Catallaxy Files

polymathic pontification, bleeding heart economic rationalism and liberal secularist contrarianism

email: jasonsoon AT



  • Jason Soon
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    Saturday, August 31, 2002
    First strike on AA
    Predictably Alex Robson attacks my thought experiment on AA as silly and irrelevant:

    This is really missing the point on affirmative action: in Jason's "thought experiment" if you are a descendant of the military personnel and you can show that you suffer actual physical defects and illnesses and that these were directly caused by the toxic waste dump, you get the compensation; but with AA, the only criterion for compensation is the color of the recipient's skin. You get Abstudy as long as you are sufficiently black, not because you can show that government negligence directly caused you to not be able to fund your own education. This thought experiment is silly and irrelevant

    Well, Alex what if a lawsuit based on the 'Stolen Generation' had been successful? What if a lawsuit based on other past government policies on Aborigines had been successful? Can you completely rule out the possibility that such lawsuits would not ever be successful? More pertinently how many opportunities for recompense for discriminatory government action may have been unavailable to Aborigines in the past? If hypothetically one can accept that the payouts from possible successful lawsuits along these lines are not racist or discriminatory then the differences between these outcomes and AA lies only in the broader application of AA using less specifically defined compensatory remedies, and on a legislative basis. Alex's point that lawsuits require show of causation and so on only go to the fact that AA is a blunt instrument and this may well be the strongest argument against it - but essentially you could argue it is still like a 'stand in' for past opportunities foregone. I believe my analogy is completely valid. Alex also ignores my point about intergenerational effects of past policy which essentially adds to the number of potential 'plaintiffs'.

    AA is also necessarily a blunt instrument because many of the misdeeds are now lost in the foggy mists of time and the chain of causation is difficult to trace back and identify - that doesn't mean it isn't there, and some form of AA may well be a more efficient means of sorting these out than alternative means such as individual lawsuits. But of course AA is open to other objections. So be it.

    The main purpose of my post was to distinguish the 'moral' case against AA - and on this I argued that this moral case was based on a misinterpretation of what AA is meant to achieve - and the practical case against it, which may be a stronger one. But it's important to get the terms of the debate clear first. The philosophical case for AA does not have anything to do with racism - that there have been abuses with respect to ATSIC and some things have gone too far is irrelevant to my argument that AA can be read more charitably than the way some conservatives (and apparently libertarians) keen to use the stigma word of 'racism' when it suits them have tended to read AA. It looks to me that Alex's implicit definition of racism which he uses for classifying AA as racist is a very literal one - which is fine as it goes. If you interpret the word 'racism' literally then yes AA is racist in the sense that it impacts disproportionately on one race compared to another. But Alex disingenuously sidesteps the fact that that is not the broader sense of 'racism for the sake of giving a particular race privileges for its own sake' in which critics of AA usually use the word when attacking AA otherwise it would rob the critique of all its moral force. *All* policies in one way or another may have disproportionate impacts on different races or different groups in the community. This is not at issue.

    Now, one of my points is insofar as AA can be fitted into the compensatory justice framework then it isn't about racism and it isn't about blaming one group for another's misfortune - it only goes to the fact that a government can be implicated in the past acts of disadvantage and this government is a trustee in a sense for the 'legal debts' of past governments. That was the point of my lawsuit example which Alex seems to have taken too literally.

    Alex quotes a transcript from the Four Corners programme about people claiming to be Aborigines to prove that AA is about racism:

    There are many, many, many Aboriginal families over the last 200 years who have ceased to be Aboriginal and now see themselves as European. This process is probably going on all the time and has been going on since the beginning of European settlement. But we still have no real agreement about where that point is, or whether indeed there should be a category that scarcely exists in Australia -- and that is people of mixed descent

    Now this controversy seems to me to be perfectly consistent with my reading. Aboriginality is a very blunt proxy used for the aims of implementing the compensatory justice I outlined in my previous post. People are coming out left, right and centre claiming to be Aborigines. This further reduces the efficaciousness of the proxy. It also creates resentments among the Aboriginal community because some of the claimants may not have shared the historical legacy they shared and yet are claiming part of this compensatory payment. Again it is not race per se that is the issue but the sense of 'ownership' of this historical legacy which the community perceives as being tied up with their claims of past disadvantage.
    Two cheers for affirmative action
    Mark has a post below on affirmative action, most of which I agree with insofar as it goes to the unintended consequences of AA and the other troubling issues it raises. Nonetheless I think libertarians and conservatives sometimes get too emotive when discussing AA. It is in no way comparable to racism. What can be granted is that it can be misused to preserve race-based privileges indefinitely. This possibility seems relatively less troubling in Western countries where it is used to advantage a minority group that has been traditionally oppressed. It looks far less benign when it is used in favour of a majority, is not subject to review and becomes seen as an entitlement by that majority.

    The latter case is true, for instance of the 'bumiputera' policy in Malaysia where it is used to favour the majority Malays in academic places, access to business loans, restrictions on who can manage particular companies and so forth - obviously to the detriment of the other minority ethnic groups given, for instance, that there is only a limited pool of academic places to go around. At no risk of overstatement the AA policy in Malaysia, although justifiable in principle, has backfired in various ways - for instance creating a brain drain, inducing all sorts of sham arrangements in companies to get over the policy. It has dampened some ethnic tensions (for instance those created by the disparities in academic and economic performance between Malays and Chinese) while arguably creating new ones and even a sense of resentment and disenfranchisement on the part of the minorities. Even Mahathir recently spoke out against it, saying it cannot go on indefinitely.

    Furthermore there is difference between AA policies in Malaysia and other countries which were implemented to even out disparities in racial performance and the underlying reasons for AA in the US and Australia. The disparities in racial performance in Malaysia which are the concern of its AA policy arguably owed much more to simple differences in culture and initial lags in responses of different cultures to changing conditions feeding into each other over time - you could say cultural hysteresis which then required some way of backpedalling.

    The Chinese and Indian labourers brought in by the British during the period of colonial rule were self selected to be better adapted to a commercial, trading society because hungry peoples seeking opportunity would have been more inclined to be indentured labourers in a foreign land. They also came from societies with long established sophisticated and heavily populated trading centres, with cultural institutions and mores that were already adapted to flourish in such a society. Furthermore, they were brought in expressly for the purpose of aiding the economic development of the land. The primarily village-dwelling Malays on the other hand were treated by benign neglect by the British who made no efforts to encourage them to adapt to the new society being forged by Malaysia's economic development (and possibly the British took some pride in wanting to leave their traditional societies undisturbed for the most part). And it was for primarily these reasons that the Malays fell behind in economic performance and modern academic standards, not through oppression or unfair disadvantages. A similar narrative can plausibly be constructed to account for the disparities between Indians and native Fijians in Fiji, or between Indians and Africans in Uganda.

    A different story has to be told for the Western countries where AA was introduced. In the case of Australia, notwithstanding warnings against a black armband view of history, no one with any historical sense can deny that the Aborigines were an oppressed people. This extended to far more than just their voting rights as the 'Stolen Generations' debate informs us. And though one can argue that 'black armband' theorists may have exaggerated particular details of injustices one cannot deny that there were injustices perpetrated by the State against Aborigines.

    AA policies benefiting Aborigines insofar as they can be said to be race-based are only race-based because given past historical injustices and the need to compensate for these injustices -which can have adverse effects on a people which are consequently perpetuated intergenerationally (in much the same way as the legacy of slavery in the US arguably helped undermine black 'family values') - Aboriginality serves as a good proxy for directing policies which aim to correct for these intergenerationally perpetuated effects of past injustices. Do AA policies mean that 'we' non-Aboriginal Australians are somehow being blamed for what happened and being unfairly called on to foot the bill? This is possibly the stupidest thing that conservatives say everytime they attack AA. Try this thought experiment: the Australian government negligently locates a base for military personnel and their families on a toxic waste dump. This is only discovered years later by which time there has been a history of birth defects and illnesses among descendants of the military personnel. These descendants sue the government and win a multimillion dollar compensation package. Now obviously this package is ultimately being funded by taxpayers.

    Now - are conservatives suddenly going to leap out and denounce this verdict on the grounds that it blames the rest of us hapless taxpayers for what happened to the descendants of the military personnel? Or that such a verdict gives these descendants a 'free ride'? No,of course not, it is a simple matter of compensatory justice. And yes - let me use the R word. AA is a form of reparations - which is what makes the whole reparations debate in the US so silly.

