August 24, 2012

Analysis

BBC Radio 4


Contents


Is America Doomed?

The Free-Rider Problem

Darwinian Economics

Profits Before Pay

Do Schools Make A Difference?

The Right Way


ANALYSIS

  • Green Shoots from the Arab Spring, 17 November 2012.
  • Political Prejudice, 17 September 2012.
    Jonathan Haidt: Professor of Psychology, University of Virginia.
    Dan Kahan: Professor of Law and Psychology, Yale Law School.
    Roger Scruton: Philosopher.
  • Why Economics Is Bunk, 4 June 2012.
    Steve Keen.
  • America: The Right Way, 27 February 2012.
    Justin Webb.

    Jay Cost [Commentator, The Weekly Standard]:
    [We are faced with] the end of an era.
    For over half a century we could have social welfare spending, a massive military, low taxes and a balanced budget.
    [Now] we can’t have those anymore and neither party has come to terms with it. …

    Michael Lind [Founder, New America Foundation]:
    I’m a native Southerner [from Texas.]
    [The South is] almost sort of a country within a country.
    [Since] before the Civil War, it’s had this tradition of fear and loathing of central government …
    [This] idea that its people and its institutions are under attack by alien outside forces.
    You can’t understand the paranoia and the rejectionism of the modern American Right without recognising that much of it comes from the political culture of white southerners. …

    Henry Olsen [Vice President, American Enterprise Institute]:
    Over a quarter of our votes now are cast by racial and ethnic minorities [who] tend to vote for the Democratic Party.
    And [some of the evolving Republican] views on social issues [have driven] wealthy, educated people away from the Republican Party towards the Democratic Party …
    [This] means that the Republican Party now has to win massive majorities among the white working class in order to [achieve] narrow electoral victories. …

    Mitt Romney:
    I like being able to fire people that provide services to me. …

    This century must be an American century.
    This is America’s moment.
    We should embrace the challenge and not shrink from it, not crawl into an isolationist shell, not wave the white flag of surrender, nor give in to those who assert that America’s time is passed. …

    Justin Webb:
    [America] still spends more than all other large nations combined on defence [and attack.]
    But can it afford [to in] future? …

    Jay Cost:
    The second wave immigrants who … entered the electorate in the 1930s, they were overwhelmingly Democratic.
    [In] the post-war years … those voters moved from the working class into the middle class and by 1980 they were voting Republican. …
    [However, the] amazing prosperity that elevated Italians and Poles from the working class into the middle class … cannot be taken for granted now.
    The Republican Party cannot assume in two generations Hispanics will be voting Republican because they can’t assume that they’ll be better off then than are now. …

    Justin Webb:
    “Extremism in defence of liberty” is what Goldwater promised in 1964 and the American people decided that message was a little dangerous for their tastes.
    But in 1980, more gently expressed, the same notion fuelled the Reagan revolution.

  • Profits Before Pay, 20 February 2012.
    Duncan Weldon: Senior economist, Trades Union Congress.

    James Plunkett [Secretary, Commission on Living Standards, The Resolution Foundation]:
    In the lead up to the recession: from about 03 to 08 we saw almost no wage growth in the middle and below in the UK economy despite the fact the economy grew by 11 per cent in that period.
    [Then] the recession hits and you see people’s wages fall …

    Stewart Lansley [Research fellow, Bristol University]:
    The wage share is … the share of the total output in the economy that goes to the workforce …
    [The] share of the economic pie [that’s going to the workforce] is smaller now than it was 30 years ago.
    [In contrast] the gains from growth in 30 years after the war were divided more or less equally.
    [The] workforce have been separated from the proceeds of growth … at an accelerating rate. …

    James Plunkett:
    [In] the 80s … we saw rising inequality across the spectrum …
    [The middle] moving away from the bottom and people at the top are moving away from the middle …
    What has changed … since the late 90s [is] the top 1 to 3% have detached from the rest …

    Duncan Weldon:
    Currently someone in the top 3% earns over £65,000 a year.
    For the top 1%, it’s over £117,000.
    And of course some earn a lot more. …

    Matt Oakley [Head of Economics, Policy Exchange]:
    [There's] some evidence [that] giving tax credits [allows firms to] pay less wages than it would do otherwise. …

    James Plunkett:
    [In the] post-war decades [the first wave of] job growth [shifted people] out of unskilled factory jobs into [skilled] white collar jobs.
    [The second wave, saw] women entering the labour market throughout the 80s … pushing up household income …
    [Later] we saw tax credits and the Labour Government [directly supporting struggling] households …
    [Each] of those waves [have now] slowed down or broken …
    [So] the question is [what is] going to drive up household income in the next 10 years?

