Monthly Archives: July 2013

UK indepedence

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I was living here back in 1973 when the UK entered the Common Market. It was a free trade agreement at the time but what a horror it has become since. Yesterday the House of Commons voted to hold a referendum on the UK continuing in the European Union, a very different kind of animal in which decisions of the most local kind are made by a bureaucracy of European technocrats in which no one locally often has much of a say. According to a story in The Telegraph there a number of reasons this has come to a head at this particular time. The “he” below is David Cameron:

For now, he has achieved something distinctly unusual in the modern Tory party – unity on Europe. Partly, this has been brought about by a fear of Ukip and the real prospect that Nigel Farage’s party will top the poll in next year’s elections to the European Parliament. But it is also a recognition that this matter cannot be left unresolved – not least when the ramifications of the euro crisis (which loomed again this week in Portugal) will fundamentally alter the shape of the EU.

Ah yes, UKIP, the UK Independence Party. If they had our form of preferential balloting over here, it would be a formidable force even now.

From Catallaxy 6 July 2013.

Dropping the anvil on their own toes

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This is by Paul Kelly but picked up from Andrew Bolt

The terrible truth is unfolding. Julia Gillard and Wayne Swan have left Rudd with a budget that allows no room to move… Rudd inherits a long-term fiscal situation with huge commitments on the disability scheme and school funding, a three-year ‘return to surplus deadline and no scope for new spending pledges.

The original intent was to sandbag Tony Abbott with fiscal commitments and budget deficits that would give him little room to move but has apparently now done in Kevin Rudd instead. The pleasure this would give Julia must be intense.

The problems that Labor has left behind are massive. Kevin’s role in their creation and his inability to solve a single one will soon enough be evident across Australia. It is not just the leader but the ethos and policy structure of the Labor Party that is the problem for which there is only a single solution that will make sense.

From Catallaxy 6 July 2013.

The front page of The Times

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Two stories share the front page of The Times today, that might make the front page anywhere and the other that would be about as noteworthy in Australia as the results of the Stanley Cup Finals. On the less important side, someone in the Labour Party has had to resign because of branch stacking in some constituency.

The other is that shares have soared because the new Governor of the Bank of England has said rates are coming down. And they had to bring someone from Canada to do that. Glenn Stevens would have been a much much better pick but then shares would not have soared as much.

From Catallaxy 5 July 2013.

Plan B on the Carbon Tax

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You will have to forgive me for first mentioning that yesterday I went to a meeting on climate change in the House of Lords chaired by none other than Nigella’s Dad. We even spoke a few words to each other but I doubt he went home and blogged about meeting me.

But it was a serious meeting with a serious proposal that the Coalition should look at seriously given that we already have a carbon tax in place which, given the future state of the Senate, may not be removable in the first instance.

There was a presentation on what the speaker, Ross McKintrick, described as a “Temperature Index Tax”. You start with a carbon tax put in at a very low rate and then you index the tax based on movements in some particular temperature, with the proposal based on the recorded temperatures in the tropical troposphere since they are apparently especially responsive to changing concentrations of CO2. The size of the tax then depends on actual outcomes which could even go down depending on what happened to the actual temperature. There were then three additional features:

1) It is an “instead of” tax and not an “addition to” tax. For carbon taxes to be effective, there must be no other carbon abatement programs. The rest should then be completely repealed and no new programs added in.

2) The tax must be revenue neutral. The revenue raised cannot be used for any other purpose except lowering other taxes. Otherwise the tax becomes a source of regulatory inefficiency.

3) It must always be understood that the carbon tax as described is a price instrument, not a quantity instrument. Major issues if the attempt is made to use it for both.

Since Nigel Lawson has about as much belief in AGW as I do, the aim is to find some mechanism that will allow an each way bet on what temperatures will do. If you think they will go up a lot you get your abatement taxes and everyone is in agreement. If they don’t go up, then no one has to do anything and everyone is content that a contingency plan has been put in place. Various forms of futures markets also become operable which allow for hedging. The suggestion that the superannuation of global warmists be related to the tax revenues raised has an appeal but that was an idea raised from the floor and not part of the proposal.

I’m afraid I cannot link to the report on the primitive machine I am using but I suspect that if you go to http://www.thegwpf.com you will find the paper there under the title, “An Evidence-Based Approach to Pricing CO2 Emissions”.

From Catallaxy on 4 July 2013.

“The Rudd-Gillard government has been a highly statist government”

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You know, I like this not because of what it says about Obama, but because of what it says about Tony Abbott. Abbott is quoted in The Telegraph (The London version) from an interview in The Wall Street Journal.

“The Rudd-Gillard government has been a highly statist government, the Brown government reverted to statism with a vengeance in Britain, and Obama is the most left-of-center government in at least half a century.” (At this, the media minder shifts in his chair.)

“Now I’m not being critical of Obama,” Abbott adds, soft-pedaling his response in a way he probably wouldn’t have a few years ago, when he was a minister in the Howard government. “He’s following a well-trod path. But I think it is a fact that the Obama government is a much more statist government than the Clinton administration.