    I am not saying there is a perfect correspondence between the hypothetical case here and the past government oppression of Aborigines. However there is a closer resemblance between these two cases than the alternative interpretations being offered by conservative critics of AA - such as the idea that AA is 'inherently racist' or that it involves 'blaming all non-Aborigines for what happened to Aborigines'. I would argue the underlying justification for AA in relatively advantaging Aborigines compared to non-Aboirgines is similar to the underlying justification for taxpayers' money going to descendants of the military personnel in my hypothetical. This is masked by the fact that admittedly different mechanisms are being used to achieve the restitution (so to speak).

    And it is with respect to the relative costs and benefits of the mechanism in achieving its ends that the debate lies. A plausible argument may be constructed against AA along the lines that Mark constructs that AA is, although well-intentioned, a policy with diminishing marginal returns - that it creates low self-esteem among its beneficiaries, that it induces resentment among the community towards its beneficiaries that is undermining other attempts to make Aborigines full participants in our community with equal rights, that there are better methods available for tackling the problem which do not create these undesirable self-esteem effects and resentments, and so on. However to superficially brush off AA on the grounds that it is 'racist' and morally equivalent to other racist policies is not good enough.
    The inheritance tax debate
    Heath has a few critiques of the inheritance tax idea I floated.

    The first and most devastating is this:

    I think this really could drive some perverse sorts of behaviour. For starters, you’re going to have a whole new set of transaction costs and wasted money as lawyers for the wealthy, and the tax office, play hide and seek with the wealth of a deceased, or nearly deceased person. Furthermore, unless you have an outright prohibition on giving gifts to others (or a punitive tax = >100%), then you may see greater redistribution of wealth whilst the person is still alive and possibly giving money to family members before they are ready to handle it (how much wealth would be left if Kerry gifted away even larger sums of wealth and responsibility to Jamie ?)

    Exactly, these were the sorts of evasion/avoidance problems I envisaged would make the idea hard to implement when I wrote in my first post on this that:

    As for my two cents, I am someone who likes prodding my fellow libertarians from time to time so it may come as no surprise that I do not regard Stelzer's or Gray's idea as bad in principle. I am skeptical about whether a system can be designed that would minimise avoidance of such a tax - if it can then I would welcome its implementation

    So is it bad in principle? I'm not convinced it is. Heath argues that it may be unfair or overly punitive because:

    If you’ve crossed the wealth threshold to fall into the category of qualifying for Jason’s proposed 100% inheritance tax, then you have probably already paid a fair bit of tax in your time already. And yet now you’re suggesting that what didn’t get redistributed whilst you were alive, the government gets to redistribute once you die?

    But let's put this in perspective. On one view it isn't really a tax if people are likely to respond as I think they will. Let's put this in perspective of all the many other regulations and restrictions on markets that exist in the world today. The idea essentially amounts to restrictions on one's freedom of bequest. A very trivial restriction if you ask me. And as Mark points out, most of the additional tax 'hits't will come from someone dying prematurely before he can arrange all his bequest affairs - doesn't sound like very strong disincentive effects to me! But the idea isn't really to sneak up on dead people - it's to free up some of the vast concentrations of wealth. We all know welfare dependency is a bad thing - well, that's also true for rich sons and daughters.

    All it says would be something like this: each individual can leave a maximum of $x to his or her children. If you're not happy with the rest going to the government give it to a favourite charity - whether it be the arts, medical research, the Salvos, whatever.

    So if the costly avoidance/evasion costs of such a proposal do not undermine its effectiveness, what this means is that poor old James Packer gets to inherit, say, $50 million from Kerry, and possibly Kerry's genes for good business sense and the benefits of Kerry's good parenting, and Kerry's connections instead of all that plus maybe a few hundreds of millions more. It would also mean a reinvigoration of civil society, it would be one way of keeping capitalism's dynamism while addressing inequalities of wealth which concern its critics (I just cannot imagine Bill Gates giving up the game just because he can't leave $10 billion to his children).
    Born to Rant

    Rachel Lucas does what we would all love to do with our blogs,

    “rant about what I know, which this week, is that people are very stupid, very rude, very self-absorbed, and very dangerous.”

    Get the blow by blow version of Rach’s latest rant, if you dare.

    Friday, August 30, 2002
    SMH – Two Interesting Views

    Two interesting articles in Friday’s opinion pages of the SMH. Daniel Mandel bucks the trend in the SMH opinions columns by actually arguing FOR war against Iraq, and sooner rather than later.

    “Others resort to strategic objections. Saddam is an abomination, they agree, and yes, he is developing weapons of mass destruction. But he lacks the means to deliver them, so he is no threat. Others say just the opposite: because Saddam already has weapons of mass destruction, a military campaign would spur him to use them.

    It is possible to argue both of these propositions. But it is frivolous to assert them simultaneously. As Saddam constitutes a threat to his neighbours, it might be wise to act before he can be immunised against retaliation by acquiring a nuclear weapon. And if he already has the means to use weapons of mass destruction, it might be wise to confront him at a time of our choosing, not his.”

    Meanwhile, Murray Goot gives us an interesting article on the immigration debate. Based on data from the Australian Election Study, Goot argues that in fact it isn’t opposition to immigration more broadly that is behind the anti-boat people sentiment of the public, pointing out that

    “ under the Howard Government the proportion opposed to immigration has declined. In 1996, nearly two-thirds of AES respondents thought "the number of immigrants to Australia" should be reduced. In 1998, the corresponding figure was about a half. In the latest study, just over a third of respondents thought the number should be reduced.”

    I won’t reproduce the full article here, but for those with an interest in the immigration debate I suggest giving it a look over.
    Swifts Clip Kestrels Wings

    Catallaxy Files is nothing if not a little eclectic. Tim Blair comments on AFL. Lets face it – AFL commentary is dime a dozen and found all over the web and conventional media. So as regular readers will have noticed, I choose to bring you something you won’t find in many other places, real blogger commentary on the National Netball League.

    Tonight, a disappointingly small crowd was present in Sydney to see the Melbourne Kestrels once afail to follow through with four quarters of consistent netball – despite starting quite well. Even up to half time, the Kestrels were still in the game, at times even hinting of an upset win over the strongly favoured Swifts. In the third quarter however, the Swifts built a sufficient margin that even a good run of goals by the Kestrels in the dying minutes of the game wasn’t enough. In the end, the Swifts looked easy victors despite only winning by six goals.

    For the Swifts, Jane Altschwager and Cath Cox are working well in goals together, with Jane a number of time making some incredibly athletic moves to set up Cox. Well and truly gone is the awkwardness that was present when these two started teaming together at the start of the season. If both stay with the swifts for next season, I wouldn’t be surprised to see Nat Sloane move to the Sandpipers for 2003. (Especially with Nat Avellino’s ongoing injuries).

    Back to tonights game - Cox was also shooting well – just how well we will see when the match stats are put online. With her first season as a Swifts mid-courter coming to an end, Megan Anderson is looking quite comfortable in Centre. Gilsenan, Broadbant and Ellis all did what was required – even forcing kestrels to bench Amanda Burton at ¾ time. And Briony Akle also seems to have saved her best for the end of the season.

    As in 2001, the Swifts seem to be going from strength to strength as the season comes to its finale. Next week the team faces a daunting task. Travel to Adelaide and attempt to beat the Thunderbirds in front of the T-birds home crowd. All the best - Go Swifts.
    Another view on an Inheritance Tax.

    Lets face it. If you’ve crossed the wealth threshold to fall into the category of qualifying for Jason’s proposed 100% inheritance tax, then you have probably already paid a fair bit of tax in your time already. And yet now you’re suggesting that what didn’t get redistributed whilst you were alive, the government gets to redistribute once you die?

    I think this really could drive some perverse sorts of behaviour. For starters, you’re going to have a whole new set of transaction costs and wasted money as lawyers for the wealthy, and the tax office, play hide and seek with the wealth of a deceased, or nearly deceased person. Furthermore, unless you have an outright prohibition on giving gifts to others (or a punitive tax = >100%), then you may see greater redistribution of wealth whilst the person is still alive and possibly giving money to family members before they are ready to handle it (how much wealth would be left if Kerry gifted away even larger sums of wealth and responsibility to Jamie ?)

    If one does insist on forcing the redistribution of wealth, then as Jason suggests below, offer the choice to give to charity to avoid the money going to government. But at the end of the day – whoever has created the wealth (or maintained it) should really be the one to decide how it is disposed of.
    Affirmative action and the inheritance tax
    Jason quotes an argument that it is inconsistent to be against affirmative action and against an inheritance tax.