    Duncan Weldon:
    [These trends] have long been apparent in the United States. …

    Jacob Hacker [Professor of Political Science, Yale University]:
    Between 1979 and 2007 … 40% of all household income gains went to the richest 1% of Americans …

    DeAnne Julius [Economist, Chatham House]:
    [The information communication] technology revolution [has] disproportionately benefited higher skilled people, which means the higher end of the income distribution.
    [It's] also killed off … the secretarial positions, the admin positions which a lot of semi–skilled people in earlier decades filled. …

    It’s a fallacy to think that increasing productivity automatically leads to increasing wages.
    [For example,] manufacturing productivity [has] up much faster globally than service productivity, but that doesn’t mean that manufacturing wages have gone up in the West because those jobs are now often done by people earning much less in East Asia.

    Duncan Weldon:
    [The] other major structural change in the economy since the 1970s has been the impact of globalisation.

    Roger Bootle [Managing Director, Capital Economics]:
    [What’s] occurred as a result of the opening up of world economy is that something like a couple of billion workers have just joined the world economy. …
    [This puts] downward pressure on [the] real incomes of people who are in competition [with] people in emerging markets.

    DeAnne Julius:
    [A recent OECD study] showed that it wasn’t really trade flows that seem to affect wages.
    It was more the dispersion of supply chains – the outsourcing, the fact that many labour-intensive industries actually shifted from European countries to China, to Asian countries.
    So it was more the flow of capital that affects where companies are investing rather than trade itself, and both of those of course are an element of globalisation.

    James Plunkett:
    In the US and Canada we’ve seen … stagnation in middle wages for about 30 years.
    [In Germany] for about 10 years or so.
    [Yet] France [and] Australia have seen much stronger growth at the bottom …
    [They] have not just a minimum wage but a … more complicated system of mechanisms to push up wages.
    [In France] workers above the minimum wage have their pay linked to the minimum wage, so that when the minimum goes up, they go up as well. …

    Stewart Lansley
    There were a series of acts in the 1980s that weakened the power of unions …
    [Labour market deregulation] gave business more power.
    [The] balance [of power] shifted [and the] checks and balances that used to exist in the economy were removed in favour of one group against another.

    Duncan Weldon:
    The American economist J K Galbraith coined the term “countervailing power” in the early 1950s.
    [In] the years before the Second World War the US economy had been dominated by big business to the detriment of employees …
    [In] the post–war world this power [was] balanced by a stronger role for trade unions [and] government.

    [The] weakening of trade unions and their countervailing power in the UK since the 1980s has played a part in driving down the share of the economy that reaches those in the middle and below. …

    Through the 1950s and 1960s the wage share of the economy … was around 58 to 60%.
    In the mid-1970s it began to rise quickly, briefly hitting a peak of 65% [in 1975.]
    Corporate profits came under pressure, investment began to fall and the UK found itself in serious economic problems culminating in a bail out from the IMF in 1976. …

    [Since then] overpowerful labour has [been replaced by] over powerful capital.
    [And] the wage share [has fallen into] the low 50s. …

    Stewart Lansley

    In the 1950s and 1960s, we had a … model of capitalism in which the share price and profit were both key drivers of business activity but [not the only ones.]
    [Relationships] with the staff [and with] the community [were also important.]
    [Subsequently] a lot of those extra [social responsibilities were] ditched. …

    Roger Bootle
    It’s perverse [that governments] can borrow at [negative real interest rates] and yet [companies continue to demand] huge returns – 10%, 15%, in some cases 20% – from prospective investment.
    [That's] a major failure of the system …

    [What] would have happened in the 19th century?
    What would the great Victorian entrepreneurs and businessmen have done confronted with these very low rates of interest?
    [The] answer is they’d have rebuilt the world. …

    Duncan Weldon:
    [The] Institute of Fiscal Studies believes the squeeze on living standards will continue until at least 2016.

    [The] factors that have put wages under pressure, such as globalisation and technological change are here to stay, whilst the factors that helped … to drive incomes higher, such as the growth of two earner couples or transfers through the tax system, have slowed down. …

    [If] both members of the household are already in work and tax credits and other benefits are [not] increased, then the [only] future driver of incomes can … be wages.

