Fair trade and inefficient do-gooding: what’s good about it?

Here’s an extract from a book on fair trade that I had occasion to look up. In what circumstances is fair trade a good thing? If we dig into our pockets to buy something at a higher price than necessary in order to engage in ‘fair trade’, then we know a few things.

  • The sacrifice we made paying a higher price could have purchased more good for the beneficiaries if we’d given them our money – usually a whole lot more. In other words in terms of helping it’s inefficient – often hugely so. Often the exchange rate back to the people one is putatively helping is less than 25 cents to the intended beneficiaries for every $1 we invest.
  • Even without this diluting, if people are producing a product for a price that’s inflated against world prices, they’re entering a new kind of dependency – on us. Perhaps they’d be better off adjusting to the unfair price and (hopefully) producing something else which has a less ‘unfair’ price. Presumably in many cases the there’s nothing much else the producers can produce, but this is a hard thing to know.

In any event, I’ve always been hugely ambivalent about fair trade, but it’s a subset of what might be called ‘inefficient do-gooding’.  The same issue turns up in a different guise in environmental policy where we reduce waste to landfill and increase kerbside recycling. Usually this reduces greenhouse gas emissions (though sometimes even that isn’t true), but we could do a lot more environmental good, if that’s what we want to do, by just spending the money on the environment directly – say with a stand of carbon sequestering trees, rather than spending the money on kerbside recycling.

On the other hand there is an argument that a lot of human do-gooding is not focused on utilitarian efficiency. Kristina Keneally supports the still-birth foundation because she has been touched by still birth. It’s arguably not the most ‘efficient’ use of her time in terms of alleviating human suffering, but it’s something she wants to do. By the same token maybe people don’t want to make an ‘efficient’ contribution to the environment, they want instead, (maddeningly as far as I’m concerned) to reduce their carbon footprint. So what – O Troppodillians – can we say about this?

Revisiting Australian Fisheries Economics Part 2

Herewith Bob McDonald’s second post on fisheries economics.

With Australia being the last ‘settled’ continent, the flattest and driest and without reliable streamflow from snow melt it is not outrageous to suggest its fisheries are unique.  Until WW2 Australian commercial fish catches almost entirely came from bays, estuaries, lakes and rivers.  Even the offers of government funded trawlers failed to lure fishermen from these sheltered waters and their reliable catches. By WW2 Australia was changing with rapid population increase, accelerated with industrialisation including the industrialisation of agriculture. Continue reading

Guest post on fishing the common pool resources of Australia’s fisheries

On a Background Briefing program on micro-targeting of political campaigning and advertising, I was being pressed by the interviewer. If people hate negative ads, if they degrade the reputation of politicians, why do they do it?  I likened it to over-fishing where each fisher pursues their ‘local optimum’ and keeps fishing, but the result is that collectively, everyone is worse off – the global optimum is forsaken.  Trouble is, I can’t imagine too many disarmament agreements between political parties – so they can get on with their positive campaigning!

Anyway, this prompted Bob McDonald to write to me telling me that there was a lot of nonsense talked about overfishing. Anyway, after a series of emails, I invited him to send me a guest post. I publish it here without endorsing it or otherwise. I am completely unqualified to judge. Now this doesn’t mean I’m giving away my right to have an opinion, but I’ve not really even had time to consider Bob’s arguments or poke around to see how they stack up, so I’m just ‘putting them out there’ – as my daughter says these days. But in my ignorance and haste, I must admit his argument seems interesting and plausible.

Putting existing fish stock management out to pasture by Bob McDonald

Part 1 Habitat

It is a common and shared observation that there are less fish along the coast, especially in bays, inlets and estuaries. As a naturalist less fish actually means less time when fish are abundant in a particular place – and ‘biting’ from the point of view of someone trying to catch them with bait. For watching or catching fish – or for events of seabirds feeding on them – it is the presence of schools of smaller fish in vast numbers that indicate good fishing and a productive ecosystem for that time. There are many species of small fish that fit this bill, from anchovies to sprat, pilchards and even herring and these fish, rarely fished in Australia, are the feed of many others that are.

