Monthly Archives: April 2015

Unity, community and purpose

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I went to the Dawn Service this morning here in Caufield. I had intended to go to the main service in Melbourne, but when the tram never made it, I walked back up along the tracks and found that the traffic had been blocked because of the service at our local RSL. So I went there instead. Not as exciting perhaps as the 100,000 that went to the Shrine of Remembrance. But there were a couple of thousand, the speeches were excellent and the Last Post just as moving no matter where I might have been. We even had a fly-past of our own.

The speeches by our local RSL President, Bob Larkin, struck exactly the right note, as did the speech by the Special Guest Speaker, Colonel Michael Joseph “Mike” Kelly (Retd). Former Labor member for Eden-Monaro though he may have been, his speech resonated with my conservative instincts as he focused on the importance of “unity, community and purpose”.

And this contrasted very badly for me with the speech given by “the New Zealand Sub-Branch President” who spoke favourably about the New Zealand ANZACs who had had separate Maori battalions where they were able to maintain their way of life and camaraderie even under arms. This was unlike the circumstance of our Australian aboriginal soldiers, he said, who had been merely melded into the regular Australia army, just like anyone else.

So I have to tell you, that for me listening on this 100th anniversary of the landing at ANZAC Cove, I felt a renewed sense of what a great country this is. Even a hundred years ago, we did not segregate and separate out our fellow aboriginal soldiers, but allowed them to fight and die with the rest of us together, as the members of our one united national army. This is as it should be, and it made me once again proud to be Australian.

The moribund state of economic theory

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I wrote about Hugh Goodacre’s post on the History of Economics discussion thread under the heading, How many economists can dance on the head of a pin?. This is what he said in his post:

Sir, The moribund orthodoxy that currently exercises such an inflexible grip on university economics departments will, as Wolfgang Münchau comments, inevitably face a challenge, and this “will come from outside the discipline and will be brutal” (“Macroeconomists need new tools to challenge consensus”, April 13). The orthodoxy has brought this dismal prospect on itself through the brutality with which it has purged those departments of any other school of thought than its own.

Indeed, in its extreme version, the orthodoxy’s doctrine holds quite simply that there are “no schools of thought in economics”, a totalitarian assertion all too true in most economics departments today, so ruthless has been the purge of alternatives. As a result, the different approaches to economic issues of Adam Smith, Bentham, Ricardo, Marshall, Keynes, Friedman and so on are all relegated to the fringe subject of the “history of economic thought”.

This is indeed a 1984 situation, in which the very idea that debate could exist on how to approach economic issues is regarded as a mere historical memory, and consequently of purely antiquarian interest.However, economics students are increasingly demanding a pluralistic curriculum, as discussed by Martin Wolf in “Aim for enlightenment, technicalities can wait” (April 11). Similarly, the “fossilised habits of thought” entrenched in much of the economics professions are facing increasing criticism from within the academic world (see, for example, “The world no longer listens to the deaf prophets of the west”, Mark Mazower, April 14). Let us hope that all this pressure from students, from the worlds of journalism and of interdisciplinary debate, will combine to bring university economics departments back into the world of liberal academic life from which they have for so long isolated themselves.

I left a very substantial space in time for others to say their piece, but after almost a week, I felt I had waited long enough. This is what I wrote:

I have let six days go by to see if anyone else was interested in Hugh Goodacre’s message on the moribund state of economic theory. The more time goes by, the more I am convinced there is this subject taught at universities called “economics”, and there is this aspect of the world that is called “the economy”, but the first has only a remote relationship to the second. And I could not agree more about the following in the letter Hugh quoted, with two minor qualifications which I will come to:

‘In its extreme version, the orthodoxy’s doctrine holds quite simply that there are “no schools of thought in economics”, a totalitarian assertion all too true in most economics departments today, so ruthless has been the purge of alternatives. As a result, the different approaches to economic issues of Adam Smith, Bentham, Ricardo, Marshall, Keynes, Friedman and so on are all relegated to the fringe subject of the “history of economic thought”.’

