Tuesday, 31 January 2012

Ocean currents are warming faster than expected

Writing in The Register article Ocean currents emerge as climate change hot-spots Richard Chirgwin reports that scientists have confirmed a prediction that global warming will lead to increases in temperature of major ocean currents:
A global study that assesses the temperature change in ocean currents has made two findings – one surprising, the other less so. The unsurprising outcome is that as the Earth’s temperature rises, so does the temps in a collection of major ocean currents; the surprise is that those currents are warming faster than the globe as a whole.

According to the study, published this week in Nature Climate Change, a pattern of warming in the ocean’s long-distance currents has now been identified near Australia, Japan, Africa, and North America.

Moreover, the warming is also sending the currents “polewards”, meaning that species migrations already observed in Australia (in which many species are moving southwards at as much as a degree per year) are almost certain to happen on a global scale.
It's also worth reading the comments, in particular the contributions by Trevor Pott.

Sunday, 29 January 2012

The End of Loser Liberalism

Dean Baker has written a book "The End of Loser Liberalism: Making Markets Progressive". You can download a free copy here. You can also buy a hard copy at cost. In the book Baker argues that:
Progressives need a fundamentally new approach to politics. They have been losing not just because conservatives have so much more money and power, but also because they have accepted the conservatives’ framing of political debates. They have accepted a framing where conservatives want market outcomes whereas liberals want the government to intervene to bring about outcomes that they consider fair.

This is not true. Conservatives rely on the government all the time, most importantly in structuring the market in ways that ensure that income flows upwards. The framing that conservatives like the market while liberals like the government puts liberals in the position of seeming to want to tax the winners to help the losers.

This "loser liberalism" is bad policy and horrible politics. Progressives would be better off fighting battles over the structure of markets so that they don't redistribute income upward. This book describes some of the key areas where progressives can focus their efforts in restructuring market so that more income flows to the bulk of the working population rather than just a small elite.
Philip Pilkington at Naked Capitalism has a two part interview with the author: part one and part two.

Behavioural economics and tax cuts as stimulus

Drake Bennett in Behavioral Economics Foils an Obama Tax Cut? writes that in a 2009 stimulus bill, the Obama administration used theories from behavioural economics to dribble out tax cuts over a period of time rather than pay them in a lump sum (as was done with the cash handouts in Australia). This was done because:
... policymakers believed that parceling out the money piecemeal, rather than sending it to taxpayers in a lump sum, had two advantages: It could start sooner, since people didn’t have to wait for the check; and it was more likely to work. By giving people the sense that their incomes had grown, doling out the money paycheck by paycheck was supposed to make recipients more likely to spend it, thereby lifting the economy.
Subsequent research has shown that the opposite was true:
That’s not what happened in practice, according to Sahm, Slemrod, and Shapiro. In a study of the 2009 stimulus, based on 500 telephone interviews, the authors found that only 13 percent of Making Work Pay recipients reported that the tax credit would lead them to increase spending. This was just half of the 25 percent spend rate the researchers found for the traditional lump-sum tax rebate in President Bush’s 2008 stimulus. Of course, 2009 was a worse economic climate than 2008, and that might have played a role in the change. To control for this, the researchers looked at one-time stimulus payments that went to retirees at the same time that Making Work Pay was going to working households. The retirees, too, reported much higher spending rates than the Making Work Pay households, who got their money in a steady drip.
So, the behavioural economists were wrong. Should we stop listening to them then? (I can image Dan Ariely asking this very question in one of his podcasts). Well, actually we should keep listening:
The biggest criticism of behavioral economics is that it remains little more than an interesting grab bag of exceptions to traditional economic theory—TED-conference fodder gleaned from lab studies that are pale approximations of real life. However, as both Thaler and Slemrod point out, there are important questions that neoclassical economics simply doesn’t deign to answer.
Traditional economic theory predicts that the design of a tax credit like Making Work Pay should have no effect on its efficacy: A tax cut is a tax cut, whether it comes in a check, reduced paycheck withholdings, or, for that matter, a briefcase full of cash. How money is delivered should have no effect on whether people spend or save.