The habitat types, whether sand or mud, seagrass beds, mangroves, saltmarsh and even the vegetation that fringes estuaries, are the pastures of fish. Places where they can attach their eggs and shelter from currents.  Estuaries, where the freshwater flow meets the tide are among the most productive of these ‘pastures’. The smaller fish feed and in the zooplankton layer, on algae, fish and mollusc eggs etc. that is near the surface and mostly invisible.

The nursery grounds for many species are also the feeding grounds for others. Young fish need the shelter of these habitat types and even simply shallow water on tidal flats to avoid their predators. Even where mangroves and sheltering vegetation have been lost many fish and prawns still use ‘the night’ to hide from birds – with restoration of such shelter having obvious benefits to fish production.

Along the coastline and in estuaries fish feed and mate and lay eggs or have ‘live young’ in the case of many sharks, especially small coastal schooling species.  If the water quality is bad, the streamflow too weak for the tides to push it up into ‘shelter’ or this habitat is missing, the times of fish abundance are less frequent.  The species we fish for are few but the species reliant on the same habitat, especially the invertebrates, are typically of many hundred of ‘kinds’ and many millions in numbers in ‘productive habitat’.

Imported overseas styles of catch management totally ignore these coastal habitats where most Australian fish breed. By managing catch alone under quota and catch share systems there will be invariably less fish in an ever growing market. If only the landed price of fish is considered this may well appear to increase the net value of fish to the economy – but this is a grim and narrow view of fisheries economics.  Under this limited and flawed vision of ‘supply and demand’ into the future the last boat will land the last fish that will be worth the entire value of the previous fishery!  The hundreds or even thousands of people could made needlessly unemployed, in this scenario, are reduced to ‘ignored and uncalculated statistics’.

Stock management (or catch) management without ‘pasture’ management would no more work for farming than it does for fisheries. Continue reading

The Herald/Age Lateral Economics Index of Wellbeing

Herewith my op ed from the Herald and Age today.

What is the good life and are we living it?

Assessing and measuring wellbeing has vexed us since ancient times. But a funny thing happened on the modern world’s way to the answer. The metric that economists used to dampen down the business cycle – Gross Domestic Product (GDP) – received such prominence that it ‘went viral’ as we say these days. It became the default measure of national progress.

But there’s lots wrong with GDP as a measure of economic wellbeing let alone more general wellbeing. Measuring gross activity, it ignores the growth and depreciation of assets – such as buildings, equipment, natural resources like farmland and mineral deposits, biodiversity and clean air. And that’s not to mention the greatest asset of all – our knowhow.

Moreover GDP is measured by money changing hands. So converting bread, mince and salad into a hamburger increases GDP in McDonalds but not at home. More starkly, an evening of passion and pleasure only adds to wellbeing as measured by GDP if it happens in a bordello! More broadly still, GDP takes no account of the distribution of income or of our physical or social wellbeing.

But considering how different all these phenomena are, how can we possibly measure their sum impact on national wellbeing in a single number? Because it would ‘dumb down’ complex issues, economics Nobel Laureate Amatya Sen initially refused to participate in the construction of a single index of human development to help guide development in poorer countries. But he relented because he appreciated that, however unsatisfactory a single wellbeing index might be, it was better than the alternative. Given the thirst for simple answers, the alternative is even more dumbing down as would occur if GDP yet again filled the vacuum. Continue reading

Australia gets Baufritz Homes

A friend of mine, and a great contributor to Australian public policy, Mike Waller, a man who sketched out Australian competition policy on a single page and fed it up the line as an FAS in PM&C in the late 80s (or perhaps it was 1990), has wrenched himself from the policy scene (though not entirely, as he keeps his hand in with consulting and other occasional gigs) and joined a few others in setting up a company which will initially import Baufritz homes and which will ultimately build quite a lot of them here.

