Club Troppo

I have written a few posts about education.  But I’d not seen this presentation by Conrad Wolfram – brother of someone who may be one of the intellectual giants of our time – Stephen. (Since Stephen is a good deal older – born in 1959 with Conrad born in 1970 – perhaps one might call Conrad “Wolfram Beta”, but I digress).

Anyway, Conrad’s TED talk is very well worth watching. His case is simple and compelling. I couldn’t agree more.  It’s kind of tantalising, frustrating to have something so obvious within our intellectual grasp and yet to be so far off in terms of realisation, so far off because the workplace is a mass of routines. Even small routines can be difficult to break but usually they come in numbers which form a thicket which somehow kills off its enemies which die the death of a thousand cuts.

For those of you who don’t want to watch the video – I sympathise – after all you could read the words, jumping in and out at points of greater and less interest in a fraction of the time. If that’s you, you can read the words here.  Even better, I’ll summarise the basic message which is pretty straightforward.

Maths, Wolfram argues consists of four steps.

And as Wolfram says:

Here’s the funny thing. We insist that the entire population learns how to do step 3 by hand. Perhaps 80% of doing math education at school is step 3 by hand and largely not doing steps 1, 2, and 4. And yet step 3 is the step that computers can do vastly better than any human at this point, so it’s kind of bizarre that that’s the way around we’re doing things. Instead, I think we should be using computers to do step 3 and we should be using students to do steps 1, 2, and 4 to a much greater extent than we are.

Remarkably like the teaching of economics too – though it focuses on both calculation and model building, but only in passing on 1 and 2 and just a bit on 4.

As you may have heard, on Friday the debt of the United States was downgraded by Standard and Poors. Subsequently everyone continued to rush to buy said debt, and the 10 yield fell to an astonishing 2.20%, and taking into account inflation, many people seem keen to pay the government to take their money. This was an understandable response given the rating’s agencies track records. It also reveals a market that remains orthodox Keynesian [fn1] and with no desire for short term austerity. Radical heterodox theories about expansionary austerity may earn you  respect in the otherworld of North Atlantic politics and academia, but its a terrible way to anticipate events in reality. Better to accept that contractionary policy is contractionary and take to safe harbours.

This follows the experience of Japanese downgrades over the past decade. I have marked them because you wouldn’t notice otherwise [for laymen, a lower yield implies lower expected risk relative to alternatives].

Zero cash rates negate the need to take a spread

If markets don’t pay attention to the agencies when it comes to government debt, why talk about them? The do matter for two reasons.

A) Regulation in many places requires funds to take their ratings into account

B) The provide an announceables for media outlets and pundits to discuss, to spare them from the effort of examining the world. This has political ramifications.

These issues are important in Australia. They are the justification for underspending on state infrastructure, and for using expensive, elaborate and ineffective funding mechanisms such as Private Public Partnerships. They also are used to justify privatisations that lack the financial or microeconomic case that would ideally justify them. Borrowing might be the simplest way to fund infrastructure, but governments cherish the AAA rating and fear the agency’s wrath.

In NSW, the AAA rating was also the given justification for investigating Tax Increment Finance. In that interview (the now Treasurer) Mike Baird feared that losing the AAA rating would present difficulties as institutional investors, such as Japanese pension funds, could not invest in a lower rated product because of reason A). I felt however that the shortage of safe securities around the world would mean there was more than adequate money not bound by regulation that would be keen to get in. If that was true then, it’s more than true now. Many people dismissed the Japanese experience by pointing to a repressed financial sector and high domestic saving – plausible, but not applicable in the US case.

Compare the situations.

Japan’s debt to GDP ratio is well over 200% with a dysfunctional Diet, huge structural deficit and terrible demography.

America nears 100% with a huge structural deficit and a Congress willing to hold the nation to ransom.

NSW has a debt to GSP ratio of 23%, down from 27% in the 90s, a  (now)stable government  and a budget that is change away from balanced. (Continued)

I’ve long been puzzled why Michelle Grattan is seen as an eminence grise of the Parliamentary Press Gallery. Unlike her corpulent male counterpart Laurie Oakes, who still occasionally produces major scoops and penetrating political analyses, I can’t remember the last time Grattan produced anything other than bland, predictable group-think. Her latest piece on yesterday’s High Court interlocutory injunction restraining implementation of the Gillard government’s Malaysia Solution until a full hearing in a couple of weeks is a case in point.

Grattan begins with a perfectly reasonable observation:

The High Court has agreed the case against it should be heard – but it has not pronounced on the issues.

But she then instantly segues without even a semblance of analysis into regurgitating the current Press Gallery spin on anything the Gillard government does:

It’s a shambles. When, with the Commonwealth Solicitor-General floundering over his paperwork yesterday, Justice Hayne said that it was ”unsatisfactory that this matter proceed in this half-baked manner”, he could have been summing up the Gillard asylum seeker policy.