    I’m against affirmative action because

    1. It is morally, legally and politically wrong to discriminate on the basis of race.
    2. As a practical matter, the consequences of hyping group identity has been disastrous (e.g. in Sri Lanka, Northern Ireland, Yugoslavia.
    3. It encourages a victim mentality and a focus on redistribution rather than wealth creation. That does not help society, and may not even help the group we are trying to help. Albrechtsen had a column on this yesterday. They can do more to help themselves than the government can ever do for them.
    4. It gets us involved in unsavoury activities like deciding which racial and ethnic minorities will be favoured and which ones not, and how much blood is needed to establish group membership.

    Also affirmative action creates further problems in particular cases. Take affirmative action in university admissions:

    1. it stigmatizes the so-called beneficiaries in the eyes of their classmates, teachers, and themselves;
    2. it removes the incentive for academic excellence;
    3. it encourages separatism;
    4. it compromises the academic mission of the university;
    5. it creates pressure to discriminate in grading and graduation;
    6. it breeds hypocrisy within the school;
    7. it mismatches students and institutions, guaranteeing failure for many of the former;
    8. it papers over the real social problem of why the group is academically uncompetitive.

    As I look at this list, I can’t see any point that would lead me to support an inheritance tax. Quite the opposite actually.
    Alright maybe not 100%
    Mark writes in response to my inheritance tax proposal:

    Gee Jason. Any money I save to provide for my widow and orphaned children (money I have already paid tax on) is confiscated – just when they have lost their breadwinner.

    That’s great if you want everyone dependent on the government.

    So I thought the "100% inheritance tax" looked good as an attention grabbing headline but I should have explained it a lot better.

    (1) The proposal need only apply to people above a certain level of wealth. Alternatively it might be phased in in stages like the current progressive tax system.
    (2) For whatever group it is applicable to, we could designate a maximum amount that people are allowed to leave to their children. In fact this might even be a better way of doing it - and I think may have been the idea suggested by John Gray (not the American John Gray but the British one) in his neo-liberal phase. That is, any amount above this maxium amount (call it X) - will go to the government unless it is donated to a charitable institution of choice. Thus the inheritance tax would kick in at 100% above a certain value of bequests. I really cannot see this having much of an effect on incentives. Does Bill Gates really strive to be rich to leave his billions to his children?
    Libertarians against a 100% inheritance tax

    Gee Jason. Any money I save to provide for my widow and orphaned children (money I have already paid tax on) is confiscated – just when they have lost their breadwinner.

    That’s great if you want everyone dependent on the government.

    One of my prime reasons for working (and for taking out life insurance) is to see that those who are dependent on me will be taken care of after I am gone.

    I think destroying the incentive to provide for your family is morally and economically wrong. In effect it abolishes the family as a decision-making unit. It will reduce productivity and undermine the virtues and attitudes that create prosperity and make a free society possible.

    What revenue you raise (mainly from people dying before they expect) will be distributed according to politician’s interests (buying votes) – not necessarily any more fairly.
    Libertarians for a 100% inheritance tax

    Tim Dunlop has an interesting discussion of charitable giving in the US and its interaction with the inheritance tax. How about this for an idea? Let's have a 100% inheritance tax levied on people on people who own wealth above a certain amount. Interacting with that a system whereby one can avoid having all of one's wealth going to the government by giving it to charitable institutions or one gets a 'credit' in terms of paying inheritance tax with every dollar that goes to charity (so that someone who gave a certain amount to a charitable institution would still be allowed to leave some to his or her children). Variations on this idea have in fact been proposed by libertarian economist Irwin Stelzer of the Hudson Institute as well as by Hayekian liberal John Gray (before he went off the deep end and became a Deep Green). Frustratingly I can't seem to find the 1997 article by Stelzer which stirred up all the controversy among libertarians and conservatives - if someone can point me to the link if there is one that would be good. All I can find is this critical evaluation of Stelzer's idea by George Will:

    Most conservatives want to cut inheritance taxation, if they cannot abolish it. They say such taxation is institutionalized envy, confiscation in the service of egalitarian social engineering, and an affront to family values. Stelzer, whose idea of fun is poking tigers with short sticks, says conservatives should favor an inheritance tax rate at least as steep as the top rate on earned income.

    How, he asks, can conservatives square opposition to affirmative action and to inheritance taxes? Conservatives, he says, oppose affirmative action because it confers on certain groups unearned advantages, and conservatives oppose inheritance taxes because such taxes deny a certain group -- inheritors of the fruits of other people's successes -- unearned advantages ...

    To the conservatives' objection that a 100 percent tax on inheritances would discourage parental thrift and industriousness, Stelzer responds that such a tax would increase the incentive for the children of the rich to pull up their socks and toil and save. If such a tax encouraged the affluent elderly to go on a binge of consumption to frustrate the IRS, that consumption would just replace the consumption of their frustrated heirs. Besides, such a tax might prompt a binge of charitable giving, a conservative goal.

    Stelzer says inheritance of wealth only gilds the already amply gilded lily of birth. Government cannot stop the intergenerational transfer of assets at least as valuable as financial ones -- intelligence is largely heritable, and the children of the rich are apt to be expensively educated and supplied by their family context with useful goals, reputations and connections. So conservatives, who endorse equality of opportunity as an alternative to liberals' policies designed to produce equality of social outcomes, should, Stelzer says, favor inheritance taxes to produce a "level playing field."

    I can also find these briefly critical comments by Stelzer of the plan to abolish the inheritance tax but not the actual article advocating a higher inheritance tax:

    The retreat from market forces can be seen in policies even more fundamental than energy. Ours is supposed to be a meritocratic society in which everyone competes for fame and wealth in a free market—the proverbial “level playing field.” Indeed, if we find that some people are required, through no fault of their own, to carry extra weight in the race, we adopt policies to lighten their burdens, often through programs (affirmative action is one such) that conservatives find offensively preferential, or through means such as student loans, which allow the accumulation of intellectual capital that will earn dividends from which the loans can be repaid.

    The notion of such free and open competition in the market for skills and talent is not one that wins favor with this or any other conservative administration. Instead of using government powers as they should be used—to set fair rules applicable with equal force to all, and let the chips fall where they may—the government eschews that role for one that allows it to dictate that the outcome further favor the already-favored. How? By attempting to repeal, or at least reduce, inheritance taxes.

    Inheritors of the results of their parents’ hard work and good fortune already enter life with advantages, some of nature, some of nurture. The fact that they now can add to those advantages a greater share of the financial advantage conferred upon them—not by market-based rewards for drive, work, and initiative but by their luck in the sperm game—comes courtesy of conservatives who in other contexts swear fidelity to free markets.

    As for my two cents, I am someone who likes prodding my fellow libertarians from time to time so it may come as no surprise that I do not regard Stelzer's or Gray's idea as bad in principle. I am skeptical about whether a system can be designed that would minimise avoidance of such a tax - if it can then I would welcome its implementation. There are lots of other taxes out there which would have far worse effects on efficiency and incentives than inheritance taxes (or for that matter, carbon taxes) and the additional revenue (if any) raised by a steep rise in inheritance taxes could be used to reduce dependence on other taxes. And if little or no revenue is raised because of the redirection of wealth towards charitable institutions, so much better. Nor can i find any fundamental liberal objection to the idea as I am not a believer in 'natural rights'. If it is perfectly consistent with liberal constutionalism to have a minimal safety net or negative income tax system that involves redistribution from rich to poor - and I believe it is )such a scheme is a lesser evil than interfering in market mechanisms such as setting a floor on wages that is too high and creates unemployment )- then any system which makes the funding of such a safety net more efficient whether directly or indirectly (in this case by promoting charities and cutting burdens on more distortionary forms of taxation) is a net improvement.
    Rewarding criminals

    We have our very own Stella award nominee.

    No need to comment on the decision, its so ridiculous that if you got it in an e-mail you would think it a joke. Apparently you must now wait for an intruder to attack you before you can do anything about it. Even then the only person liable to be answerable in court is the property owner. Tex says it all really.

    Just another search for ‘deep pockets’– forgetting that they are just an aggregation of shallow pockets. Still, ‘excessive force’ is probably a criminal act, so will the insurance company pay up?