Yet if, as Sahm, Slemrod, and Shapiro argue, lump-sum payments are more effective than Making Work Pay, then behavioralists might have something to cheer about, too. That is, after all, exactly the type of effect that these economists would go looking for, even if it’s not the one they predicted. Should it hold up, the finding might best be seen as a refinement rather than a refutation. “I disagree with the idea that this disproves behavioral economics or contradicts it,” says Michael Barr, a University of Michigan law professor and former Assistant Treasury Secretary in the Obama Administration. “The basic insight is that how you give the money matters, and this supports that.”

So the behavioralists may be right after all: People don’t act the way economists predict they should. The trouble is that they don’t act the way policymakers want them to, either.

A few more interesting links on the economy

In All hail mighty Aussie dollar, as it's here to stay Ross Gittins looks at why the Australian dollar is likely to remain high, and the benefits it brings us.

Stephen Koukoulas wrotes of Terry McCrann's Glowing Endorsement of the Gillard Government.

Peter Martin in Stimulus programs work. We need them ready - Access reports that Chris Richardson of Deloitte Access to ignore talk back radio and not be afraid to stimulate the economy if the European debt crisis causes a GFC mark II. To quote from the article:
“Australia’s fiscal stimulus last time was a striking success,” he writes. “It simply wasn't seen as that in the court of public opinion. That gap between reality and perception threatens a poor reaction by the punters if a new stimulus is needed in 2012.”

Access says its central scenario is that Europe's leaders “muddle through in a way that doesn’t stop Europe having a recession, but does avoid a deep recession and bank failures.”

But it says the risk is “almost as high” that Europe could ‘blow’ sparking bank busts and a new global financial crisis.

If that happens Australia should abandon its commitment to a small budget surplus in 2012-13 and instead embrace a “huge” budget deficit.

“We should be willing to do what worked last time,” he told The Age. “We shouldn’t let talkback radio decide what worked and what did not.”

The cash handouts worked very well... The school building programs worked less well, but not for the reason many people think.

“The problem wasn’t waste. The real waste occurs in a recession when people lose their jobs. Someone who is out of work for two years might not ever return to the workforce. That’s waste. The problem with the Building the Education Revolution program was it took too long. It was stimulating the economy beyond the point it was needed. Speed is essential.”
I would also argue that the great thing about the cash handouts was the speed they could be given. It's why I think cash handouts were a much more effective stimulus measure than tax cuts would have been. Peter Martin also quotes Chris Richardson as saying:
“First home owner programs are the crack cocaine of fiscal stimulus. They usually work a treat. But they make young couples spend too much on their first home, making their lives miserable down the track.”
This is something I would agree with. I think first home owner grants, especially on existing housing stock, only lead to an inflated property sector.

Stephen Koukoulas in February - Bash-A-Bank Month is reporting that if the Reserve Bank doesn't reduce interest rates next month then the banks will probably need to increase rates because of higher funding costs. If the Reserve does drop official rates the banks are unlikely to pass on the full cut. He argues that the Reserve is well aware of this and will likely reduce rates for this very reason.

Stephen Koukoulas is also reporting that Inflation is a Dead Duck.

In George Calombaris – would you like penalty rates with that? Matt Cowgill puts the blow torch to George Calomabris' claims that Sunday penalty rates are making it uneconomical to open his restaurants on a Sunday.

Mike Carlton looks at Tony Abbott's promise to turn the boats back

Mike Carlton in Speedo politics scuttles any solution looks at Tony Abbott's latest promise to "turn the boats back". Where before he had a general promise to turn the boats back, but left the individual decision to the senior Navy officer on the spot, now he's saying that all boats will be turned back, even if the Navy has to repair and refuel them first.