What does Grattan mean by this? That Hayne J was somehow passing judgment on the Gillard government’s competence? In fact his remark is the sort of theatrical “grumpy judge” schtick that judges inflict on counsel on a daily basis in our courts, as any experienced journalist well knows.

That the mere fact that refugee advocates have launched a High Court challenge of itself somehow proves that the government’s Malaysia Solution is a “shambles”? In fact, just about every policy initiative relating to asylum seekers over the last 20 years, under the Hawke, Keating, Howard, Rudd and now Gillard governments has been challenged through the courts. You wouldn’t expect anything else. These are desperate people with little to lose and everything to gain from a successful challenge, and with refugee advocates ever willing to provide free representation. Some challenges succeed but most lose. This latest challenge will probably fail, although it isn’t completely hopeless (as I discuss below).

Is Grattan instead suggesting that the government should be taking some other policy approach? If so, what might it be? Abandoning mandatory detention of asylum seekers and adopting an open door policy, as most refugee advocates seem to assert? That might make sense in an abstract policy sense, but in the real world it would be a recipe for certain political suicide. Reverting to the Howard government’s Pacific Solution, as Tony Abbott mindlessly repeats as the sure-fire solution to “stop the boats”? In fact, as I’ve pointed out previously, the Pacific Solution has had its day. The people smugglers and their clientele now know very well that Australia ultimately had (and will have in the future if the policy is reinstated) no practical choice but to grant protection visas to most of the genuine asylum seekers sent to Nauru.

Moreover, the judicial review grounds now being advanced against Gillard’s Malaysia Solution will, if successful, almost certainly invalidate any attempt at revival of the Nauru Pacific Solution as well. This is a point that doesn’t seem so far to have dawned on any of our Press Gallery luminaries (although a commenter to Grattan’s article pointed it out). Exactly like Howard’s Pacific Solution, the legislative basis for the Malaysia Solution lies in the “safe third country” provisions found in s 198A of the Migration Act 1958 (Cth).
(Continued)

Televisions, DVD players and mobile phones have become so cheap that even poor third world families can own them. In Foreign Policy, Abhijit Banerjee and Esther Duflo write:

In rural Morocco, Oucha Mbarbk and his two neighbors told us they had worked about 70 days in agriculture and about 30 days in construction that year. Otherwise, they took care of their cattle and waited for jobs to materialize. All three men lived in small houses without water or sanitation. They struggled to find enough money to give their children a good education. But they each had a television, a parabolic antenna, a DVD player, and a cell phone.

In the Road to Wigan Pier, George Orwell wrote: "Twenty million people are underfed but literally everyone in England has access to a radio." Rather than spending all their money on necessities, the English poor were alleviating the drabness and monotony of low income life by spending money on things that brought a little fun, style or excitement. So as Orwell observed: "in a decade of unparalleled depression, the consumption of all cheap luxuries has increased."

Banerjee and Duflo agree with Orwell. Village life is dreary and things like television make life more enjoyable. But the policy wonks at the Heritage Foundation are convinced that in the United States, televisions are incompatible with true poverty. In an attempt to rubbish the US Census Bureau’s definition of poverty they reveal:

(Continued)

As some of you know, we’ve had a hit-and-miss experience with comment subscription plugins. The plugin we were previously using broke when we upgraded to 3.2.1 and made it impossible to unsubscribe.

We’ve switched to another plugin which requires “double opt-in”. I’d be interested in any feedback Troppodillians might have on their experience so far.

Reviving an old Troppo tradition – and you can cheat if you want to by following the picture’s url.

And what’s causing the dark streaks?

On the other side of the Pacific, bloggers are arguing over something called ‘left neoliberalism’. What began as a dispute over monetary policy between Yglesias and Doug Henwood quickly widened into a debate over political philosophy and strategies to rebuild the American left. But what is ‘left neoliberalism’?

Recently Yglesias’ left leaning readers have been complaining about his shift to the right. Freddie DeBoer says Yglesias was once his favourite blogger but now he has capitulated to the establishment: "He is now one of the most vocal of the neoliberal scolds, forever ready to define the ‘neoliberal consensus’ as the truth of man and to ignore left-wing criticism."

Other readers feel the same way: "Yglesias, both in substance and tone, has become much, much less left wing and much more neo-liberal and rightwing", writes Derek. "I stopped reading him regularly last winter and stopped reading him altogether about 2 months ago", says TR Donoghue, "he had, in my mind, become completely a creature of his privileged background and Washington bubble."

Last year Yglesias gave in and accepted the ‘neoliberal’ tag. But he refuses to accept that his views are right wing. In response to DeBoer he hit back : "while I’ll cop to being a ‘neoliberal’ I don’t acknowledge that I have critics to the ‘left’ of me."

So what does it mean to be a left neoliberal? According to Yglesias, it’s about maintaining egalitarian values while embracing free market policies usually championed by the right. As he wrote last year:

(Continued)

HT New Matilda.

Here’s an open thread for all those ideas, links and arguments that don’t fit anywhere else.