The economic costs of pollution

Gray Matters: Fetal Pollution Exposure and Human Capital Formation
by Prashant Bharadwaj, Joshua Graff Zivin, Matthew Gibson, Christopher A. Neilson


This paper examines the impact of fetal exposure to air pollution on
4th grade test scores in Santiago, Chile. We rely on comparisons
across siblings which address concerns about locational sorting and
all other time-invariant family characteristics that can lead to
endogenous exposure to poor environmental quality. We also exploit
data on air quality alerts to help address concerns related to
short-run time-varying avoidance behavior, which has been shown to be
important in a number of other contexts. We find a strong negative
effect from fetal exposure to carbon monoxide (CO) on math and
language skills measured in 4th grade. These effects are
economically significant and our back of the envelope calculations
suggest that the 50% reduction in CO in Santiago between 1990 and
2005 increased lifetime earnings by approximately 100 million USD per
birth cohort.


Embracing a mature tax debate?

abbott hockeyTony Abbott might well be the last bloke on earth who could plausibly demand a “mature debate” on tax reform. But that doesn’t deny the crying need for such a debate in Australia.

Nor does the fact that it’s the antithesis of what Abbott did in Opposition mean that Bill Shorten should necessarily emulate Tony’s tactics himself.  What won the last war won’t necessarily win this one.  Abbott didn’t win the 2013 election only because he relentlessly opposed everything Labor tried to do. That tactic worked because Julia Gillard had mortally wounded herself by the manner in which she seized the prime ministership, because that inevitably resulted in ongoing destructive disunity orchestrated by an embittered Kevin Rudd, and because her government consistently exhibited appalling administrative and policy implementation skills despite some excellent policy ideas. Without those self-inflicted wounds, Abbott’s “one trick pony” knee-jerk obstructionism might have failed.

Despite the fact that opinion polls have looked quite respectable for Shorten for some time, Abbott in government isn’t burdened by any of the handicaps that ensured Gillard/Rudd’s doom. Moreover, he now has the additional benefit of wrapping himself in khaki, which John Howard exploited with such great success in 2001 and 2004.

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Dick Hamer: the liberal Liberal

Dick HamerScribe publishing occasionally sends me a catalogue of books it’s publishing asking if I’d like to have one to review. Looking through their long list I picked my friend Tim Colebatch’s biography of Rupert Hamer on which he’s been working for a good while now. It’s a very enjoyable book to read. Well organised with the strictly chronological narrative occasionally being interrupted for some analysis and/or a chapter or two on specific issues, it gives a great picture of an unusually accomplished person of decency, liberality and great, if somewhat aloof grace.

Hamer was a rat of Tobruk who was always a natural leader with a strong sense of noblesse oblige. He came from Toorak (St George’s Rd no less – one of the best for those who don’t know), though Colebatch tells us they were not rich or at least their wealth was earned, not inherited. Rupert’s mum, Nancy had been orphaned at a young age but spent many years as Vice-President of Victoria Women’s Hospital which the Hamer family had spent several decades the previous century helping to build though charity drives. It was the first hospital in the British Empire to be run by and for women.

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Very clever people being … not so clever

I just came across this hilarious story.

Trying to rescue Naomi Campbell from the overzealous attentions of Mike Tyson, the Oxford philosopher A J “Freddie” Ayer – according to Ben Rogers, his biographer – inserted himself between the boxer and the supermodel. “Do you know who the f*** I am?” Tyson objected. “I’m the heavyweight champion of the world.” The 77-year-old Ayer replied: “And I am the former Wykeham professor of logic. We are both pre-eminent men in our field; I suggest we talk about this like rational men.”

It reminded me of a conversation I had about thirty odd years ago with one of Australia’s prominent philosophers John Passmore. I used to go when I could to the seminars put on by the History of Ideas Unit at around 12.00 noon on Wednesdays (as I recall) and went along to one. After each seminar off we all went to lunch across the road at University House. I was sitting next to John Passmore and for some reason the subject of banking came up. He said that he couldn’t understand why Westpac wouldn’t give him better service. I said “John, that’s because you haven’t got any market power. They don’t care about you – they’ve got bigger fish to fry”. He said “But that’s where you’re wrong – I do all my banking through them.” Perhaps he was worth squillions, but I don’t think so.

Self-importance is one of the main engines behind otherwise intelligent people acting not so much.