It seems that Tony Abbott sees this as a test of wills between Australia and Indonesia. Macho stuff from Mr Abbott (brings to mind a Laura Tingle column). Unfortunately, I don't think this is a test that Australia can really win. As Mike Carlton points out, the people smugglers know how to counter this strategy:
The people smugglers have shown they will set fire to the boats or sink them to stop them being sent back.
I can't see our Navy repairing an Indonesian fishing boat that's at the bottom of the ocean or burnt to the water line. All this policy will do is risk the lives of asylum seekers and of our sailors that may have to rescue them. The only way to counter such people smuggler tactics would be to refuse to rescue those concerned. However, this would be, I think, a bridge too far. Such actions would be highly immoral if not illegal (wasn't Admiral Dönitz charged with war crimes for ordering his submarine crews to refuse to rescue stranded sailors).

So, how does Mr Abbott think we can triumph over Indonesia in a battle of wills?

Peter Costello gets it wrong

Peter Costello recently criticised the Government for running a budget deficit and increasing debt to pay for it and suggesting that Australia may soon end up having similar problems to Europe.

Stephen Koukoulas in Peter Costello Needs to Read the Budget Papers compares the ratio of Government spending to GDP during the period of the Howard Government and the Rudd/Gillard Governments. He writes:
  • Government spending to GDP averaged 24.2% of GDP during the 12 Budgets that Mr Costello delivered between 1996 and 2007.
  • Government spending rose as a result of the stimulus measures during the GFC and peaked at 26.0% of GDP in 2009-10.
  • It since fell to 24.7% of GDP in 2010-11.
  • Government spending to GDP is projected to be 23.6% of GDP in 2012-13.
  • This will be around 1.5% of GDP below the average government spending to GDP ratio of the last 30 years and obviously below the average spending to GDP ratio in the Budget’s the Mr Costello delivered.

And for the record, in only in 3 years out of 12 Budget delivered by Mr Costello was the government spending to GDP ratio lower than the Gillard Government is projecting for 2012-13.

Saturday, 21 January 2012

An interesting article on Israel

In Life in Israel an ultra-orthodox paradox Hamish McDonald is visiting Israel and has noted many differences since his last visit 13 years ago. He also looks at some of the current issues confronting Israel, including peace with the Palestinians and the increasing influence of ultra-orthodox Jews.

Friday, 13 January 2012

Opinion leadership amongst Australian political leaders

Dr Richard Stanton looks at the different types of political leaders in Fleet-footed Abbott needs to be playmaker:
Homophily is a fundamental principle of human communication where ideas and innovations are more likely to be shared more frequently between people who are alike in beliefs, education and socioeconomic status.

The opposite of homophily is heterophily. This requires one to step outside ritual boundaries to take meaning from or communicate meaning to those with a different set of values or beliefs.

Monomorphic thought leaders tend to focus on a single issue. The alternative to a monomorphic thought leader is a polymorphic thought leader - obviously, one who is comfortable being across a variety of issues.

Abbott has accumulated several of the important characteristics of a thought leader - great exposure to news media; broad interpersonal networks; extensive contact with change agents; and the capacity to always be ''on the edge'', which means he is not on top of things but acts as a broker between groups.

These characteristics are representative of a homophilous monomorphic thought leader, which is not a bad thing in a business or corporate head. But it can be dangerous for a political head.
He goes on to write:
Abbott's monomorphic focus on specific issues during most of last year was a good strategy, but it will not hold for this year. He can no longer afford to act homophilously (preach to the choir) and expect to increase his coalition's vote.

The questions, however, are whether or not he knows he is on the brink and whether thought leadership and innovation really matter.
It's an interesting analysis. However, the Gillard Government seems to be so on the nose with the electorate that Tony Abbott probably doesn't need to change anything in his style to be re-elected. Even if, as the writer suggests, Tony Abbott does not have the appropriate characteristics to lead a nation he's probably going to win the next election anyway. The problem may well be what comes after.

Note, according to Wikipedia homophily is often expressed as "Birds of a feather flock together". The Wikipedia article on heterophily on the other hand notes that "This phenomenon is notable in successful organizations, where the resulting diversity of ideas is thought to promote an innovative environment".