My first qualification is the exclusion of John Stuart Mill and second is the inclusion of John Maynard Keynes. Mill is excluded because he has become so far off the beaten track that virtually no one even thinks of his contribution to economic theory, which was massive and arguably a good deal greater than Ricardo or Bentham. Ricardo could no longer be read to gain insights into the operation of an economy, while with Mill you certainly can.

But the inclusion of Keynes is a mystery. Virtually all macro is Keynesian. Who nowadays writes contra-Keynes? Is there any economist in the world writing today – other than myself – who is associated with a strident anti-Keynesian perspective? I can think of hardly a one, and there are not many more than a dozen. Following the dismal failures of fiscal and monetary policies to restore growth – both of which I consider Keynesian to their roots – I cannot understand why there has been so little interest in a post mortem of some kind and the investigation of alternatives.

I can only wish Hugh and his associates the best of luck in their quest to broaden the spectrum of opinion that are considered worth consideration within schools of economics. It is long overdue.

If I knew how to write these things without antagonising the others, I would. But years in the midst of a political environment, and then all this blogging, has left me with a style of writing not necessarily perfectly equipped for the academic world. But following my post was this one from one of the great economists of the world, Professor Richard Lipsey, from whose world class introductory text I had previously learned and taught. And this is what he said:

I agree completely with the others who say that many modern economics departments (but not, I think, mine) admit of no conflicts among, or even the existences of, various modern approaches. It is a mystery how anyone can hold to this view in the light of institutionalists who emphasise the importance of institutions, ‘Newtonians’ of various sorts who use maximising equilibrium models and evolutionists who emphasis evolving systems without static equilibria. And this only mentions a few of the competing visions of how best to study the economy.

I do not suppose this is the place to dwell on the contentious additional point raised by Steve Kates but I would observe that there is a world of difference between traditional Keynesian, New-Keynesian, and post-Keynesians. The econometric models of my country’s Department of Finance and its Central Bank use updated and expanded Keynesian income-flow models. So, like it or not, updated traditional Keynesian concepts, insights and measurement categories are still useful in the work of applied economists.

Since as a text book writer, I am often accused of accepting the modern no-differences view, I mention below three of my recent publications that put forward alternative visions to the prevailing one. This is not only to set the record straight but in the belief that they might be of some interest to those who agree that creative criticisms of the prevailing view are needed.

I would also say that in going ahead, we should not throw the maximising baby out with the bath water of its overuse. Partial equilibrium, maximising models of some markets, such as foreign exchange and wheat, are useful.

Recent non-orthodox recent publications by Lipsey

“Does History Matter: Empirical Analysis of Evolutionary versus New Classical Economics” (with Kenneth I Carlaw), Journal of Evolutionary Economics, 2012.

“Some Contentious Issues in Theory and Policy in Memory of Mark Blaug,” in Mark Blaug: Rebel with Many Causes, M. Boumans and M. Klaes (eds.), (Cheltenham: Edward Elgar), 2013

“The Phillips Curve and the Tyranny of an Assumed Unique Macro Equilibrium” Simon Fraser University Discussion Paper, 2014

He may not agree with my anti-Keynesian views, but sees it properly as a legitimate perspective. More importantly, if Richard Lipsey sees the moribund nature of economic theory as a genuine issue to be considered, there are some very influential people who have seen the problem and are willing to add their names to the list of those who are dissatisfied with standard economic teaching and practice. I don’t know how much dynamite it will take to break up the logjam, but this is certainly a very much needed assist.

Alan Moran – Global Warrior

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alan moran climate change the facts

Since everyone else is discussing it, I cannot see why we should not as well, since the book was edited by a good friend and close colleague. This is from Mark Steyn, speaking for us all:

I’ve had a fun time out on the Earth Day airwaves talking about Climate Change: The Facts. That’s the new book featuring me and some of the world’s most eminent scientists on the state of the climate debate as we prepare to enter the third decade of the global-warming pause. And I’m thrilled to find that the book is currently Number One on the Climatology Hit Parade, ahead of Naomi Klein, Naomi Oreskes and any number of Naomis, and also Number One on the Environmental Policy Hot 100.

If this keeps up, in the forthcoming Mann vs Steyn trial I may call myself as an expert witness.

My sincere thanks to everyone who’s bought this important new book. The turn-of-the-century cartoon science of the hockey stick is over, and it’s time for climate science to make a new start.