    I guess there is a significant group of lawyers who believe it is a good idea to stretch the law to benefit criminals and this judge preens for them. Helps their sense of superiority over the rest of us. The question is whether the judiciary will be content to allow its reputation to be damaged by the likes of this judge. I would advise them against it – the coming backlash won’t be pretty. If judges want to take on society, they will lose – and so will the rest of us.
    Greenhouse-emission calculations quite wrong

    That's the headline for this op-ed piece in the Canberra Times by Ian Castles.

    He criticises the economic assumptions that underpin the IPCC's forecast of massive rises in global temperatures. It
    "assumed an extraordinarily high rate of economic growth in the developing world.Specifically, the IPCC assumed that the volume of goods and services produced per head in 2100 would be more than 70 times 1990 levels in developing countries in Asia, and nearly 30 times 1990 levels in other developing countries. Far from marking the lower bound of likely outcomes, such astronomic increases are extremely improbable."

    No significant country has ever achieved a 20-fold increase in output per head in a century, let alone the 30-fold or 70-fold increases projected by the IPCC for most of the world's population.

    He concludes:

    The IPCC should base its climate projections on realistic assessments of future greenhouse emissions, not on the quantification of improbable "storylines" that assume that all of the world's problems except climate change will be magically overcome.

    Thursday, August 29, 2002
    Poetry or motion?

    Bugger this fancy pants Japanese stuff. What’s wrong with a good old limerick? For those who followed the liability waiver debate:

    There was a young man named Coase
    Whose theorem made Parish quite morose
    He argued economists were dismal
    Their recommendations abysmal
    And Bunyip said that’s not even close

    There was a young man named Soon
    Who thought Alex was a loon
    But he stuffed up his analysis
    And recommended regulatory paralysis
    He failed to see mutual agreement as a boon

    This isn't haiku
    But it's a self-mocking , self-referential poke at modern literature which I wrote a while ago:

    Tensions of pretension

    Brazenly he brandished his prose-poetry
    like a poke in the eye, it glimmered
    yet he proposed to persist in his errors

    Much obscurantism he hoped to garnish these
    constituent atoms of beginners’ literary gambles (alpha bets)
    with in the hope of invoking a mirage of
    Joycean pregnancy in the near sighted glimmer of a
    literary critic’s eye (though the overuse of asides of inelegant
    length and ultra tangential significance protruded through the
    aimless narrative like a projectionist’s oversight in a seedy cinema)
    Haiku epidemic
    Catallaxy's Mark Harrison and haiku-writing Alex Robson trade some friendly fire via haiku.

    Let me now get into the act not with economics haiku but haiku period. Actually, not really. I've been writing snippets of poetry for ages and have experimented with all forms including haiku. However I cheat a bit, what I present below isn't really haiku because each piece (except for Sunset) consists of two haiku which are meant to be read continously as a narrative whereas haiku is singular. And unlike proper Japanese haiku it has some Western abstraction and word play in it - not the Zen sort of state which proper haiku is meant to induce. It is only formallistically haiku in having the 5, 7, 5 syllables pattern. Nonetheless:

    sun soft simmer swooned
    epileptic spark from lost
    breath as it kissed sea

    Suburban Morning
    sounds of traffic lap
    in waves ‘round back fences, wind
    chimes in, birds riposte

    harp-harmony of
    cobwebs languished between two
    trees to strains of sun

    Winter dream and awakening

    yearning, you turn, spin
    sighs about her, pirouette
    lips, you sip your bliss

    dew drops stalactites
    night air pinches you awake
    glass gathers cold breath

    John Anderson effectively says: "I and my fellow politicians are low IQ buffoons"
    The recent mouse video controversy that has erupted in the Australian stem cell debate strikes me as completely odd. One has to ask why Professor Trounson would put the reputation of his research at risk by making exaggerated claims when there is more than enough peer-reviewed research from overseas jurisdictions (such as the US) on the benefits of stem cell research. Why? This strikes me as completely odd and close to self-destructive behaviour.

    However the politicians do not come out of this any better, including the smarmy, hypocritical young fogey John Anderson. Well, John, if you were really so swayed by the video of the mouse will you now willingly allow use of aborted foetuses in medical treatments now that you know that was the source of the mouse's cure? Admit it, the video could have shown people rising from the dead and you wouldn't have been swayed.

    Of course Anderson and the rest continue to trumpet the line that Professor Trounson's mouse video had such an overwhelming influence on politicians that it 'unfairly raised expectations' which sounds really worrying to me. In addition to the mouse video and the scientific paper under consideration for publication there surely must have been a heap of other research and reading material that Professor Trounson pointed to - was none of this reading relevant at all and shouldn't it have factored into their decision making anyway regardless of the mouse video which was in any case just a bit of 'rah rah'? Is John Anderson effectively saying that he and his fellow politicians have such low IQs that they are incapable of making considered judgements based on reading and are overwhelmingly swayed by visual presentations like hypnotised couch potatoes watching daytime TV?

    Wednesday, August 28, 2002
    Something most of us may have known all along
    Does this surprise you?:

    Doctors in California think high autism rates in the Silicon Valley area could be down to the 'computer geek' genes of its workers.

    The BBC says up to one in 150 children in the area have some sort of autistic disorder - much higher than the rest of the US.

    It says experts at the Mind Institute in Sacramento believe hi-tech workers in the area may be carrying genes which contribute to autism.

    They think the 'computer geek' men probably find it difficult to mix socially and are more likely to meet partners who also carry autistic genes.

    Dr Robin Hansen told BBC Online: "If your father has four genes and is a computer whiz, and your mother has three genes, you might as well get seven and develop full-blown autism."

    The number of autistic children attending treatment centres in California between 1987 and 1998 rose by 273%.

    'Globalisation' in 8000 BC
    According to this:

    Modern Europeans can trace a great deal of their ancestry to Middle or Near Eastern farmers who moved into the continent 10,000 years ago.
    The assessment comes from a new computer and genetics study which has sought to understand how the new agrarian technologies were introduced to the region.

    It is clear from the work that it was not purely a spread of ideas - but a mass movement of people who settled and mixed with the hunter gatherers who dominated Europe at that time....

    Anthropologists believe agriculture probably started in the Middle East and then swept into Europe about 8,000 BC ...

    The research team took the results of a previous study and subjected them to a new computer-intensive technique. From this, the scientists estimate that Middle Eastern farmers contributed about 50% of the analysed genes to the modern European population.

    Contributions ranged from 15-30% in France and Germany, to 85-100% in southeastern European countries such as Albania, Macedonia, and Greece.

    These figures are much larger than previous ones, suggesting that the Middle Eastern contribution to European genetic heritage has been underestimated.
    Update on the Alley Writer outing incident
    To their credit, most warbloggers have taken what I think is the 'right' side of the debate on the outing of Alley Writer by Amir Butler. To recap, this Alley Writer fellow had been going on for a while on his site about why he would personally kill lots of Muslims if he had the chance, then he recently lamented the fact that Richard Goldstein was stopped before he could blow up mosques in the US. That was the last straw for our resident Taliban groupie, Amir Butler, who proceeded to 'out' him by revealing his name and address after some Internet research.

    While I'm unsure about whether I would have felt right about doing such a thing if I had the information at my disposal, I must say that Alley Writer was asking for it and what Amir did was understandable. I wish nothing unpleasant to happen to Mr Alley Writer (except perhaps to be given psychiatric help) and hope nothing does but I would also hope that he take some time out and think about what he has said and perhaps seek some therapy, speak to a priest or something. As I said, to their credit, warbloggers from Rottweiler to Godless Capitalist say much the same thing about Alley Writer's fate and I, too, like Godless, defer to Rottweiler on this in expressing my thoughts:

    Mr. "Alley Writer": I do share your point of view that the only way to win this war is to take it to the enemy. But that, ironically enough, is exactly where we differ. You see the "enemy" as innocent Moslems anywhere you can find them, I see them as Islamo-fascist nutcases who have declared themselves enemies of ours. To be sure, there has to be overlaps, but to deliberately plan blowing up men, women and children who have done absolutely nothing wrong, is just as despicable as what the people we're at war against are doing.
    As to Mr. Butler's "outing" you, I can only say that, whereas it goes against my principles in the worst possible way, in your case I have to wonder if it's not the best way to deal with you. Clearly you're so blinded by hatred that you can no longer see the line between losing innocent lives as a tragic consequence of war and deliberately aiming for them. If you'd posted a retraction the day after, I wouldn't have had a problem, we all get irate from time to time. But seeing as how you seem to stand by your point of view (anybody who doubts me can peruse Alley Writer's site), which is to say that everybody who happens to be Moslem is a "legitimate" target, whether they've actually done anything wrong or not, I have to ask myself if it's safe to have you wandering the streets.
    Quiggin claims that

    “Although we use the term 'efficiency' all the time, we don't really have a consistent and rigorous definition of what it means for an economic policy to improve efficiency.”

