What things shouldn’t we be wasting this crisis on?

Not sure Winston ever said that, but it sounds like the kind of thing he might have said. Quote investigator doesn’t tell me sadly. Grateful for any others’ researches in comments below.

The subject of this post has been a theme of some conversations I’ve had with some people in Canberra. What things should we have been doing before the crisis that the crisis concentrates the mind sufficiently to try to do now? And what things should we have been thinking of, but weren’t till the crisis arrived?

Though lots of things need to be done quickly and needn’t have some long-term game plan attached, it’s worth thinking about what long-term benefits might come. Doubling the dole, I’m hoping will make it more likely that when the payment is ‘normalised’ it goes back to a more humane level than it was at. There will be little need for the government to be stingy with it when it’s trying to engineer a recovery in six or more months time.

The Commonwealth being the government with the big tax base and a central bank sitting behind it should be offering broad underwriting of State schemes of tax relief. It might hopefully use that to bring about some rationalisation of state and federal taxes at the end of the process – and closer cooperation between states and the feds – for instance allowing the Commonwealth to collect tax for the states to simplify administration for businesses.

Then there’s regulation. Continue reading

Posted in Democracy, Economics and public policy, regulation, Sortition and citizens’ juries | 6 Comments

Hoisted from archives: Wrapping up 2008: the year of the first blogged financial crisis

Since we’re blogging the next crisis, I thought now was a good time to reheat the blogging of the last one. intriguing to think of all the changes, and in many ways how much steam has gone out of blogging, and yet how resilient it has been when we need it! Enjoy!

I wrote this column for the Fin at the end of the year [2008 NG] only to discover that I was on leave. Anyway, it was put in this morning’s Fin in a slightly edited back form. The original is below.

Blogging the Crisis: Enter the bright world ushered in by 2008

George Soros called 2008 the end of an era the bursting of a super-bubble. It also the beginning of an era: The era in which an unlikely cast of characters assembled themselves to crowdsource answers to the global financial crisis.

In late 2006 a former academic in English with decades of experience in Americas mortgage industry, off work ill, began posting at finance industry blog Calculated Risk, anatomising her industry and prophesying doom with encyclopedic knowledge and wry hilarity.

Why were things going off the rails?  “Because God hates us” she suggested beginning a paragraph that explained yet another attenuation of the relationship between borrower and ultimate lender in the (by then) stupefyingly complex chain of mortgage securitisation.

To retain her good name in the industry she wrote pseudonymously using only her family nickname Tanta. But in the intellectual hothouse of the blogosphere she rapidly gained the authority she deserved even being cited in Federal Reserve research.

Welcome to the turbocharged ecology of cyber-opinion where intellectual esteem matters rather than notoriety or media budgets: Where towering figures usually, but not exclusively, top academics, direct the traffic, and literally hundreds of high quality contributors weigh in with posts and comments like a set of strategically placed cameras around a sports ground. Blogs like Naked Capitalism, Angry Bear, Follow the Money and Grasping Reality bring you the action from every angle. Continue reading

Posted in Best From Elsewhere, Blogs TNG, Democracy, Economics and public policy | Leave a comment

6 post-Corona Institutional questions

The mass hysteria of the corona crisis is raging, with the resulting self-isolation of whole economies and populations. The loss seems greater with every new forecast on the economic collapse than I initially thought, and the benefit of imprisoning and terrorizing the population smaller than I initially thought, leading courageous little Sweden to forego these options. High-level media and calm commentators are waking up to the longer-term implications, though the population is still too overcome by fear.

I want to share 6 areas where we should think of international institutional reform to prevent another hysteria like the one we are going through now. I don’t want to presume any answers but simply want to hear your thoughts and suggestions, so am merely laying out the challenges.

They are: i) How to diminish the normality of apocalyptic thinking, ii) How to read China better, iii) How to prevent international contagion of panic through social and regular media better, iv) How to reduce the fragility of international supply chains, v) How to foster better cooperation between countries in the EU, and vi) How to regain our lost freedom and reason.

Over the fold I explain them in more detail.

Continue reading

Posted in Business, Climate Change, Cultural Critique, Economics and public policy, Health, History, Life, Political theory, Politics - international, Public and Private Goods, regulation, Religion, Science, Social, Society, Terror | 20 Comments

It is 1984. A message from London.

People shuffling in the street, afraid to look others in the eye, get close, and be accused.

Fear as a silent ghost hovering above the city, watching us, like drones.

The panic in the eye of the mother as her little toddler cycles by an older woman on the street, too close.

The glee of the neighbourhood bully as she shouts at a couple embracing in the park, taking pictures with her phone.

The stern voice of the expert on the news who has discovered yet 5 more reason for why he was right last week.

The bombast of the politician who sheepishly looks through our screens, almost apologetic at introducing more restrictions and for what his experts are urging. Fines. GPS tracking. A gulag for the unwilling.

The desperation of the black teenager shouting abuse at himself on the street, echoing the words shouted at him at home where they are cooped up with 10 in a small apartment.

The shame in the eyes of the men who have no jobs and little savings.

The gratitude in the eye of the middle aged woman as someone returns her smile on the street, acknowledging she exists.

A beautiful day in which the first stirrings of spring can be seen: cherry blossoms.

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PANIC IS OUR FRIEND!