Having edited books myself, it is both insanely finicky and ridiculously unrecognised given how many hassles there are. I just hope Alan won’t mind my putting him up in lights in this way, but it is an astonishing achievement.

Here is how you can get a copy of the book while helping Mark Steyn in his climactic battle against the forces of stupidity and deceit. And here is where you can buy the book through the IPA which was the publisher of this worldwide success.

The Kluka Klan

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This is Rush Limbaugh going after those who perpetrated the home invasions in the name of the law in Wisconsin in 2013. He wishes to ensure their names are known to one and all, and I am happy to assist. At the centre of it was “the judge, without whom this case could not have happened, Barbara Kluka, K-l-u-k-a“.

She came along in the second John Doe investigation, and she approved every petition, every subpoena, every search warrant in the whole case in less than one day’s work. She enabled law enforcement to raid these innocent citizens’ homes. She’s since recused herself from this, but not before she enabled all of this to happen in the second phase of the John Doe 2 case here.

In the second John Doe case, the DA, John Chisholm, had no real evidence of wrongdoing by anybody. It didn’t stop him. Conservative groups were active in issue advocacy, which is protected by the First Amendment. It didn’t violate any campaign finance laws. Issue advocacy is politics 101. These people were targeted because they’re conservatives and liberals. As I say, what happened here in not only the treatment Scott Walker got, but everybody else, this is liberalism run amok without any checks, without any opposition, without anybody pushing back, and in its own way California is the same example.

Despite the fact that there were no violations of the law in any away, the DA, Chisholm, convinced “prosecutors in four other counties to launch their own John Does, with Judge Kluka overseeing all of them. Empowered by a rubber-stamp judge, partisan investigators ran amok. They subpoenaed and obtained (without the conservative targets’ knowledge) massive amounts of electronic data, including virtually all the targets’ personal e-mails and other electronic messages from outside e-mail vendors and communications companies. The investigations exploded into the open with a coordinated series of raids on October 3, 2013. These were home invasions,” including the ones that I have detailed previously in this half hour.

They are true fascists and totalitarians, in the exact mould of people who think of themselves as good and decent. Instead they are vicious cowards who use force to terrorise those whom they cannot convince by their words and argument. The totalitarian temptation is ever-present and is almost invariably associated with the left.

The best test of a sound economist

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A friend and colleague has written a fascinating paper on the various interactions amongst later classical economists from the late middle of the nineteenth century through to the end. Part of his paper dealt with Mill’s Fourth Proposition on Capital – “demand for commodities is not demand for labour” – on which I have just published a paper explaining its meaning which no one else has been able to do since Leslie Stephen at the end of that century. Most intriguingly for everyone since, in 1876 he described it as “the best test of a sound economist” which no one, until me this year, has been able to make sense of. Here is my reply to his note to me. I also have put this up since I think it is a perfect example of why the study of the history of economic thought makes someone a better economist. Where is the standard issue economist who would even begin to know what any of this is about?

As always, it was a fascinating paper from which I learned a great deal, even some things I didn’t want to know, such as Cairnes form of rheumatism which sounds like a kind of torture you would wish on no one. But being almost entirely like Leslie Stephen in the issues you discuss, I can stand in as a proxy to see things from his point of view.

On your three points:

(1) It is perfectly clear to everyone that Mill’s Fourth Proposition (MFP) is a restatement of Say’s Law. The problem is that they don’t understand Say’s Law which I have translated thus: demand deficiency does not cause recessions and a demand stimulus will lead neither to recovery nor higher employment. That is the point, and the words support my view. Economists since 1936 have been trapped in the belief that classical economists always assumed full employment, on the assumption, I guess, that they were idiots. Once you see that they never thought any such thing, you are able to take the first steps in understanding Mill and MFP.

(2) You say that the issue came up again in the 1870s because of a rekindling of interest in the wages fund doctrine. This may well be, but whatever may have rekindled the issue, the arguments in support of the Fourth Proposition have nothing to do with the wages fund doctrine. I don’t teach the wages fund, but I do teach all four propositions. But you have to understand Mill, which no one, absolutely no one in my view, does.