Unfortunately I can't find entries for monomorphic or polymorphic in Wikipedia, at least in the context of opinion leadership. Wikipedia does have an article on the concept of opinion leadership. The opinion leader concept does, in my opinion, help explain the influence of people like Alan Jones and Andrew Bolt.

This website has definitions of monomorphic opinion leadership and polymorphic opinion leadership, although it's the context of marketing. Note that you can't read the entire page is parts of it are hidden by a login screen. If you disable JavaScript you should be able to copy the contents of the page.
BusinessDictionary.com defines monomorphic opinion leadership as:
A type of leadership in communication and media that leads to the spread of information concerning one particular, highly specialized topic rather than a broadly-based set of information. This can be a very narrow point of view and can lead to making decisions based on lack of full information. opposite of polymorphic opinion leadership.
It does not have a definition of polymorphic opinion leadership. I guess we just have to treat it as the opposite of monomorphic.

Some Drum Articles

The always excellent Greg Jericho looks at the politics of 2012 in The frozen gales of political bluster are near.

Damon Young looks at extremism amongst ultra-Orthodox Israeli Jews in The symbolism and rage of victimhood.

Monday, 9 January 2012

How to get to Mars

I found this YouTube video on Peter Martin's blog:

A couple of articles on The Drum

The Drum has a couple of interesting articles:

Ben Eltham writes in Common sense is in the eye of the beholder:
Common sense is a proxy, in a way, of all the things that seem self-evident in your own worldview. Much like beauty, it's in the eye of the beholder. Unfortunately, those with a different view aren't likely to agree.
In When the boat people were welcome Marion Diamond discusses moves in the 19th century to encourage fishermen from Indonesia to visit and trade with settlements in northern Australia.
Singapore was an immediate success. So in 1824 the British decided to try to develop "another Singapore" in northern Australia – another multi-lingual, multi-ethnic port that would tap into existing trade routes between Makassar and northern Australia.
Anitra Nelson in The global equation: Growth = Debt argues that not only is debt not always bad, but our economic system depends on for growth.
However, income and expenditure accounts include several layers of obligations. It is easy to see the very temporary debts and credits created by working and receiving wages. Similarly buying materials to use immediately in production are generally quickly remunerated investments. The more complicated networks of obligations arise with very expensive equipment and other assets necessary for production, such as offices, storage and vehicles for transport. Many capitalist enterprises today represent considerable ongoing investments dependent on the system of stocks and shares, which in Australia involve workers through compulsory superannuation. It is significant that we tend to think of such investments, and all the risks they entail, as 'savings', even though they are not like gold or any real store of durable consumables. In fact they are debts/credits.
I'm not sure I agree with Anitra's conclusion, but her article is in many ways insightful.

Tammi Jonas in Intellectual honesty and an open mind writes:
Academics are trained to research a topic until they know it inside and out. That doesn't mean there can't be new data at any time, that may shift the scholar's position once uncovered. It does, however, mean the scholar is considered 'an expert' who has authority to speak on the topic. This authority has come with years of work and constantly challenging assertions and so-called common sense beliefs. It has not come from reading an article in the newspaper and then citing that article for the next year as authoritative.

Newspapers are not authoritative. Research is, as carried out by academics and other knowledge workers across many sectors who read widely, ask questions, observe, and engage in constant discussion and debate on a topic.

What you read in The Australian about climate change is not authoritative. What you read from the Union of Concerned Scientists is.

Tuesday, 3 January 2012

Link to Thomas L Friedman’s column titled Newt, Mitt and Bibi

In Gingrich the Worst Bob Carr recommends a column by Thomas L Friedman: Newt, Mitt, Bibi and Vladimir. Unfortunately, Bob didn't provide a link. So I have.

The GFC in less than 800 words

Mark Crosby has written Brief History of GFC. While it is in deed brief, it's also a pretty good summary of the GFC and its impact on Australia. Recommended reading for those who might not have understood what happened.