    Speak for yourself John. There has been a rigorous definition for decades – for example Harberger’s classic papers on the measurement of waste published in 1964 and 1971. All in top journals. There was even a seminar on the issue in your department last week! Lots of references in the bibliography.

    Perhaps not all economists understand it, but that does not mean it doesn’t exist or that everyone who uses the term efficiency does not understand what it means.

    For a good basic textbook discussion on why economists use efficiency that is available on the web see David Friedman’s Price theory text pp.438-447.

    In summing values in order to decide whether some change is an efficiency improvement, we count a one dollar gain to one person as just canceling a one dollar loss to another. We act as if a dollar (or what a dollar can buy) were worth the same amount to everyone. That is, we proceed as if everyone got the same utility from a dollar. We use this rule because my value for more of a good is much easier to observe than my utility for it. We can observe my value by my willingness to pay.

    Policies have efficiency effects and redistribute income (result in gainers and losers). Efficiency lets economists separate resource allocation effects from distributional or equity effects in the analysis of any given problem. It does not mean that distributional concerns are unimportant. But we can never expect to achieve a general consensus about the weight that should be attached to the welfare of different groups. But economists can say something about the resource allocation effects of policies. As Harberger says: “I can give a course on the efficiency effects of different interventions, but not on how to tell the good guys from the bad guys.”

    Quiggin gives an example where a change that improves efficiency is not desirable.

    If a policy change makes all 20 million Australians (but one) $100 poorer and James Packer $2.1 billion richer, it's not helpful to know he could pay us back and keep $100 000 for himself if he chose.”

    That does not imply efficiency is a useless concept. We are not saying policies should be only based on efficiency.

    Efficiency is not the only thing that matters, but it is one thing that is worth knowing. It is an imperfect measure, but is better than no measure at all.

    The fact that the poor value dollars more than the rich is relevant if we are considering a policy that benefits a rich man and hurts a poor one. But it is less relevant when a policy benefits and injures large groups of people.

    Both gainers and losers are large and diverse groups, and there is no obvious reason to expect the one group to value dollars more or less than the other. If the average is about the same for both groups, then a change which produces a gain in value probably produces a gain in utility as well.

    So long as we are considering situations where there is no reason to expect gainers and losers to have different utilities of a dollar, an efficiency gain will be a good indication that there is a social welfare gain.

    In many situations the fact that a change is an efficiency improvement (increases total value) is strong evidence that it also increases total utility. Since changes in total value are much easier to measure, we use it as a proxy.

    But we should consider distribution where the gainers and losers have different incomes. But:

    There may be no conflict between equity and efficiency. The policy may favorably redistribute income. The poor are just as likely to be victims of government redistribution and transfers as the beneficiaries. For example, tariffs on clothing and cars may hurt the poor the most (as they spend a larger portion of their budget on these goods). The gainers may those who own shares in car companies, could be the rich).

    Actually, government policies that are inefficient, hurt large groups and give to the Packers are probably more likely than the example Quiggin quotes.

    If there are a lot of policy changes then everyone can gain on balance and equity can be best dealt with by other, more direct and lower cost, measures. At the end of the day the government can redistribute if desirable, rather than applying test to every single policy. A number of policies may even out. If we adopt the general policy of ‘where ever possible adopt policies that improve efficiency’ we may come close to a Pareto improvement – unless one group is always on the losing side.

    As Friedman summarises, (p.435) when an economist is asked whether something is good or bad, he answers:
    "As an economist I have no expertise in good or bad. I can, however, set up a "criterion of goodness" called efficiency, that has the following characteristics. First it has a fairly close resemblance to what I suspect you mean by "good". Second, it is so designed that in many cases I can figure out, by economics, whether some particular proposal (such as a tariff) is an improvement in terms of my criterion. Third, I cannot think of any alternative criterion closer to what I suspect you mean that also has this second characteristic."
    Hypocrisy to the nth power
    Robert Corr rightly accuses some on the Right of jumping to conclusions about asylum seekers:

    The right wing really do want to sledge refugees and asylum seekers unfairly. Take Alan Anderson's latest post on the subject ...
    Nonetheless, we need to maintain the propagandistic line that all asylum seekers fund terrorists and drug dealers through an organised crime underworld.

    Too right, Robert, some people have been guilty of this in the past as well. Take these marvellous examples from this recent piece by Hal Colebatch:

    Labor's immigration spokesman, Tony Mulvihill demanded Vietnamese boat refugees be returned to Vietnam under armed escort. Future West Australian Labor premier Brian Burke demanded: "Halt this refugee flood!" Clyde Cameron, Gough Whitlam's immigration minister, talked of an "invasion." "These are rich people who have been racketeers, drug peddlers and, in some cases, prostitutes in their own country, some riddled with a form of venereal disease that cannot be cured...

    The house organ of the chattering classes, the now-defunct Nation Review, repeatedly referred to Vietnamese as "brothel keepers", "black marketeers", "drug peddlers" and "capitalist exploiters on the run". This raises questions about protests now, whose driving motive seems to be: "Get Howard!"...

    Since Tampa, Macphee has attacked Howard for "callous, ruthless indifference to boatpeople". But when he was immigration minister in March, 1982, he was probably the first senior Liberal to join the Left in calling Vietnamese boatpeople "queue jumpers." He said many refugees from communist countries were not genuine, and he even dismissed the story of a Polish refugee family escaping the Iron Curtain as "some bleeding-heart stuff". To accept them would "condone queue jumping by migrants".

    Colebatch also notes:

    Protest against the Left's attacks on refugees was left to a few relatively small organs such as B. A. Santamaria's News Weekly, Peter Coleman's Quadrant, and writers such as Greg Sheridan

    Yes, it seems one of the few 'bleeding hearts' to come out of Colebatch's expose with any integrity is the 'bleeding heart' conservative hawk Greg Sheridan who has maintained a consistent compassion throughout, regardless of race or creed.
    Short note on credit cards
    No doubt many bloggers will be commenting tomorrow on the recent reforms to credit card schemes handed down by the Reserve Bank. There are many misconceptions in this debate and the issues are undeniably complex. Though I commented on this a bit some weeks prior to the decision being handed down I think I should refrain from doing so now since it is too close to the action, the firm I work for represents one of the major card schemes designated and I may be at risk of inadvertently muddying up the messages and compromising various positions. There will be more than enough intellectual ammo thrown from various quarters in the next few days and even weeks anyway as this progresses, of that I can assure you.

    Instead I shall link to this which is the regulation impact statement prepared by the RBA to justify its reforms and which fundamentally repeats for the umpteenth time the arguments it made in the past. You will find related papers on the RBA website.

    For Visa's position as prepared by my employer in a report which I had some input into, see this attempt at a comprehensive refutation of the arguments prepared by the RBA and its expert, Professor Michael Katz (who incidentally cannot be said to share all the RBA's contentions given his own distinguished work in this area). For the more experienced economists among you, I recommend this important paper by Professor Julian Wright which develops the famous Rochet-Tirole model of credit card networks.

    Tuesday, August 27, 2002
    Robson joins feudin' family
    It was remiss of me not to officially welcome Alex Robson and add him to the links - so I'll do it now. Alex was unfortunately having technical difficulties with his blog (aside from the link to his controversial post) when he first debuted which was why I didn't, and then he and Ken Parish immediately got stuck into each other. As warm, or should I say, hot a welcome as any.
    Tex gives Green senator Kerry Nettle a good whacking
    May the Force be with you

    Tim Blair beat me to posting on this. In what might be seen as a protest vote , or maybe just a good hearted bit of Australian larrikinism, more than 70 000 Australians identified their religion as Jedi, Jedi Knight or Jedi related.
    Why I am not a conservative no. 154,679
    A few posts ago I referred to Miranda Devine as Australia's Dr Laura. Let me go one up on the comparisons. Angela Shanahan is Australia's Phyllis Schlafly but sans 50 or so IQ points. In her latest rant she almost starts sounding like a deranged leftist, implying that we as a society are somehow 'all guilty' of a recent spate of child murders in the UK:

    But, like the people of Soham, we are shocked to discover that we cannot protect our children from violence, madness and sheer evil. More pertinently, perhaps we fear that we have allowed too many of the supports that bolster and protect us to break down. In other words, there is another distinguishing element of the reaction to these murders. It is guilt.