(3) You say that Stephen’s statement that it was the best test of a sound economist was not an offhand comment as I do. I thought of it as offhand given the nature of the book he was writing. It was far from being a book on economic theory and while it is in context, it is not essential to the point he was making over all.

On your paper, let me make a few points related to these matters.

(i) You quote the proposition incorrectly, but it is this error that is part of the problem. The proposition is “demand for commodities is not demand for labour”. You wrote, “a demand for commodities is not a demand for labour” (p 9 and 13). This is fundamental and was the same problem that Simon Newcomb had. It is not micro. It is classical macro. Mill is looking across the entire economy and pointing out that lifting the level of aggregate demand does not lower the unemployment rate. I can see that, but no one else can see that. Aside from myself, no one, so far as I know, opposed the stimulus because it would not create jobs. To me, because I understand Mill, and therefore believe because of that that I understand how an economy operates, the failure of the stimulus was an absolute certainty. I listen to Krugman-style blather about how the stimulus was not large enough or that we are beset by secular stagnation and it is all ridiculous. Mill makes it clear, but to understand Mill you must absolutely give up on modern macro (and on Real Business Cycle theory as well). Stephen says it precisely right as you quote him (14-15) where he points out that expenditure by the rich will not lower unemployment. Substitute the government for the rich and you will see what he is getting at. I say the same and have more than enough evidence given the past six years. What evidence does a Keynesian have that they know the first thing about any of it?

(ii) The notion that MFP has been “exploded” is news to me. Marshall and Hayek tried to show that it was true, if you just made these wee adjustments. Of course, they made it completely incomprehensible and leached out of it any reason to see it as a “fundamental” proposition. They just couldn’t understand it for reasons I explain in my paper. That is why, I also think it is the “best test of a sound economist” which is why I think there are so few sound economists left. No Keynesian is a sound economist since each and every one would fail this test.

(iii) You seem to think that Stephen and Ruskin couldn’t agree on economic issues because of their different philosophies, and that Ruskin was shoveled out because he was not amongst the professional economic elite. I went back to read Ruskin’s Munera Pulveris after watching Mr Turner and even with the best will in the world, which I then had, could not bear it. Ruskin is a rotten economist. He asks the wrong questions and comes up with stupid answers. Mill, and I presume Stephen, were concerned about the poor and wished to raise living standards and see them employed (as I wish to do myself). It’s not even that I disagree with him but that Ruskin had literally nothing to contribute to any serious debate about how economies work. It wasn’t that they disagreed but that Ruskin’s views were irrelevant since he wasn’t looking at serious questions.

But these differences aside, your paper was very stimulating reading. Could you send me in the direction of this additional debate over MFP that followed from the debate over the wages fund. There may be something there that I should follow up on.

I am very pleased to find myself cited by you in this excellent paper.

Kind regards

But it did change our attitude to gun ownership

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From Andrew Bolt, Of all the absurd analogies offered by the wilfully blind:

George Megalogenis, who has written a book and produced a documentary linking Australia’s economic success to its immigration program, said … the recent spate of terrorism-related arrests should not affect Australia’s attitudes to Muslim migration any more than the Martin Bryant massacre should affect mainland attitudes towards Tasmania.

It truly is an absurd analogy. Rightly or wrongly, we completely changed our gun ownership laws because of this one unique instance. Whether it did or did not make us safer, that was the premise of these changes. Our immigration program ought to at least not make us less safe on our streets, or when we go off to an ANZAC Day parade.

And for what it’s worth, the article Andrew was referencing was titled, Five million visas into Australia this year likely to set new records. Immigration is a good thing, generally agreed upon by all, if the numbers are increasing at a moderate rate so that migrants can be assimilated into our way of life. These are the necessary characteristics of migrants that we can agree on:

“If a nation’s immigration programme is well crafted and targeted, and migrants enjoy high levels of economic participation, as distinct from high levels of social exclusion and welfare-dependency, immigration has beneficial impacts in terms of growth in the demand for goods and services; increases in national income, and living standards; improved labour participation; expansion of the economy’s productive capacity; and growth in household consumption and public revenues.”

Every migrant comes at a substantial cost to the economy which is only repaid slowly over time and will only do so if they are productively employed. The kinds of migrants we should do everything we can to keep out are precisely those with “high levels of social exclusion and welfare-dependency”.