    Gavin Kelly [former Downing Street adviser]:
    [No single] department in Whitehall … sees it as their job to worry about big trends in living standards facing the working population of this country.
    [Everyone] has in interest in it but no-one really owns it.

    Duncan Weldon:
    The Treasury … focuses on growth and the public finances …
    [The] Department of Work and Pensions [on] unemployment and … child poverty.

    Gavin Kelly:
    There’s not much data on [what] actually informs key decision making.
    If you want to have a debate about a particular tax change or a particular spending cut, you will be inundated with analysis …
    [But if] you [ask:
    'How] is this type of household faring from all the wider sort of trends which could impact on [it?']
    ‒ you’ll find it quite hard to get that information.

    Duncan Weldon:
    No one can deny that technology [and globalisation] have had a major impact on wages in Britain.
    But [they] simply cannot explain why the trend has moved further in the US and the UK than elsewhere.

    If we want living standards to start rising for ordinary people … then we need to see wages rising again.
    If we don’t then the 2010s will resemble the 2000s but without the alleviation of cheap credit, rising house prices and generous tax credits.
    People will get poorer, something that no modern generation has experienced on this scale. …

    [How] we can talk about economic recovery in any meaningful sense unless the rewards from growth are more evenly shared[?]

    Gavin Kelly:
    Even if we do get growth back [‒] given how far we have fallen in terms of living standards of working people over the last few years [‒] it will take [until around 2020 before many households recover] the position that they had … prior to the recession.

  • Do Schools Make A Difference?, 12 January 2012.
    Fran Abrams.

    Harvey Goldstein [Professor of Social Statistics, Bristol University]:
    After you’ve adjusted for the achievements of children when they start school, there are further effects related
    • to their social background …
    • to whether they’re a boy or a girl,
    • to their ethnic background [and]
    • [to social class and income.]
    These background factors … have very important effects very early on in childhood, and of course these persist throughout schooling.
    Once you’ve [accounted for] all those [the school effect] accounts for [maybe] 10% of what’s left …

    Fran Abrams:
    [Nobody] we spoke to in academia believed [league tables were of] any use to parents.

    Harvey Goldstein:
    [In our study of] 19 Bristol schools [you couldn’t] distinguish statistically between any of them.

  • The Darwin Economy, 11 November 2011.
    Robert Frank: Professor of Economics, Johnson Graduate School of Management, Cornell University.

    Tom Schelling … noted that hockey players, if they were given a choice, would always skate without helmets.
    But … if they took a vote on the manner in a secret ballot, they would vote often unanimously for a rule requiring themselves to wear helmets. …
    [His explanation was] that what is in the individual interest in competitive situations when rank is really what matters isn’t necessarily what’s in the group’s interest. …

    Amos Tversky [–] one of the founders [of behavioral economics –] liked to say,
    My colleagues … study artificial intelligence.
    … I study natural stupidity. …
    If you’re a merchant, you want a sign that people will see.
    What must a sign be like in order to be seen by people driving by?
    It must stand out from the visual field.
    It’s not how big it is; it’s whether it’s bigger than the other signs. …
    And so the equilibrium amount of signs gets huge and then we get a visual blight …
    [One could address this with] a few zoning laws. …

    [The economic libertarians say] workers can get higher wages if they take riskier jobs. …
    [Say] I’m a worker [and] I want to send my kids to the best possible school I can.
    The good schools are located in the neighbourhoods where the houses are more expensive.
    So if I want to send my kids to a school of average quality if I’m in the middle of the earnings distribution, what must I do?
    I must outbid 50 per cent of all families who are trying to do the same thing.
    One way I can get a leg up doing that is to sell my safety for a higher wage, so that puts me ahead in the bidding.
    But then you can do the same. …
    You sell your safety, I sell my safety.

    We’ve each bid for houses in better school districts.
    At the end of the day, we succeed only in bidding up the price of those houses.
    Half the kids go to bottom half schools same as before.
    That’s wasteful.

  • The Spirit Level: the theory of everything? 11 October 2011.
    Mukul Devichand.
  • Aid or Immigration?, 3 October 2011.
  • Non-Riotous Behaviour, 19 September 2011.
    Jamie Whyte.