Baufritz homes are about the most ecologically fine habitation one can buy. Extremely energy efficient, made without nasty emissions, emulsions and things like that, they are exceptionally comfy. They are also quite pricey, but what do you expect for comfort?

One of the things that excites Mike is the fact that Australian homes are still built according to the craft model, with people turning up on site and building the house. There’s more prefabrication in units (with the efficiency gains having been captured and then some by the unions), but in houses there should be a lot more factory pre-fabrication with the ultimate building resembling a barn raising. This can reduce cost, and improve the quality and efficiency of houses.

Houses will initially be largely imported from Germany but will be progressively displaced by Australian production as scale rises. So drop into the new site of MGW Homes and let MGW know if you’re interested in buying one.

Sustainability tips for the non-credulous

I tend to get increasingly grumpy as I get to the fag end of final exam marking.  This morning provided a classic example.  I received in my email inbox a typically sanctimonious, patronising communication from someone in another School who is in the habit of sending frequent unsolicited “environmental sustainability tips” to the entire faculty bulk email list.  There is no way to unsubscribe.

I failed to resist the temptation to fire off a retaliatory email (addressed only to the Head of School who I know shares my views) titled “sustainability tips for the non-credulous”:

  1. Don’t recycle domestic waste in Darwin.  It’s uneconomic.  Darwin City Council pays $47 million per year for “waste and recycling services”.  It’s unclear from their audited annual returns how much of that is paid to make it feasible for the recycling contractor to sort recyclables and transport them to somewhere where they actually have some economic value.   If it made sense the taxpayer wouldn’t have to pay anything at all.
  2.  Don’t buy “fair trade” coffee or any other fair trade product.  Apart from the fact that it tastes dreadful, the only sustainable way to help third world prosperity is genuine free trade and Ricardian comparative advantage.
  3.  Oppose the plastic shopping bag ban.  All it does is force people to buy expensive garbage bags instead of using shopping bags as free bin liners.  Moreover the Productivity Commission found that plastic bags don’t present a significant environmental threat anyway (the same report also debunked recycling – see 1. above).
  4.  Don’t be skeptical about all carbon tax opponents.  A carbon price only makes sense if most other countries impose one, which currently looks quite unlikely.  In the absence of an international price in the next few years all we’ll be doing is exporting jobs in return for a warm inner glow of self-righteousness.

Unfortunately the HoS didn’t resist the temptation to copy it to the entire School of Law and Business bulk email list.  I am keeping a watchful eye out for a Green Lynch Mob.

How Gillard fell victim to the Knobe effect

By calling it the greatest moral challenge of our generation, Kevin Rudd framed climate change as a moral issue. Now as Prime Minister Julia Gillard is putting a price on carbon. So why isn’t she getting credit from people who care passionately about the issue? The reason is the Knobe effect.

According to experimental philosopher Joshua Knobe, people are much more willing to blame a decision maker for bad side-effects than to praise them for good side-effects. And according to the conventional media narrative, Gillard’s decisions on carbon pricing a side-effect of her search for electoral advantage.

When the polls indicated that action on climate change was a vote winner Gillard supported Rudd’s plan for a carbon price. But when public opinion turned, Mark Arbib and Karl Bitar went to Rudd and told him to put the plan on ice. According to commentators like Gerard Henderson, Gillard supported this move. Now that her government’s survival depends on the Greens, Gillard is taking action.

Among those who see action against climate change as a moral imperative, Gillard is held responsible for stalling Rudd’s carbon pricing scheme in order to hold onto office. Then when she does decide to take action, her decision is discounted because it’s seen as an effort to hold onto office by appeasing the Greens.

Knobe tested his ideas on how people make moral judgments in a series of experiments. Here’s how he explains the results in The Edge:

Continue reading