    And guilt is an appropriate reaction. This is not just a matter of dysfunction, it is a matter of evil. But the new sterile behaviourist view doesn't allow us a sense of good and evil. Godless and with nothing to replace God, we have stripped ourselves of the moral framework to understand what seems inexplicable. Simply making it inexplicable doesn't work. These children were really victims of evil. The word victim takes on a different meaning in the case of a child ...

    Surely evil and corruption can only be rationalised to a certain point – that is, until we are forced to look it in the face, as have the people of Soham, and see ourselves for what we are: Moloch-like, devouring the innocence of our own children.

    I don't know about you, Angela but the only thing I have been devouring is my time, reading crap like this.

    And of course there is the standard tirade against pornography, drugs and family breakdown, all implicated in some mysterious way in these child murders:

    In the new cleverly engineered society, where good and evil have been left in the dustbin of Western culture, moralist has become a pejorative word. Freely available pornography has seeped into popular culture, and as a consequence the sexualisation and objectification of the young is tolerated. A level of drug use is accepted. Family and the authority of parents have broken down and there are people seriously equating the concept of procreative marriage with homosexual relationships.

    How do we break the news to her that most of the freely available porn on the Internet isn't about pre-pubescent children - such porn is illegal Angela. And I suspect most porn addicts are after such things as boobs anyway. I believe someone somewhere must have done a survey of the incidence of child sexual abuse by pornographers compared to child sexual abuse by clergy - I'd like to see how these figures stack up.

    Of course she has to bring this up:

    In such a society there are no more taboos. The last taboo is child sex, so consequently we overreact and scream that pointless bit of meaningless newspeak "abuse" whenever any unsubstantiated rumour of sexual impropriety arises, particularly by the traditional guardians of morality, such as Catholic archbishops.

    The fact is, George Pell has been treated a lot better than Michael Kirby. And no one has presumed Pell to be guity yet. I know I haven't.

    I mean, how do you argue against such people?
    Join us, leftists, join us
    The erudite Don Arthur once again hits the nail on the head. He is one of the few lefties in Australia who is capable of a fair characterisation of us righties. As he writes:

    These are confusing times for right wing conservatives. These dinosaurs now find themselves in bed with economists and law and economics types who have the kind of scandalously libertarian ideas that were once the preserve of drug crazed new leftists. Nobody is as dismissive of religion as are the disciples of Richard Posner. Nobody undermines efforts at moral social engineering in welfare reform like the followers of Milton Friedman. Economic rationalists are talking about buying and selling babies, body parts, and sex. Their fellow right wingers have become a bigger threat to traditional morality than the left.

    The left are also confused. There is one wing of the left who are tempted to form a progressive alliance with economic liberals. They want to form a movement to drive moralism out of public policy. Extending marriage to homosexual couples, decriminalizing soft drugs, heroin trials and pushing for more relaxed censorship guidelines are all part of the program. The other wing is more focused on conserving institutions which economic rationalists want to attack - the arbitration system, tariff protection, a living wage, public education, grants rather than contracts for community organizations and charities. These leftists may be tempted to form an alliance with social conservatives - in fact they may end up being led by social conservatives.

    True, Don, we are not all members of the Miranda Devine and Piers Ackerman fan club who spend their days fuming about the 60s. I only have one thing to add - Don's characterisation of people who call themselves 'conservatives' is arguably more true of Australia than the US. There are lots of people whom would not readily identify as right wing libertarians of the extent of a Friedman or Posner and who are by appearances closer to the conservative camp and yet are less 'moralist' and intolerant than other conservatives. For example, the Republican Jack Kemp, by all appearances a fundamentally decent guy who has spent a lot of his political career arguing that black ghetto citizens would be transformed into upstanding citizens if only they had a stake in property ownership.

    The rest of Don's analysis is quite unimpeachable. One of my friends, who is probably one of the few hard-core free market anarchists in Australia, thinks that conservatives are 'fundamentally evil' while leftists are just 'misguided' and campaigned for the Greens at the last election. With certain caveats, I generally agree with his assessment. You will also find many lapsed leftists in the libertarian camp (myself for instance) but you will never find someone who defected to the libertarian camp from the conservative one.
    Coase Round II
    If I weren't so busy with work I would write a longer response but I suspect when I have time to the issue will have died off of its own accord. However let me jump in here with a short note again re Ken Parish's latest arguments which I agree with in its conclusions but not in its tone or its 'method' of argument.

    Ken writes:

    Yes, Alex, you're right: "these arguments have nothing to do with economic analysis", or "efficiency", "transaction costs" or any of the other esoteric jargon so beloved of feral abacuses (abaci?). It has everything, however, to do with basic social justice, and that is why these amendments must be defeated in their present form. There are numerous options for attacking the liability insurance premium crisis, but this is just about the worst of them.

    He also aims the feral abacus abuse at Mark Harrison:

    Mark and Stanley Gudgeon (who also weighed into the debate today) remind me of why Paul Keating once famously described John Hewson as a "feral abacus". What a cold, calculating, reductionist, mechanistic little world you guys must live in. I'd suggest that you go and "get a life", but you'd probably demand I spell out the transaction costs for you first.

    No Ken, these arguments have everything to do with efficiency. Efficiency is a word which has a different meaning under economics from what laypeople understand it to mean. Efficiency isn't solely about technical efficiency - ultimately it's just another word for what maximises the welfare of society. Economic efficiency analysis is simplu a methodology for taking account of all effects on total welfare. These arguments have everything to do with efficiency because one wrong step means a lot of people will be a lot worse off.

    Furthermore I recommend once again that you read the ACCC paper which arrives at the same conclusions as you do using law and economics and without recourse to simply trumpeting slogans like 'basic social justice' which are not in any way operationalisable but merely assume what they conclude. Do this before you start denigrating economics.

    Again let me emphasise - good law and economics is good economics, period Not ideology, not advocacy. Alex and I disagree on this as economists because I believe he has wrongly applied the economics, not because I disagree with his framework of analysis. One reason I don't disagree with his analytical framework is because there seems to be no alternative. Lawyers like Ken are all upset that economists are practicing economic imperialism, trespassing on other subject areas they want to hold an intellectual monopoly on. There is one simple reason for this - economics provides a useful set of tools for looking at social problems, And before Ken accuses me of being an ignoramus or not having an intellectual perspective outside economics I should point out I lalso have a law degree. And I have read other fields too. If you want a theoretical framework for looking at social problems, economics is so far the best available, it's not perfect, but it's the best available. It certainly beats the name calling, juvenile abuse and sloganeering that Ken resorts to.

    Pretty ironic that I have to step in this way when I actually agree with Ken's policy conclusions.

    Update: Just to anticipate Ken's arguments, I am well aware of developments such as framing effects (footnoted in the ACCC report), behaviourial law and economics and the economics of 2nd best. This still leaves me with one observation - economists have come up with what Marshall called a box of tools, a very powerful and versatile box of tools for analysing societies and social problems. They have then critiqued this box of tools to death and picked holes in them and suggested improvements. What have the moral philosophers, the sociologists and the lawyers done lately? A lot perhaps but have they come up with a competitor to what economic theory does, something which tries to do minimal damage to realism while being more than descriptive? One promising competitor is probably dare I say it, the sociobiologists. However sociobiology and mathematical biology (eg as done by John Maynard Smith) use a lot of the same basically U-max technique and game theory in addition to population statistics. My suspicion is further advances will come when economics is reunited in analytical methodology with the one science it has the closest analogue with - not physics but biology. (Ironically the founding father of neoclassical economics, Alfred Marshall, thought this too even though his contributions did the opposite) The sort of teformulation of basic concepts of rationality and competition found in 'Uncertainty, evolution and economic theory' by Armen Alchian is one example of this.
    Thanks to Paul Wright for recommending this great article.
    Satellites and global warming

    As regards the Quiggin v Parish debate on what we can infer about the views of individual members of the panel assembled by the US National of Academy of Sciences specifically to examine the issue of the apparent discrepancy between satellite and ground data. An op ed written by one of the panel members (RICHARD S. LINDZEN, who Ken quotes) provides a nice summary of his position. It was in the Wall Street Journal, but I can only find it on the web here.

    He makes it clear that although he agrees with the quote Quiggin presents,

    Our report doesn't support the Kyoto treaty”

    there is no consensus, unanimous or otherwise, about long-term climate trends and what causes them.”

