Jeremy Rivkin saves the world

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Can this moustache save the world?

A friend asked me on linked in for my comment on this grand lecture by Jeremy Rivkin. I reproduce my initial reaction and then a longer set of comments I offered after having listened to the lecture.

I can’t see much new in this. Rivkin has written more than 20 books. That’s too many books IMO. Way too many if they’re really working out substantial ideas. So he’s really a journalist and populariser – not that there’s anything wrong with that :) 1He wrote a book with a great title that I wished I’d used – The Zero Marginal Cost society or something like that, but when I read it (actually I mean I subjected it to the bookshop test which is to say I spent say 20 minutes or half an hour with it), I didn’t find any fresh ideas in there – just ideas in the zeitgeist and what everyone else was saying.

In any event, the doco starts with all the usual big-noting – how he’s advising the EU etc. Good luck to him, but the ideas you’ve summarised – communications, energy and AI navigation are all in the ether. They’re extensively theorised – even if theorising them is of limited benefit. A lot of things we’ll have to wait until they play out. Continue reading

  1. Of course I should have added ‘management consultant’.
Posted in Economics and public policy, Environment | 1 Comment

Independent fiscal councils (probably) improve forecasting and adherence to fiscal rules SHOCK!

Countries increasingly rely on independent fiscal councils to constrain policymakers’ discretion and curb the bias towards excessive deficits and pro-cyclical policies. Since fiscal councils are often recent and heterogeneous across countries, assessing their impact is challenging. Using the latest (2016) vintage of the IMF Fiscal Council Dataset, we focus on two tasks expected to strengthen fiscal performance: the preparation or assessment of forecasts, and the monitoring of compliance with fiscal rules. Tentative econometric evidence suggests that the presence of a fiscal council is associated with more accurate and less optimistic fiscal forecasts, as well as greater compliance with fiscal rules.

The paper can be downloaded from this link.

HT: Saul Eslake for the reference.

Posted in Economics and public policy | 1 Comment

Several things you WON’T BELIEVE about Marijuana Legalization and Traffic Fatalities

From the moral panic division of ClubTroppo.

Early Evidence on Recreational Marijuana Legalization and Traffic Fatalities

Over the last few years, marijuana has become legally available
for recreational use to roughly a quarter of Americans. Policy
makers have long expressed concerns about the substantial
external costs of alcohol, and similar costs could come with the
liberalization of marijuana policy. Indeed, the fraction of
fatal accidents in which at least one driver tested positive for
THC has increased nationwide by an average of 10 percent from
2013 to 2016. For Colorado and Washington, both of which
legalized marijuana in 2014, these increases were 92 percent and
28 percent, respectively. However, identifying a causal effect
is difficult due to the presence of significant confounding
factors. We test for a causal effect of marijuana legalization
on traffic fatalities in Colorado and Washington with a synthetic
control approach using records on fatal traffic accidents from
2000-2016. We find the synthetic control groups saw similar
changes in marijuana-related, alcohol-related and overall traffic
fatality rates despite not legalizing recreational marijuana.

by Benjamin Hansen, Keaton S. Miller, Caroline Weber – #24417 (HE LE)

Posted in Economics and public policy, Health | 1 Comment

Cranks in the ranks: Central banking for all and the gatekeepers of micro-economic reform

Herewith a newspaper column on central banking for all, published in the Age and SMH today. Note: the bit in the brackets in the first paragraph is as submitted but Fairfax edited it out. They also headed the piece “One way to deal with the banks: cut them out of the equation entirely” which is a little extreme. As was the case after the introduction of central bank notes for wide circulation in 1844, there remain plenty of things banks can and should do, just not supply commodity services at massive mark-ups.

Central banking for all: the column

Image result for greedy banksHow would you like to bank with the government, pay interest two percent lower than now on most of your home loan (with a higher rate on any lending over 60% of the value of your property) with a tax cut of around $1,000 per person?

It’s possible, but only if we have the guts to dramatically intensify competition – not just for manufacturers and other cosseted sectors which have been through economic reform – but also for our still cosseted banks. The Productivity Commission (PC) is conducting a review of competition in finance right now, but this fearless architect of disruptive reform for some can’t quite stir itself to even consider serious reform at the big end of town.

In 2010 when Mervyn King was Governor of the Bank of England (Britain’s equivalent of our Reserve Bank), he said this. “Of all the ways of organising banking, the worst is the one we have today.” Banking’s fatal flaw is this: Although the money in our economy is a classic public good, like the air we breathe or the radio spectrum over which we communicate, almost all of it is privately created – by commercial banks like NAB and Westpac when they advance loans.

That flaw not only hogties our Federal Government to underwriting banks if they get into trouble – as when it guaranteed over a hundred billion dollars of bank borrowing one panicked weekend in late 2008 – even as the bank executives continued making out like bandits. It also means that one of the central tools of macroeconomic policy functions through its influence on the appetite to borrow – something which is notoriously fickle and so amplifies the economic cycle economic managers are trying to moderate.

It also locks economic managers into blowing debt bubbles to moderate sluggish growth as has occurred in recent years. That can store up rising risks of debt deflation for the future. Will those risks be realised? No one knows. Are you feeling lucky?

And here’s the big secret: if wildly profitable private banks creating money out of thin air sounds a bit dodgy, it is! In other areas like radio spectrum, where public goods were once allocated to the powerful few, much of it is now auctioned, generating free money for nothing for governments (instead of corporations) and so, reducing taxes elsewhere.