The middleware of democracy. Or from knowledge to wisdom: or at least knowledge 2.0

StyrelseSimon Heffer’s High Minds presents us with a portrait of the mid-Victorians in which they consciously set about building the world which became ours. A liberal democratic world.

To do so they recognised the need for all sorts of public goods. Those of education and health surely enough, an honest public service chosen on merit too (an idea they nicked from the Chinese who’d been at it for a millenium or so) and also civic virtue. It’s a stirring and a sobering story reflecting an age which I think had a more balanced understanding of the necessary ecology of public and private goods each reinforcing each other in building the Good Life.

Today for all manner of reasons – intellectual, sociological and economic - our contemporary vision is profoundly skewed toward private good and private endeavour as the paradigmatic category. That’s why I regard it as a happy hunting ground for low hanging policy fruit – a panoply of ways to drive productivity and economic growth that don’t even cost any serious government money.

But as Heffer makes clear, this Victorian quest was not just economic. It was a political project. As he argued in an interview with Geraldine Doogue – which I quote from memory because I can’t find on the ABC website – they knew that democracy was coming, so they needed to get The People a decent education before they used their vote to wreck the place. Continue reading

Neoliberalism and big data: public and private goods

In the words of Ronald Reagan, here we go again.*

Sandy Pentland rehearses something that’s made it’s way from heresy to platitudinal commonplace with breakneck speed. Asked “what, specifically, is the New Deal on Data?” Sandy tells us this:

It’s a rebalancing of the ownership of data in favor of the individual whose data is collected. People would have the same rights they now have over their physical bodies and their money.

Jaron Lanier has written a book on devolving power to individuals in their own data.

Ladies and gentlemen, we have a metaphor problem. We have the Wrong Metaphor. It was a pity we ever called intellectual property intellectual property.  (we want strong property rights don’t we? Pretty much the stronger the better?  Wrong – we need to balance the strength of the rights between creators and users of technology – remembering that the most important users of technology are those that want to improve the technology. Tomorrow’s creators of technology are todays users of technology).

Similarly, by making data something that is owned, our Wrong Metaphor gives short shrift to the free rider opportunity. Once more with feeling, here are the words of Thomas Jefferson, well known freedom fighter and slave-owner.

He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me. That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density in any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation.

Now it’s one thing to say that, in so far as we arrogate a right of control to anyone, it should be to the individual that the data is about. (This is arbitrary in some ways.  It took two to tango and the data is about some attribute or assumed attribute of the industrial, but it was also the product of someone else capturing and organising that data.) But since we want a society in which individuals are empowered over firms selling to them, assuming that the locus of control should devolve to individual consumers seems like the right call.

But there’s a problem. We’ve erected this idea of someone owning their own data out of anxiety about the way it was being misused, for instance in ways that compromised individuals privacy. So we’ve done something about that – as well we might. But along the way that Metaphor got in the way. Here we have data – which in the age of the internet is always and everywhere a potential global public good. And here we have identifiable mischiefs that can befall an industrial. But instead of focusing the remedy around constraining the mischief in the most efficient way – with regimes that make it difficult and punishable to misuse data and create those mischiefs, we’ve gone with The Metaphor.

Your data is yours. And we’ve gone with something that we built modern commercial and property law from and which lawyers love. Consent. We’re devolving the decisions to those at the coalface – a good instinct – and, hey, it’s your data so you had better consent to all the uses it will be put to, just as you’d normally need to consent to anyone using your property.

But this is already going too far. Why? Because you can’t possibly consent to all the possible worthwhile uses to which your data could be put. Furthermore this all smacks of the fiction of assuming we all have infinite computing power (which has been so useful, for instance in macro-economics in building views of the world which are unparadoxically, counterintuitive and at the same time wrong). If data is owned, then the cascade of permissions follows from the logic of property.**

One of the most important things I know about political discourse I got from a few lines in Schumpeter’s Capitalism, Socialism and Democracy. The ‘engine’ behind democracy – what makes us engage – is not reason (which tells us that there’s no point in engaging because of the infinitesimal chance we have of affecting the outcome) but affect – our emotional and expressive selves. And this governs what gets covered by the media – what takes off as a meme and what doesn’t. And it turns out the metaphors of property are pretty memeworthy, while the metaphors of a public good commons are strangely not.