    “we are not in a position to confidently attribute past climate change to carbon dioxide or to forecast what the climate will be in the future.”

    and concludes

    Science, in the public arena, is commonly used as a source of authority with which to bludgeon political opponents and propagandize uninformed citizens. This is what has been done with both the reports of the IPCC and the NAS. It is a reprehensible practice that corrodes our ability to make rational decisions. A fairer view of the science will show that there is still a vast amount of uncertainty--far more than advocates of Kyoto would like to acknowledge--and that the NAS report has hardly ended the debate. Nor was it meant to.”

    Monday, August 26, 2002
    This looks like something unpleasant brewing
    My number 1 rule - never, ever write anything on a blog that you wouldn't want your parents to read because you'd feel ashamed of it. Unfortunately some guy named Alley Writer doesn't abide by this rule. Now Amir 'Ayatollah' Butler has just shown him up literally. Nasty stuff but I can't say Alley Writer is entirely blameless.
    Imre’s back! A laugh a paragraph. And Gittins and I can at last agree on something – it would be a good idea to imprison a few white collar criminals.
    Ken Parish seems to think that the main point to legal rules is to affect the distribution of wealth between buyers and sellers.

    “Of course, the real (and very much intended) effect of "law and economics" advocacy in almost every case is to provide a pseudo-economic basis for shifting risks and costs from businesses to consumers and/or employees”

    Actually, one message of economics is the futility of trying to redistribute wealth through legal rules when the two parties are linked by a contract and a price. Economists take account of the effect of legal rules on market prices. The result is often to eliminate the distributional effects that so preoccupy Ken.

    A legally imposed change in the terms of the contract will result in a change in the market price. Take a David Friedman example. The government passes a law requiring landlords to give tenants 3 months notice before evicting them. Common sense may lead you to think that this makes tenants better off (they have greater security of tenure) and landlords worse off.

    Wrong – because house rents will change. The law increases the cost of supplying housing and raises the demand for rental housing.

    Once rents adjust, tenants are better off by the value of the increased security less any rent increase, landlords are worse off by the extra costs less increased rent received.

    Clearly both landlords and tenants may be worse off. Say tenants value the extra security at $5 a week and it costs landlords $10, rent will rise between $5 and $10 a week and all will be worse off.

    Of course if tenants valued the extra security of tenure at $10 a week and it cost landlords $5 a week to supply it, rents would rise between $5 and $10 and both will be better off. But if that were true, contracts would be likely to include the term and the law would be unnecessary.

    The common sense answer on the effects of the eviction law is wrong because of incorrect price theory. Implicitly assuming that the price remains unchanged gives the wrong answer.

    This is naive price theory, assuming that the only thing determining tomorrow's price is today's price. It is perfectly natural if you do not know what happens to prices, but it makes no sense to assume that the market price stays the same if you change its cost of production, its value to potential purchasers or both. The assumption that the price stays constant is wrong.

    Price theory is unavoidable, the alternative to correct price theory is incorrect price theory and doing it correctly requires more than simple common sense. It requires a knowledge of economics. The alternative to correct economic theory is not doing without theory (or using common sense) but is incorrect theory. The problem is that the models that a lot of people carry around in their head are wrong. You do not avoid the problem of assuming something about price by assuming it remains the same.

    Most law and economics is not about helping business at the expense of consumers – but about more subtle issues, like what set of rules is best for society. Liability law affects the incentives that face buyers and sellers and the decisions they make – which affects the damage produced by accidents.

    It may be that negligence is the best standard. Or strict liability. Or buyer beware. The preferred rule depends on several, possibility conflicting, considerations. For example, strict liability on the producer may mean the buyer takes too little care. The behaviour of the person renting a horse may contribute more to the chance of an accident than anything the horse owner can do.

    Parish and Gittins assume that sellers are the least cost avoider – but they may not always be. There is a strong case for the government to set a default rule and allow parties to contract around it. There may be a case against this – but it requires more than asserting the least cost avoider is the same in all cases.

    One problem with the courts always striving to impose liability on ‘deep pockets’ is that they often come to ludicrous decisions. I’m probably perpetuating a furphy, but the following e-mail I recently received gives some examples. Worth a laugh.

    “The "Stella" awards rank up there with the Darwin awards. Stella Liebeck is
    the 81 year old lady who spilled coffee on herself and sued McDonalds. Her
    case inspired an annual award - The "Stella" Award - for the most frivolous
    lawsuit in the U.S. The following are this year's candidates:
    1. January 2000: Kathleen Robertson of Austin Texas was awarded $780,000 by
    a jury of her peers after breaking her ankle tripping over a toddler who was
    running inside a furniture store. The owners of the store were
    understandably surprised at the verdict, considering the misbehaving little
    bastard was Ms. Robertson's son.

    2. June 1998: 19 year old Carl Truman of Los Angeles won $74,000 and medical
    expenses when his neighbor ran over his hand with a Honda Accord. Mr. Truman
    apparently didn't notice there was someone at the wheel of the car, when he
    was trying to steal his neighbor's hubcaps.

    3. October 1998: Terrence Dickson of Bristol, Pennsylvania was leaving a
    house he had just finished robbing by way of the garage. He was not able to
    get the garage door to go up since the automatic door opener was
    malfunctioning. He couldn't re-enter the house because the door connecting
    the house and garage locked when he pulled it shut. The family was on
    vacation. Mr. Dickson found himself locked in the garage for eight days. He
    subsisted on a case of Pepsi he found, and a large bag of dry dog food. He
    sued the homeowner's insurance claiming the situation caused him undue
    mental anguish. The jury agreed to the tune of half a million dollars.

    4. October 1999: Jerry Williams of Little Rock, Arkansas was awarded $14,500
    and medical expenses after being bitten on the buttocks by his next door
    neighbor's beagle. The beagle was on a chain in it's owner's fenced-in yard.
    The award was less than sought because the jury felt the dog might have been
    just a little provoked at the time by Mr. Williams who was shooting it
    repeatedly with a pellet gun.

    5. May 2000: A Philadelphia restaurant was ordered to pay Amber Carson of
    Lancaster, Pennsylvania $113,500 after she slipped on a soft drink and broke
    her coccyx. The beverage was on the floor because Ms. Carson threw it at her
    boyfriend 30 seconds earlier during an argument.

    6. December 1997: Kara Walton of Claymont, Delaware successfully sued the
    owner of a night club in a neighboring city when she fell from the bathroom
    window to the floor and knocked out her two front teeth. This occurred while
    Ms Walton was trying to sneak through the window in the ladies room to avoid
    paying the $3.50 cover charge. She was awarded $12,000 and dental expenses.

    And the winner is: Mr. Merv Grazinski of Oklahoma City. In November 2000,
    Mr. Grazinski purchased a brand new 32 foot Winnebago motor home. On his
    first trip home, having joined the freeway, he set the cruise control at 70
    mph and calmly left the drivers seat to go into the back and make himself a
    cup of coffee. Not surprisingly the Winnie left the freeway, crashed and
    overturned. Mr. Grazinski sued Winnebago for not advising him in the
    handbook that he couldn't actually do this. He was awarded $1,750,000 plus a
    new Winnie. (Winnebago actually changed their handbooks on the back of this
    court case, just in case there are any other complete morons buying their

    A second comment. I would state the Coase theorem as: efficient outcomes are reached in the absence of transactions costs. What are transactions costs – anything that prevents an efficient outcome. That makes the theorem a tautology – but a useful one. It directs our attention to the relevant issue – what is preventing bargains being made?

    Parish seems to treat the Coase theorem as a theoretical curiosum not relevant for the real world. A world of zero transactions costs is obviously unrealistic. In the real world, transactions costs are important. But it is worth thinking about this artificial world. Coase’s contribution is to make us realise that a large range of problems result from the transactions costs that prevent the parties affected from bargaining to an efficient outcome.

    For example, it is the transactions costs of making deals and enforcing property rights which drive the externality problem. If transactions costs are sufficiently low and property rights can be cheaply defined and enforced, the externality problem disappears. Externalities are a problem of transactions costs. The Coase theorem is important not because we live in a world of zero transactions costs but because it shows us the importance of transactions costs.

    Acknowledgement: These comments draw heavily on David Friedman, who taught me a lot of law and economics.

    Sunday, August 25, 2002
    How not to argue against subsidising broadband

    There are lots of good reasons not to subsidise broadband, no matter what the whiz-bang technocrats who get turned on by reading Knowledge Nation may say. Like where is the market failure exactly? And if there is a market failure that leads to underprovision of broadband why can't it be tackled by other means that get rid of this source market failure? However this is not a good reason not to subsidise broadband:

    ALAN KOHLER: In the early days you were actually not just sceptical, you were quite negative, I think you even said that it's just for pornography and gambling?