The best thing that can be said about Obama is that maybe he’s just stupid

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We still go safely to bed at night and these things are still a million miles from our homes. But they are getting closer and there are no barriers being place in their way by anyone at the top of our societies. The article: Amid talks, Mideast nightmare looms. Oh well, it’s just the Middle East. What’s any of this got to do with us?

Let’s face it: While we’re busy taking the pulse of level-headed negotiators in Switzerland, we forget that Iran’s a fanatical republic, intent on spreading its Shiite Islamic ideology far and wide. Foreign Minister Javad Zarif endlessly smiles at us in Lausanne, but in Iran, the man charged with exporting the revolution, Gen. Qasem Soleimani, has become a local hero.

Meanwhile, every small gain for Soleimani’s growing army of proxy militias strikes ever more fear among its Sunni enemies, many of whom feel it necessary to join with jihadi groups to roll back Tehran’s advances.

The see-no-evil deference paid by the Obama folks in the hope of reaching an agreement and maybe converting Iran’s mullahs into peace-lovers has only left the region more volatile.

Far from helping to pacify the region, the talks in Switzerland have only escalated wars there. Whether we reach a deal on Iran’s nukes or not, they have only helped Iran further its own goals — which fly in the face of our own.

The assumption that this is just there and will not soon be here is so ostrich-like that it defies belief. But this is one story in the midst of a million more about the latest goings on with Brad and Trish. Meanwhile, our European home is beset by Up to 1m migrants waiting to enter Europe, warns Italian prosecutor. Just imagine if they succeed, and what do you suppose is going to stop them?

The GYPSY life

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baby boomer reality v expectations

An interesting article sent to me by my son: Why Generation Y Yuppies Are Unhappy. And it starts with an equation of sorts:

Happiness = Reality – Expectations

Ah, as explained, Gen Y is in deficit compared with us baby boomers who are in a major net surplus, as shown in the chart above. And it begins the assessment of us with this: “after graduating from being insufferable hippies . . .”. Having been literally one of those insufferable long-haired hippy dropouts – life in the communal settings of Vancouver, a year and a half as a gardener in London after finishing my Masters, living in a garret in Paris, dishwasher at Honest Ed’s Ice Cream Parlour, before I finally snapped out of it.

And there were two parts to it that may seem contradictory but are not. The first was that I felt I was on a conveyor belt towards a future that was pre-determined and not my own. The job I didn’t get in Ottawa – the one my Mother always thought back on wistfully before I went off to Australia – I missed out on because the mailman came that day after 5:00 pm. So I took off instead, and aside from the pain it caused my parents, which is not a small consideration, I lived a very different life from the one they had thought I should.

The second half is that I felt a kind of fear that I would not measure up to the requirements of the adult world. It is not obvious when you are twenty-odd that you will be able to move up and along the career path towards higher levels of responsibility. Maybe you have it and maybe you don’t but failure is unpleasant, and the fear of failure stops many taking even those first few steps. Anyway, it was only after I had been promoted to Assistant Charge Hand for the gardening crew I was part of for the London Borough of Hammersmith that I began to feel a kind of confidence in myself that getting an A on an essay never could quite provide.

But the difference for me is that I was taught by and lived amongst members of that Greatest Generation. You have lived amongst and been educated by those despised hippies. They were your teachers, or your teachers’ teachers. And what a difference that has made, and you do have my sympathies. The worst generation and you have not even begun to see just how destructive we have been.

So let us see the first part of the false narrative of my generation that is supposedly believed by this GYPSY generation:

The GYPSY needs a lot more from a career than a nice green lawn of prosperity and security. The fact is, a green lawn isn’t quite exceptional or unique enough for a GYPSY. Where the Baby Boomers wanted to live The American Dream, GYPSYs want to live Their Own Personal Dream.

If you don’t think this is a hippy ethos, you were not paying attention. We were dropouts of a society that was a good deal more together than this one, and we were bored by it. But only a comparative few of us did the dropping out, and what we found was how unsatisfying it was. We tried it, and there is nothing there, which is why there are hardly any of us left leading such empty lives.