It warms my heart to hear such things said. Not just that he has characterised them so well but that he appreciates the difference. My strong suspicion is that he does not think running a highly statist government is a good thing.

From Catallaxy 4 July 2013.

A history that goes back about twelve months

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As I knew I would do, as soon as I came across Mark Blyth’s Austerity: the history of a dangerous idea that I would buy it. Not all the way through it yet, but to help you understand just how useful it is, let me note first that on the back cover the very first of the people quoted to expain why someone ought to buy the book is written by John Quiggin. “An essential guide for anyone who wants to understand the current depression”. How austerity can be used to explain anything over the past five years up until the end of last year I will try to work out in making sense of the book.

As to its contents, this is the only reference to Say’s Law, found on page 137:

The policy objective of these institutions was therefore the encouragement of ‘achievement competition’ rather than ‘impediment competition,’ whereby the quality of products manufactured would create the demand for them, in a modern supply-side restatement of Say’s Law.

Is life really long enough for me to read the rest?

From Catallaxy on 3 July 2013.

Piltdown man and global warming

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I’m in London and on the first day here I went to see the skull of the Piltdown Man, the notoriously faked missing link with the skull of a human but a monkey like jaw. The reason for the exhibit was that it was in 1913 that it had been discovered so, settled science as it was all the way through to the 1950s when carbon dating proved that it was a very cleverly designed artifact whose actual creator no one has ever known (except the person who did it). So I said to the guide that I looked forward to a similar exhibition in fifty years time about global warming as the greatest scientific con in history, a thought to which he took exception but was very nice about it. But it will happen. How anyone in London can worry about global warming is beyond me. Bring it on should be the idea.

Meanwhile the Bank of England has installed its new Governor, Mark Carney, as a Canadian the first foreigner ever to be given that position. Well, he is considering a QE of his own to revive a sinking economy. My worries, as conventional as his own ideas on monetary policy seem to be, is that they are about as sound as his wife’s who was in the paper worrying about green issues, with the one she picked to discuss being the amount of paper used in making tea bags. It’s good to see people with their finger on the pulse of the major issues of our time.

From Catallaxy on 3 July 2013.

The fix was in

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On June 9 I observed that the fix is in and Kevin Rudd will return. And so he has, more awful than ever. It must be terrible to be a Labor supporter, having to pick amongst Mark Latham, Julia Gillard and Kevin Rudd.

The last day of the Parliamentary sitting was the only time to make the switch so now the deed has been done.

But since even I could see it coming, obviously everyone else could as well. My guess is that this entire scenario was worked out weeks ago, the steps that would be taken, the painful decision by Penny Wong, the regretful switch by Bill Shorten and the final vote engineered just as it was. It is likely that even Julia was herself in on this, playing her part right to the end.

From Catallaxy dated 28 July.

Arnold Kling on George Gilder

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I will want to write my own post on George Gilder’s brilliant Knowledge and Power but I have just run across this review by Arnold Kling who is favourably mentioned in the book. Kling is not all that enamoured with the book, as seen in this passage:

Gilder would argue that redistribution is baked into the methodology of economic models that downplay agency and instead treat economic outcomes as random. For example, finance professors will describe the effort to “beat the market” when investing in stocks as a sort of coin-flipping tournament. Start with a very large number of players, have them each flip a coin five times, and see which flippers get the most heads. Some players will get heads five times in a row, making it appear that they are very skilled coin-flippers. By analogy, if we start with a large number of stock market investors, a few of them will outperform the market several years in a row. These sorts of models imply that wealth accumulation results from a combination of risk taking and luck. Instead, Gilder insists that it results from better knowledge, which has been used to create products and services that promote human flourishing. (He would make an exception, of course, for knowledge that only exploits government-created noise.)

In Gilder’s view, entrepreneurs create information where none existed before. Rather than sustain the equilibrium, their role is to disturb it.

On this issue, I have mixed views. On the one hand, when it comes to business success, I agree with Gilder. Even though luck plays some role, skill matters much more, because there are so many little choices that must be made wisely in order for an enterprise to succeed. The more skilled business team usually will win, just as in tennis the more skilled player usually will win. On the other hand, with financial speculation, skill and luck are more difficult to separate. To me, financial speculation is more like a multiple-choice question on a test. One can easily make a good choice for a bad reason, or vice-versa.

There is much to quarrel with in Gilder’s book. For one, his political and social conservatism will put off many readers. Also, in his attempts to sharpen the contrast between his views and those of other thinkers, he often paints a caricature of the individual he is criticizing. For example, his depiction of Burton Malkiel, the American economist best known for his support of the efficient market hypothesis, as an adherent of technical analysis was completely unfair.

Funny business this. His political and social conservatism hardly put off this reader since, to tell the truth, I didn’t even notice it. As far as I can see, there was little ideology as such, only a drawing of the implications of the basic premises that his arguments were built upon.