Drought: the rising dust-cloud of dumb

Is there any area of public policy in Australia that gets weaker treatment than agriculture these days? Whether it’s milk prices or agricultural investment, the normal Australian tough-mindedness about policy gets shunted aside in favour of emotive puffery. Not too many people want to be tough-minded when it comes to our farmers – not nearly as tough-minded, anyway, as they were when they were taking the subsidies away from the TCF industries employing migrant women in Melbourne in the 1980s.

Now I can think of a few reasons for this.

  • Lack of adaptability: People who have lived on a farm all their lives will find it really hard to do anything else. They may be tough but they’re really not that adaptable that they could just move into town and settle down running a milk bar. And no-one wants to shove them off the farm just because they can’t make a go of it.
  • Effort: Farmers are actually working extremely hard, which to most people (me included) makes them more deserving than some.
  • Nostalgia: Clem Smith, Manangatang farmer, has a higher and longer-established place in our national mythos than Vera Dimopoulos, Coburg house cleaner and former seamstress.
  • Distance: Most of us live a long way from farming communities, so we are free to breathe in the myth of farming without observing the less pleasant realities.
  • Our emotional relationship to food: The food issue somehow trigger things in our psyche that make us more amenable to bad policy solutions.

So as we prepare to read the coverage of the latest drought relief announcement, here are a few ideas on drought relief and farm policy that seem in danger of getting lost in the dust:

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Protectionism: of the white collar variety

Relaxing Occupational Licensing Requirements: Analyzing Wages and Prices for a Medical Service
by Morris M. Kleiner, Allison Marier, Kyoung Won Park, Coady Wing

Abstract:

Occupational licensing laws have been relaxed in a large number of U.S. states to give nurse practitioners the ability to perform more tasks without the supervision of medical doctors. We investigate how these regulations may affect wages, employment, costs, and quality of providing certain types of medical services. We find that when only physicians are allowed to prescribe controlled substances that this is associated with a reduction in nurse practitioner wages, and increases in physician wages suggesting some substitution among these occupations. Furthermore, our estimates show that prescription restrictions lead to a reduction in hours worked by nurse practitioners and are associated with increases in physician hours worked. Our analysis of insurance claims data shows that the more rigid regulations increase the price of a well-child medical exam by 3 to 16 %. However, our analysis finds no evidence that the changes in regulatory policy are reflected in outcomes such as infant mortality rates or malpractice premiums. Overall, our results suggest that these more restrictive state licensing practices are associated with changes in wages and employment patterns, and also increase the costs of routine medical care, but do not seem to influence health care quality.

Young, Restless and Creative: Openness to Disruption and Creative Innovations

Abstract:

This paper argues that openness to new, unconventional and disruptive ideas has a first-order impact on creative innovations-innovations that break new ground in terms of knowledge creation. After presenting a motivating model focusing on the choice between incremental and radical innovation, and on how managers of different ages and human capital are sorted across different types of firms, we provide cross-country, firm-level and patent-level evidence consistent with this pattern. Our measures of creative innovations proxy for innovation quality (average number of citations per patent) and creativity (fraction of superstar innovators, the likelihood of a very high number of citations, and generality of patents). Our main proxy for openness to disruption is manager age. This variable is based on the idea that only companies or societies open to such disruption will allow the young to rise up within the hierarchy. Using this proxy at the country, firm or patent level, we present robust evidence that openness to disruption is associated with more creative innovations.

by Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik. Paper here.

PPPs 2.0: the presentation

Above is my presentation to the Berkman Centre for Internet and Society – the background blurb of which is here. You’ll find the first half of the presentation on the fractal ecology of public and private goods is effectively the same content as the first half of this presentation from late last year. However where the first presentation takes the introductory framework as a basis for talking about social capital, the same framework is used as a basis for sketching out a terrain for public-private partnerships. Anyway, I mention this to save you time. I’m not much of a fan of watching videos, as it’s more efficient to read something but in case you’re OK with them – here’s another. But if you want to read the ideas presented you can read them in very summary form in the column here. But I’ve also completed a draft paper on the whole thing. If you’re interested, please email me at ngruen AT gmail and I’ll send you a copy on which I’d be grateful to receive comments and suggestions for improvement.

 

Jeff Sachs’ ego to the rescue: or maybe not . . .

Jeffrey Sachs [Photo by World Economic Forum/ Flickr]“as much as I don’t understand it, Jeffrey Sachs really, really, really doesn’t understand it.” Nina Monk, author of The Idealist

“I don’t want to argue with you Jeff, because I don’t want to be called ignorant or unprofessional. I have worked in Africa for 30 years. My colleagues combined have worked in the field for one hundred plus years . We don’t like your tone. We don’t like you preaching to us. We are not your students. We do not work for you.” USAID head Pamela White to Jeff Sachs.

I just listened to yet another excellent EconTalk, this time with the author of The Idealist, which is about Jeffery Sachs’ efforts to end poverty and how they ran into well known problems. Problems that not only could have been predicted in advance, but problems that were predicted in advance.

I started tweeting words to the effect that “I’d always thought Jeff Sachs was a snake oil salesman”. Then conscience clicked in.  I thought I’d better check Troppo to see if I was right – as H.L. Mencken says “conscience is that little voice inside you that tells you someone might be watching”. In any event, I’m not unhappy with my response to Sachs before the data was in.

In many ways this story is of a piece with my dyspeptic take on Red Tape and Political Correctness.

One might write this off as just a pity, a small silly excess to which we have gone, but it is an example of a larger phenomenon that is becoming more and more evident and unfortunate – the domination of daily life with edicts from on high. In this case, an issue arises. Those at the top of the hierarchical system then get into ‘something must be done’ mode. It is time to issue instructions. So instructions are issued. The problem is that the issue may be one of considerable subtlety. In the case of regulation, we really need the people at the coalface to be thinking about the efficiency of what they’re doing within a larger whole. It’s very difficult for the top, or the centre to get this to happen – as it has to happen at the periphery, but no matter. We’ll issue instructions.

Enough said – or enough said for now - I’m quite busy.

Meanwhile from the unintended consquences department

Does Planning Regulation Protect Independent Retailers? by Raffaella Sadun

Abstract:

Regulations aimed at curbing the entry of large retail stores have
been introduced in many countries to protect independent retailers.
Analyzing a planning reform launched in the United Kingdom in the
1990s, I show that independent retailers were actually harmed by the
creation of entry barriers against large stores. Instead of simply
reducing the number of new large stores entering a market, the entry
barriers created the incentive for large retail chains to invest in
smaller and more centrally located formats, which competed more
directly with independents and accelerated their decline. Overall,
these findings suggest that restricting the entry of large stores
does not necessarily lead to a world with fewer stores, but one with
different stores, with uncertain competitive effects on independent
retailers.