Everybody wants to fashion their own life to suit their own personal ambitions. No one even knows what these personal ambitions are until life begins to tempt us into our different directions. Until the moment comes, it is all just sampling and grazing. We are wealthy enough as a civilisation to indulge our young in an ability to mess around like this. The disdained hippy generation was perhaps the first ever to be part of a civilisation wealthy enough to allow large-scale indecision before most of us settled into a life-time pattern, although it is possible that the 1920s was also something like that as well, cut short by the Depression, then war and then the restoration of a hardened centre.

The apparent disdain for “secure” careers shown in the article is merely an artefact that there is no sense of insecurity felt by the young. And that is because, if you ask me, they have not yet felt the possibility that their entire lives may end up wasted in purposeless frivolity, an aimless path of no consequence in which nothing was achieved and life just petered out.

We shall nobly save, or meanly lose, the last best hope of earth

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julie bishop he drew first

From The Age.

A new cartoon sits on the crowded walls of Charlie Hebdo’s offices in Paris.

The image will be familiar to many Australians who followed the aftermath of the terrorist attack on the satirical magazine in January.

Canberra Times cartoonist David Pope’s stark, confronting “He drew first” pencil sketch, drawn while watching TV reports late at night after the shooting, went viral on social media within hours.

It was instantly, instinctively familiar to the staff at Charlie Hebdo, too.

Any of them could have drawn this, cartoonist and managing editor Riss said on Monday. “This is exactly how we felt and how we feel.”

The sketch, signed and framed, was presented to the staff of Charlie on Monday by foreign minister Julie Bishop, as a gesture of Australia’s sympathy and support.

It’s not “sad”, it’s terrifying

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There is the IRS which is a scandal that is now just seen as part of the American way of life and has been part of the background scene in the US for almost two years. And there is a president who is doing everything he can to allow Iran to build nuclear weapons. And now there is this:

“It’s a matter of life or death.”

That was the first thought of “Anne” (not her real name). Someone was pounding at her front door. It was early in the morning — very early — and it was the kind of heavy pounding that meant someone was either fleeing from — or bringing — trouble.

“It was so hard. I’d never heard anything like it. I thought someone was dying outside.”

She ran to the door, opened it, and then chaos. “People came pouring in. For a second I thought it was a home invasion. It was terrifying. They were yelling and running, into every room in the house. One of the men was in my face, yelling at me over and over and over.”

It was indeed a home invasion, but the people who were pouring in were Wisconsin law-enforcement officers. Armed, uniformed police swarmed into the house. Plainclothes investigators cornered her and her newly awakened family. Soon, state officials were seizing the family’s personal property, including each person’s computer and smartphone, filled with the most intimate family information.

Why were the police at Anne’s home? She had no answers. The police were treating them the way they’d seen police treat drug dealers on television.

In fact, TV or movies were their only points of reference, because they weren’t criminals. They were law-abiding. They didn’t buy or sell drugs. They weren’t violent. They weren’t a danger to anyone. Yet there were cops — surrounding their house on the outside, swarming the house on the inside. They even taunted the family as if they were mere “perps.”

As if the home invasion, the appropriation of private property, and the verbal abuse weren’t enough, next came ominous warnings.

Don’t call your lawyer.

Don’t tell anyone about this raid. Not even your mother, your father, or your closest friends.

The entire neighborhood could see the police around their house, but they had to remain silent. This was not the “right to remain silent” as uttered by every cop on every legal drama on television — the right against self-incrimination. They couldn’t mount a public defense if they wanted — or even offer an explanation to family and friends.

Yet no one in this family was a “perp.” Instead, like Cindy, they were American citizens guilty of nothing more than exercising their First Amendment rights to support Act 10 and other conservative causes in Wisconsin. Sitting there shocked and terrified, this citizen — who is still too intimidated to speak on the record — kept thinking, “Is this America?”

No, it’s Nazi Germany or Soviet Russia or any common garden totalitarian regime. But on Instapundit, where I found this, the comment begins:

Sadly, it is America, as controlled by a liberal/progressive agenda that inanely believes that conservatives who “coordinate” their political messages are somehow subverting the democratic process (rather than actually furthering it). [My bolding]

This is not “sad”. It is terrifying.