerly adopted by portions of the media (and then lauded as skillful), the latter is now ridiculed as PR failure. The consensus is on whether it was good PR or not, and only then, occasionally, on the merits of the policy. The horse race instinct is deep in these people, and the entire business model is built on the unverifiable assumption that marketing is worth what people spend on it.

This is interesting from a public policy perspective, particularly since of the mining rent receivers and the domestic retailers, I think it’s the retailers who have the better case. Yeah, it’s still disingenuous, ignores all sorts of other reasons for online shopping and is impractical to implement, but the principal of non-discrimination had some kernel of truth that the rent receivers never had.

It’s possible that they are just accurately channeling public opinion, but I find it hard to say this with a straight face. Even if there was a thing such as “public opinion”, in the absence of decent polling, they’d only have anecdotes, and anecdotes heard by people the most divorced from normal society (and who thinks latte sippers are a distinct demographic for instance). [fn1]

So were does this consensus come from.

1) Inertia. It’s so much easier to sell an interested sophistry, an argument for a policy in favour of vested interests, when it is the existing policy. For better and for worse, the present self vindicates, or at least has a huge benefit of the doubt. It’s hard to shift from this even when the case is strong (which the retailer’s wasn’t).

2) The implications aren’t as abstract. Paying GST is a straightforward story, and an inescapable one. Even the most credulous journalist won’t be convinced otherwise, since it’s so obvious. Stories about investment suspension and jobs and macroeconomics are easier to weave.

But I think by far the most important is 3).

The retailers didn’t go partisan. Had they be aligned with a political party, or even had merely attacked the government, the default reporting processes of the media would have been triggered. Partisan conflict. A story that was being reported as ” Retailer calls for tax on internet purchases” would become “Labor under pressure from retailers”. Subsequently, the doctrine of false balance established in contemporary journalism would have required uncritical quoting of media releases and interviews with PR spivs and Gerry Harvey. Beyond that, they’d likely be enthusiastically quoted by partisan parts of the media. (Continued)

Missing Link Friday is back. And to start off the new year, here’s a short quiz. Follow the links to check your answers.

1. When the Japanese look at the moon, they don’t see a man, writes Catallaxy’s Ken Nielsen. According to Nielsen what do they see?

A. A lotus root
B. A rabbit pounding rice cakes
C. A yawning dog
D. A boy gathering wood

2.According to Mervyn Bendle at Quadrant’s History Wars blog, the teaching of history in Australia is dominated by:

A. Neo-Marxism
B. Postmodernism
C. Radical feminism
D. Post-colonial studies
E. Radical environmentalism
F. Gay studies
G. Other contemporary radical ideologies
H. All of the above

3. According to Katy Barnett, when someone says the words “climate sceptic”, the stereotype which springs to most people’s minds is:

A. A right-wing Holocaust-denying lunatic
B. A half-witted nutter who spends every lunch hour posting comments on Andrew Bolt’s blog
C. The kind of person who thinks evolution is an unproven theory but insists that the Laffer curve is a scientifically proven fact
D. Somebody who doesn’t hang washing on the line because you can never be sure it won’t rain

4. Earlier this week Andrew Bolt wrote that the Age is coming to resemble "a student newspaper from an Australian university circa 1970, selling a totalitarian ideology already responsible for the enslavement of more than 1 billion people and the deaths of perhaps 100 million." Which Australian blogger was he attacking in his post?

A. Kim from Larvatus Prodeo
B. Economist John Quiggin
C. John Passant from En Passant
D. Bill Muehlenberg from Quadrant

(Continued)

So now we have to take it seriously! Well I doubt any study can prove something like that, but there you go.  Causation could go in both directions, but either way, we told you so.

Public policy, trust and growth: disclosure of government information in Japan.
Date: 2010-12-20
By: Yamamura, Eiji
URL: http://d.repec.org/n?u=RePEc:pra:mprapa:27703&r=ict
Since the end of the 1990s, local governments in Japan have enacted Information Disclosure Ordinances, which require the disclosure of official government information. This paper uses Japanese prefecture-level data for the period 1998–2004 to examine how this enactment affected economic growth. Furthermore, this paper explores how generalized trust is associated with the effect of information disclosure on economic growth. The Dynamic Panel model is used to control for unobserved prefecture specific effects and endogenous bias. The major findings are: (1) disclosure of government information has a positive effect on GDP growth; and (2) generalized trust enhances this effect on GDP growth. This implies that social trust has a critical influence on the effectiveness of policy.