    Tim Harford [The Undercover Economist, Financial Times]:
    [Ten people] are each given ten pounds to invest.
    They can [either] invest it in [the public good] or they can [keep] it for themselves.
    [Money] that’s invested in the public good is doubled.
    [So if everyone invests in] the public good … everyone will have their money doubled.
    [But] if everybody just holds on to the money themselves, then they’ll each keep their ten pounds. …

    [A rationally self-interested agent might think:]
    If I invest the ten pounds in the public good [but no-one else contributes], that’s twenty pounds, but I have to share it with ten other people [leaving] only two pounds for me [– a loss of] eight pounds …
    [But if I] hold on to my money [and the other nine contribute 10 pounds (generating 180 pounds divided 10 ways) I'll profit by 18 pounds.]
    Simon Gaechter [Professor of the Psychology of Decision-Making, University of Nottingham]:
    [About] twenty per cent [of subjects free-ride and] don’t put in anything …
    [In] older people … it can be as low as ten per cent.
    [If you] introduce the possibility of punishment … contributions shoot up … dramatically. …
    [After] a while, there [are] very high levels of co-operation and very little punishment because it’s [no longer needed.]
    [A credible] threat of punishment [keeps] many people in check who would [otherwise] violate [social or] legal norms. …

    Jamie Whyte:
    Legal penalties reassure people that co-operation will be sufficiently widespread to be worthwhile.
    [A minimum threshold level of] coercion is required to get high levels of co-operation.
    [Genuine] cooperation, not obedience based only on fear of the authorities.

  • Is America Doomed?, 3 July 2011.
    Justin Webb.

    Justin Webb:
    [During] the Second World War … the total debt rose sharply …
    [However,] by the time of the Clinton administration they were seriously considering bringing it down to zero. …

    Richard Haass [President, Council on Foreign Relations]:
    [Three] or four things [contributed to the subsequent blow out of the national debt:]
    One was the tax cuts early on in the Bush presidency.
    Two, you had year after year after year of a rather remarkable growth in federal government spending.
    Thirdly, after 9/11 you had a tremendous growth in the national security state, Homeland Security … the war in Iraq and to a lesser extent the war in Afghanistan.
    [Lastly] with the economic crisis of 2008 …
    [You] had the tremendous efforts [of the Bush and then the Obama administrations] to stimulate the economy.
    And all through this tax rates have stayed … low.
    [This gap between spending and revenue] has been going on for a decade now. …

    Justin Webb:
    [For] his re-election bid Barack Obama alone is seeking to raise a billion dollars.
    Every senator and congressman needs to get as close to that figure as he or she can.
    [And it] is raised from wealthy folk … big business, big banks, and the financial industry. …
    Now what is it that [all] those people don’t like? …
    Tax. …

    David Frum [Former Speech Writer to George W. Bush]:
    The United States spends about 17% of its national income on healthcare.
    If it spent the same as the runner-up, Switzerland [13%] – that would be like getting the entire defense budget for free …
    On the revenue side [the] deduction for home mortgage interest [is unnecessary and leads to] over investment in housing.
    Canada [and] Britain … maintain very high levels of home ownership [without it]. …

    Jeffrey Sachs [Director, Earth Institute, Columbia University]:
    We are an overstretched society … that relies excessively on military approaches to global problems.
    These military approaches are ferociously expensive and highly ineffective.
    America [could] get much more for its money through diplomacy and development. …

    Diane Coyle [Economist]:
    [There] really is a huge economic and financial mess in the States at the moment …
    [My] pessimism [is] not only the fiscal deficit but the banking sector …
    [The] absence of any banking sector reform and the capacity of the banks [to lobby] so effectively against any reforms. …

    Richard Haass:
    … Churchill [said] that Americans can be counted on to do the right thing, but only after they have … tried everything else.
    [The question is, can we] put together a new approach to dealing with our deficit and debt before the world [does it for us?]
    [If not we may eventually face truly draconian and indiscriminate] international financial pressures …

  • Radical Economics: escaping credit serfdom, 7 February 2011.
    Paul Mason.
  • Radical Economics: Yo Hayek! 31 January 2011.
    Jamie Whyte.
  • Criminal rehabilitation: a sub-prime investment?, 8 November 2010.
    Emma Jane Kirby.