It’s an intimidating picture. But the weaker the freeze, the more people die in overburdened hospitals — and the longer it ultimately takes for the economy to restart.

Donald G. McNeil Jr in the NYT

Yes folks, I normally don’t go in for all that MALARKY WITH CAPITAL LETTERS IN A POST, BUT THIS TIME IT’S DIFFERENT.

The government didn’t take coronavirus seriously at first. As it’s amped up the seriousness of its response, it’s done so reluctantly and now it’s in no man’s land, with strong social-distancing measures that will cost the economy a bomb. But those measures are not strong enough to rid the country of the virus. So they’re with us until we gain herd immunity, which will take the best part of the year.

We’ve picked a scenario that is the second-worst for health (the worst being doing nothing) but it seems to me to be the worst possible option for the economy. (The best is probably to do nothing — but that was never an option — the people would rightly have rejected it.)

Right now, panic is the friend of anyone who doesn’t want to get this disease, which continues to surprise on the downside (i.e. the bad side). Thus in yesterday’s Fin:

China is not reporting any new cases in Hubei province, but the deaths continue, as patients who are healthier and younger lose their long battles with the virus. This has pushed China’s death rate from the 2.3 per cent cited in the study to 4 per cent today.

Those ratios are misleading because the denominator is people who have tested positive to coronavirus, not all people who actually had it. But they still show how important humility is in all this. There’s still much we don’t know, including the stability of immunity.

Extreme social distancing is effective, however, in massively reducing the rate of spread and getting the rate at which one person infects others (the “R0” we’ve all suddenly adopted to demonstrate our coronasavvy) from around 2.5 to below 1. And, as complexity scientist Yaneer Bar-Yam concluded on Joseph Walker’s excellent podcast two weeks ago now, once R0 falls below 1, exponential growth goes from being your enemy to being your friend. The virus runs out of business halving, then halving again, and so on to oblivion.

Then one rebuilds the world from ‘green zones’ (they’re probably called something else on that podcast but this is an emergency). Life as normal can resume and the only economic restriction remaining is strong restrictions on travel. However, even here this will be mitigated by a system of building travel links between other ‘green zone’ countries and various forms of certified safe travelling that would include placing all arrivals not able to certify their coronavirus-free status into self-funded quarantine for 14 days before release.

This would produce extreme disruption in the short term — but it’s hard to imagine it being more than (say) 50% worse than what we have now or will have by the end of the week. But we ought to be able to announce some relaxation of the more extreme measures within six weeks. By then, tracing and testing would be massively improved, so we might be able to return to normal relatively quickly. Rather than have this thing drag on for the rest of the year as the travel restrictions will have to — although our own and other countries doing the same will draw other countries into wanting to be in the green zone if they haven’t twigged already.

I’d also like the government to publicly commit to some timetable letting us know when it thinks it can meet certain milestones. They should also commit to releasing an independent report on the state of play each week, with expert recommendations on whether and when to relax measures and in what order. It would be clearly telegraphed where we were meeting and missing our targets (there’d likely be a mix of both).

But I think people would be impressed that their interests were being taken into account — as fairly and as efficiently as practically possible.

Postscript: Since writing the words above, it seems New Zealand has adopted the strategy I’ve suggested — right down to the specification of targets by which it is hoped to have the virus under control and safely heading towards zero — perhaps with the odd breakout which is rapidly tracked down.

I’ve also watched tonight’s episode of Q&A on which the Deputy CMO repeated the idea that this will inevitably go on for six months or so. That’s doesn’t seem to be what Jacinta Ardern has been advised and I can’t see why it makes sense. However though Norman Swan didn’t directly challenge the Deputy CMO on the point he did say that we’re about to observe the results of the first easing up of restrictions in China — although at least at the epicentre, it will be from a much more heavily infected area than anywhere in Australia is — at this stage.

Posted in Death and taxes, Economics and public policy, Health | 12 Comments

A lament for the corona panic victims.

Spare a tear for millions of poor people around the world. They will no longer have good jobs, good health, or long life.

Weep for the poor, the sick, and the old in our own societies. Their hopes, dignity, and pensions are gone.

Light a candle for the workers in hotels, bars, tourist resorts, airlines, and elsewhere. Their jobs are gone.

Cry for the lonely whom we have just created and abandoned. They now face fines and ridicule for seeking human connection.

Feel one with the athletes and their helpers. Their dreams are destroyed.

Say sorry to the billions we didn’t have the courage to protect from our fears.

Ask forgiveness of freedom, privacy, and joy. We orphaned them.

Forgive the doom-sayers, the bullies, and the health advisers. They know not what they have done.

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Targetting and the stimulus: who should pay the rent?

I ran into Ken Henry at a function – I think it was the terrific PM’s Science Prizes in late 2008 but someone may be able to look things up and falsify this claim. In any event, I squatted at his table and had a quick chat to him about the recently announced or soon to be announced stimulus. He said that, he’d been saying to his colleagues and to cabinet, his plan was to “go early, go hard, go households”. I said “can I quote you on that” and he had a think and said something like “Yes, why not?” So I did and it caught on.

Economics is a simple discipline with just a few basic ideas in it. One is targeting. Continue reading

Posted in Death and taxes, Economics and public policy | 12 Comments