Anyway, for the record, reason tells us that when it comes to data we’re staring at a massive and exponentially*** growing free rider opportunity. That that opportunity ramifies into the future into a multiverse of possibilities. We want to put people in control of their data to the extent that we want them to make decisions about whether they wish to compromise their rights – for instance to privacy – for whatever reason they may wish to. Moreover this is the only way we can build a healthy eco-system in personal data in a democratic world. (And doing so would be a major economic and social boon!)

But we don’t want them to individually or even in principle consent to every possible use of their data. Rather – and people might differ on how far to go – we want to identify a universe of possible objections that people might have to allowing others to use their data and empower them to prevent such objectionable uses. Beyond that, in the words of that well known Socialist Muslim Barack Hussein Obama “they didn’t build that”. We all built it. Or to put it more clearly, we are all the beneficiaries of the information world we have built which makes it possible for there to be data on us. And if our data can help benefit future generations by being free subject to being vouchsafed against reasonable mischiefs, then it’s the least we can do to set it free.

If data that exists on me and my primary school performance can be of use in uncovering relationships between, for instance teaching styles or diet and educational achievement, then it should be used providing I’m protected from reasonable mischiefs – like having my privacy protected. But if we go with The Metaphor I’ll have to give permission for any such study, and that imposes impossible transactions costs on everyone – including me! And it will cruel all sorts of important data and data linkage projects – the kinds of projects that can uncover all sorts of things of value – like what drugs are harming us, how they interact with non-medical aspects of our lives as Fiona Stanley has shown in WA. And all these good things would be prevented for nothing. They wouldn’t protect me from privacy violations, because in the the alternative world I’m arguing for, data projects couldn’t proceed without protection from reasonable harm by privacy violations.

* Yes, I know he said ‘There you go again, but I’m after cheap mellifluence here – cut me some slack.
** As an aside I note that it may follow from the logic of property, but not from the fact of property which has always practically made room for the idea of multiple use without consent. Thus easements, adverse possession, residual rights, riparian rights, mining rights, airspace rights and on it goes.
*** Yes folks, I mean exponentially – not “really so amaaaazzzingly faaast you won’t belieeeeve it”.

Habituation – to mediocrity

A Tale of Repetition: Lessons from Florida Restaurant Inspections
by Ginger Zhe Jin, Jungmin Lee – #20596 (IO)


We examine the role of repetition in government regulation. Using
Florida restaurant inspection data from 2003 to 2010, we find that
inspectors new to the inspected restaurant report 12.7-17.5% more
violations than the second visit of a repeat inspector. This effect
is even more pronounced if the previous inspector had inspected the
restaurant more times. The difference between new and repeat
inspectors is driven partly by inspector heterogeneity in inherent
taste and stringency, and partly by new inspectors having fresher
eyes in the first visit of a restaurant.

One reason why Britannia ruled the waves: TQM 18th C style


An Englishman enters a naval action with the firm conviction that his duty is to hurt his enemies and help his friends and allies without looking out for directions in the midst of the fight; and while he thus clears his mind of all subsidiary distractions, he rests in confidence on the certainty that his comrades, actuated by the same principles as himself, will be bound by the sacred and priceless law of mutual support. Accordingly, both he and all his fellows fix their minds on acting with zeal and judgment upon the spur of the moment and with the certainty that they will not be deserted. Experience shows, on the contrary, that a Frenchman or a Spaniard, working under a system which leans to formality and strict order being maintained in battle, has no feeling for mutual support, and goes into action with hesitation, preoccupied with the anxiety of see­ing or hearing the commander-in-chief’s signals for such and such manoeuvres. . . . Thus they can never make up their minds to seize any favourable opportunity that may present itself. They are fettered by the strict rule to keep station, which is enforced upon them in both navies, and the usual result is that in one place ten of their ships may be firing on four, while in another four of their comrades may be receiving the fire of ten of the enemy. Worst of all, they are denied the confidence inspired by mutual support, which is as surely maintained by the English as it is neglected by us, who will not learn from them.


Nelson leaves men onboard to whack polar bear: Inadvertently shoots own arm off

Don Domingo Perez de Grandallana, a Spaniard writing of the Battle of St Vincent where a relatively obscure Commodore Horatio Nelson first rocketed to celebrity thrill-seeker status. Disobeying orders, he headed his 74 gun third rate straight into six of the heaviest Spanish ships three of which were 112-gun three-deckers and a fourth the 130-gun flagship. With his ship’s wheel shot away, he led his troops to board an enemy ship and then with cries of “Westminster Abbey or Glorious Victory” ordered them to board another ship. Everyone ended up very impressed. The rest is history.