If governments created the money supply, it would bring them a vast torrent of revenue. Free market evangelist Milton Friedman always supported this idea, and Britain’s best economic journalist, Martin Wolf, recently calculated – very conservatively – that it would generate government revenue of around 4% of GDP. That’s around $70 billion for Australia. Continue reading

Posted in Economics and public policy | 14 Comments

Andrew Leigh’s excellent speech launching Randomistas

RandomistasRobert Solow once referred to the law and economics scholar Richard Posner as writing books the way the rest of us breathe. Andrew Leigh seems to be in this category with his output apparently accelerating on top of his no doubt gruelling schedule as an MP, not to mention being a father of three. 

Anyway, I’ve not yet read his latest but I did go to the Melbourne launch of his book where he lavished the breadth of his learning on his audience. I would have liked a somewhat greater awareness of the foibles of what Hayek called scientism in his speech.

Randomised controlled trials definitely have some very worthwhile things to offer policy making and Andrew’s speech makes that case compellingly. I also endorse his support for randomisation as a modus operandi – not just for all singing, all-dancing RCTs costing hundreds of thousands of dollars by academics, but also for every day randomisation in the way that’s proposed in the Lean Start-up and practised by the most successful IT firms like Google and Amazon.

But I’ve got an uneasy feeling about how randomisation so easily takes on the mantle of ‘gold standard’ for evidence – something repudiated by numerous scholars such as Angus Deaton and James Heckman. Here’s  Hayek in 1942, but he held the same views up to his death around forty years later:

In the hundred and twenty years or so during which this ambition to imitate Science in its methods rather than its spirit has now dominated social studies, it has contributed scarcely anything to our understanding of social phenomena… Demands for further attempts in this direction are still presented to us as the latest revolutionary innovations which, if adopted, will secure rapid undreamed of progress.

This idea that we can prove up ‘what works’ and then build a management system around it is OK as a meta-idea but only if it’s pursued with the scientific caveats that it requires. Alas managers and politicians are impatient with such things. I fear Andrew might be a little impatient with it also. And so, just as academia pumps out graduates who have been carefully trained to generate and operate any number of sophisticated models but have been poorly trained, if they’ve been trained at all, to understand their respective merits and limitations, so it would be easy for whole systems to be built which generate knowledge using randomised trials, but show little care in understanding precisely how far that knowledge can be generalised – how constrained to its context it is. I tried to explore this terrain in my own dinner address to the Australian Evaluation Society Annual Conference last year.

In any event, these issues may be dealt with in the book. Be that as it may, Andrew gave a great account of himself and I warmly recommend his speech, reproduced below the fold, to all. You’ll learn a lot. I did anyway.    Continue reading

Posted in Best From Elsewhere, Economics and public policy | 8 Comments

Does Integration Change Gender Attitudes? The Effect of Randomly Assigning Women to Traditionally Male Teams

We examine whether exposure of men to women in a traditionally male-dominated environment can change attitudes about mixed-gender productivity, gender roles and gender identity. Our context is the military in Norway, where we randomly assigned female recruits to some squads but not others during boot camp. We find that living and working with women for 8 weeks causes men to adopt more egalitarian attitudes. There is a 14 percentage point increase in the fraction of men who think mixed-gender teams perform as well or better than same-gender teams, an 8 percentage point increase in men who think household work should be shared equally and a 14 percentage point increase in men who do not completely disavow feminine traits. Contrary to the predictions of many policymakers, we find no evidence that integrating women into squads hurt male recruits’ satisfaction with boot camp or their plans to continue in the military. These findings provide evidence that even in a highly gender-skewed environment, gender stereotypes are malleable and can be altered by integrating members of the opposite sex.

by Gordon Dahl, Andreas Kotsadam, Dan-Olof Rooth: Paper Here.

Posted in Gender | Leave a comment

Brexit Scenarios and some Advice for Brexiteers

Brexit is the main political issue in the UK, competing with sex for the attention of the public. It is a daily gamble whether the news headline is about some politician fondling a knee 55 years ago or a row over Brexit.

For the last 18 months, the debate in London has been surreal. Unhindered by much expertise about the issues, the politicians have given full reign to fake news, ranging from Boris Johnson who kept pretending there would be more spending on health outside the EU, to the latest improbable claim by some Minister that he has 21 agreements with countries outside the EU ready to sign after Brexit.

Rather than laugh at these statements, one should see them as the logical, and indeed intelligent, reaction of politicians to a situation neither they nor their voters like: they pretend a bad reality is simply not true and waffle on about what they do want to be true. That may be bad economics, but it is good politics. The UK has been the home of fake news for over 2 centuries, and still going strong.

If we forget about the current smokescreens by the politicians and think about the end game, a key question is just how easy or difficult it would be to stop the Brexit process. In the press, both in the UK and in the EU, the March 2019 deadline has been presented as an immutable wall, one that forces parties to agree to something before the end of 2018 so that 28 parliaments\governments can ratify the agreement.

I think that ‘mainstream scenario’ is absurd. Each of the three ingredients in that mainstream scenario seem highly unlikely to me. Just ask yourself: do you believe that the Brits could internally come to an agreement before the end of 2018? Do you think they could then negotiate that agreement with the EU negotiators within a few months? And do you buy the idea that 28 parliaments\governments are going to agree without using the opportunity to be difficult? I don’t expect any of these three things to happen, and I doubt that the more intelligent politicians ever expected it to happen. So nearly everything you read in the press about deadlines and watersheds is missing the real game.

What then? How can this saga end?

Well, funnily enough, a quite plausible scenario is that is simply doesn’t end at all but is rolled over, much like a loan that supposedly has to be paid back at a particular date, simply leads to another loan to pay back the previous one. Continue reading

Posted in bubble, Cultural Critique, Democracy, Geeky Musings, Humour, Political theory, Politics - international, Social, Society | 11 Comments