    SENATOR RICHARD ALSTON: Well for example, people will tell you that pornography is one of the major reasons why there's been a high take-up rate in South Korea. I haven't confirmed that at first instance but I've been there, I've looked at what's happening. My scepticism has really been about whether there is any compelling national interest in the Government spending money on subsidising roll-outs to consumers. Because at the moment it's pretty much more of same but a bit faster for most consumers.

    Next thing you know he'll be saying we should do all we can to slow down Internet transmission speeds to clamp down on Net porn .. oh better yet, an Internet restricted to text, or better yet ...
    Using Hyperlinks not a Patent Breach

    For those with an interest in intellectual property, patents and the web – the BT hyperlinking case has been decided. (Wired article, CNN article) U.S. federal Judge Colleen McMahon has declared that

    “The Internet is, in short, an entirely different beast from the system described in the (BT) patent. Consequently, the Internet does not infringe the Sargent patent,"

    For those not familiar with the case, the two minute version goes something like this. In February, British Telecom (BT) launched a case against the US Internet provider Prodigy. The suit against Prodigy was to form a test case for what would (had it gone in BT’s favour) been an enormous earner. It alleged that:

    “every single hyperlink used on every U.S. website was utilizing intellectual property the company patented in 1976 and should therefore be subject to a licensing fee.”

    Had the case gone the way of BT, hyperlink licensing could have become yet another barrier to easy online publishing. Given that most blogs are served out of the US (where Blogger is based) there was the potential to significantly harm this growing form of online publishing. Fortunately Judge McMahon has found against BT and hopefully BT will now drop the case at this point rather than risk the public humiliation of losing again on appeal.
    Don Arthur on conservatism, liberalism and post-modernism
    Don Arthur writes in response to my post on moral relativism and liberal imperialism and offers a snazzy little summary of the three major ideologies of contention:

    I agree, "a consequentialist approach to morality does not lead one to moral relativism."

    But just for the sake of argument, let's say that I am a moral relativist and that I do think that different moral systems are incommensurable. Why on earth would I want to go around respecting other people's moral traditions?

    Surely the only standards I could appeal to would be the standards of my own tradition. If my moral tradition didn't include some taboo about ethnocentrism then relativism will lead to LESS tolerance for other views not more.

    I think this is one thing which distinguishes liberalism from conservatism. Conservatism is pre-modern - it tends towards tradition and ethnocentrism rather than universalism and rationality. Whatever wisdom there is in conservatism it exists not as theory but as practice.

    This means that conservatives don't need to worry about all that PoMo stuff about the collapse of meta-narratives - that's for theory mongering moderns like Marxists and... liberals like yourself.

    Whatever happens conservatives can go right on imposing their morality wherever they can get away with it.


    Liberal moral argument

    Skeptic: "Why should I do what you say?"
    Liberal: "Because if you have a brain and can use it you'll realize that it's the only rational thing for you to do."

    Conservative moral argument

    Skeptic: "Why should I do what you say?"
    Conservative: "Because we're the ones with the guns."

    PoMo relativist moral argument

    Skeptic: "Why should I do what you say?"
    PoMo: "I've no idea Here, have my gun."
    Swifts in, Sandpipers out.

    It was a fantastic final round of the NNL this weekend. Whilst the Swifts were assured of third place, the Sydney Uni Sandpipers needed to defeat Melbourne Kestrels in order to retain their place in the semi-finals.

    Great defence by Kestrels GK Janine Illitch created just enough problems for Jo Morgan to bring her percentage down from it’s usual stunning heights. In doing so, she helped to create the extra scoring opportunities needed by the Kestrels to claim a 55-50 victory. The Kestrels will now meet the Swifts in next weeks minor semi-final.
    Recent notable Goggle searches which found this site

    1) womens' views on anal sex (ouch!)
    2) popper plato totalitarian (Who? Popper or Plato? For those who don't get this joke, it's worth noting that some people think Popper's most famous book should have been called 'The Open Society by one of its enemies' A very cranky man)
    3) sex flash files
    4) gotti files
    5) ezra pound anti semite (yes, that was apparently so)
    6) john howard actor refugees apologise on behalf of my government
    7) as terrible as the crime was we must not confuse justice with revenge (OK, got you)

    Robson is wrong, Gittins is right and Parish overreacts

    Ironies abound.

    My co-blogger Mark Harrison links to this post by Alex Robson on amendments to the TPA to allow the shifting of liability for accidents in the provision of recreational services. Ken Parish duly demolishes it, critiquing Robson's interpretation of the Coase theorem, his application of law and economics and his understanding of what the provision does. All done quite well too. However he goes one step too far, venturing into condemning a whole field which he obviously isn't well read in and doesn't understand properly. He makes a number of stupid and unsubstantiated allegations:

    Essentially, Posner seizes on economics' Coase Theorem, and proceeds (usually) to misapply it to legal situations where it is plainly inappropriate ..

    Note that, as Posner also typically does, Robson baldly asserts that the crucial proviso to Coase Theorem (about reasonable equality of bargaining power) is satisfied by the TPA amendments, but makes no attempt to establish any rational basis for that proposition

    Posner has a whole section on tort law in his book 'Economic analysis of law'. He has a discussion of warranties. On p. 58 of my 5th edition of the Economic Analysis of Law, Posner even writes (in discussing a hypothetical:

    It does not follow that the initial assignment of rights is immaterial from an efficiency standpoint. Since transaction costs are never costless in the real world efficiency is promoted by assigning the legal right to the party who would buy it ... Moreover as we shall see the cost of transacting is sometime so high relative to the value of the transaction as to make transacting uneconomical. In such a case the initial assignment of rights is final

    And on p. 117 he approves of implied warranties of fitness for intended use:
    The implied warranty of fitness for intended use ... is a good example of an insurance type of contract provision. The product may fail for reasons beyond the seller's control but the seller may be able to distribute the risk of failure more easily than the consumer. In that event the consumer will be willing to pay a higher price in exchanfge for shifting the risk to the seller.

    If Parish wants to accuse Robson of misapplying the Coase theorem, fine. But he should give some examples of how Posner himself has misapplied the Coase theorem snce Posner is clearly aware that in the real world its conditions are not always met. That Posner approves of implied warranties for fitness of intended use of goods doesn't necessarily mean that he would have exactly the same views on the issue of transferring risk to users of recreational services. But it strongly suggests so.

    An even sillier allegation from Parish is that:

    I would have thought. Of course, the real (and very much intended) effect of "law and economics" advocacy in almost every case is to provide a pseudo-economic basis for shifting risks and costs from businesses to consumers and/or employees, and ultimately on to the taxpayer via the social security and Medicare systems. Negligent businesspeople can then "maximise utility" all the way to the bank, while their injured customers try to make do in a wheelchair on a disability pension.

    Ken, if you have read anything by Posner you will know that he is driven by an insatiable intellectual curiosity perhaps even a desire to be perverse and contrarian (as am I), but not by 'pro business ideology'. You may think his views rash but anyone who is driven by ideology can easily avoid saying the many controversial things he has said over the years and still promote his ideology. A man who is driven by ideology does not write a 400+ page book on the rational choice analysis of sex. Just because you don't agree with his conclusions doesn't give you the right to accuse him of being intellectual dishonest - when Posner is wrong he is *still* 1000 times more insightful than when Hugh Mackay is right.

    And Ken has also just made a fool of himself in indicting the whole of law and economics. Why? Firstly Gittins' arguments in this article are based on law and economics:

    The second problem with the bill is explained in the Australian Competition and Consumer Commission's submission to the review panel: the bill's approach contravenes the first principle of the economics of accident (part of a long-established branch of economics called "law and economics").

    Secondly the arguments defended by Parish which are in turn defended by Gittins are from this paper by the ACCC and they even refer specifically to the Coase theorem and Posner on law and economics. How do I know this? Well, you can go read it yourself, especially section 2.3 and 3.2 of the paper to find out why I think Robson is wrong but I know this because I helped write the paper. So according to Parish, I'm a law and economics shill who wants negligent business people to maximise utility all the way to the bank, yet he is defending Gittins who draws on arguments written by me using a law and economics perspective to show why the amendment is wrong. Pick on an area you've actually read, Ken. Sheesh, the words 'maximise utility' are enough to reduce some people to hysterics.




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