August 20, 2012

Adaptation

CSIRO: Climate Science and Solutions


Risks and Opportunities

  • The less we reduce emissions, the more we will have to adapt …
    The most sensitive sectors … are:
    • water,
    • the natural environments,
    • cities and infrastructure,
    • the coastal zone, and
    • agriculture.
  • [Adaptation] presents significant challenges [and] great opportunities …
    [Early] action will maximise our ability to capture [those] opportunities.
  • Successful adaptation [depends] on
    • developing the knowledge and skills base in the industries and communities most affected [and]
    • enhancing the adaptive capacity of government agencies to provide the best policy context for adaptation.
  • [Some] climate change and consequent impacts are unavoidable due to
    • the greenhouse gases that are already in the atmosphere and
    • [increasing] future emissions … due to our slow mitigation response.

(p 59)


Heatwaves and Floods

  • With an expected increase in the incidence of heatwaves and heat-related deaths, adaptation options are required that may include,
    • developing early warning systems to reach all citizens,
    • {social network back-up for those most at risk}
    • preparation of the health system and hospital emergency departments,
    • encouragement of behavioural changes to reduce exposure to heat stress …
    • better designed [new] homes {[and] retrofitting of old houses with better insulation
    • development of emergency response plans for heatwaves in all regions.}
  • Australia’s built environment suffers from heatwaves on very hot days.
    Adaptation options include
    • applying ‘cool cities’ concepts to reducing urban heat islands,
    • increasing the resilience of cities to heat-related failures through upgraded engineering design standards,
    • the use of less heat-sensitive materials in key infrastructure,
    • better maintenance routines,
    • emergency response plans that foster adaptability through collaboration across agencies and scales, and
    • management of peak demand loading on the electricity grid. …
  • Options for adaptation to coastal flooding include
    • retrofitting existing developed areas or building beach defences,
    • changing building codes, planning and design standards to accommodate extreme and unpredictable conditions,
    • converting current land uses to those less sensitive to flooding,
    • encouraging house insurance rates that send a clear signal about the advisability of living in flood-prone areas, and
    • developing effective early warning systems and evacuation pathways for extreme events.

(p 73)


Agriculture

  • There is a national imperative to equip Australian agriculture to be prepared to adapt to climate change.
  • Some agricultural communities, industries, or regions will have a greater capacity to adapt than others: understanding their constraints and incentives is important in ensuring that they do so successfully.
  • An early part of adapting agriculture to climate change involves helping communities to understand why adaptation is a needed part of today’s vision of the future and therefore of their management strategies.
  • Successful adaptation to climate change will require flexible, risk-based approaches that deal with future uncertainty and provide strategies that are robust enough to cope with a range of possible local climate outcomes and variations.
  • Many climate adaptation options for agriculture are similar to existing ‘best practice’ and good natural resource management, and do not require farmers to make radical changes to their operations and industries in the near term.
    These options can, and should be, prioritised as part of a ‘no regrets’ or win–win strategy for agriculture because they will provide immediate and ongoing benefits as well as preparing the sector for climate change.

(p 85)

August 18, 2012

Royal Society

Green Army: Research and Development

Four Degree World:
Most analysts would agree that the … chances of keeping below 2°C [are] extremely slim, with 3°C much more likely, and [4°C a real possibility.]
(p 15)

August 10, 2012

Impacts

CSIRO: Climate Science and Solutions


Impacts

  • The impacts of climate change are already clearly visible in Australia. …
  • Southern and eastern Australia’s water supply reliability is expected to decline [and] to be accompanied by a growth in water demand due to population growth.
  • Development and population growth in Australia’s coastal regions will exacerbate the risks from sealevel rise and … coastal flooding.
  • Significant losses of unique Australian animal and plant species are expected to occur … disrupting ecosystem function and causing the loss of ecosystem services.
  • The risks to infrastructure include the failure of urban drainage and sewerage systems, more blackouts, transport disruption, and greater building damage. …
  • Heatwaves, storms and floods are likely to have a direct impact on the health of Australians, such as causing an increase in heat-related deaths.
    Biological processes such as infectious diseases [such as dengue fever] and physical processes such as air pollution may affect health indirectly …
  • Moderate warming [and higher levels of carbon dioxide] in the absence of rainfall declines can be beneficial to some agricultural crops …
    However, these positive effects can be [more than] offset by changes in
  • Production from cropping and livestock is projected to decline over much of southern Australia, as is the quality of … crops.

(p 44, emphasis added)

August 7, 2012

Conversations

ABC Local Radio

Oliver Sacks (1933–2015):
[Hans Asperger (1906–1980) wrote of a sort of “autistic intelligence” that was] scarcely touched by tradition and culture — unconventional, unorthodox, strangely “pure” and original, akin to the intelligence of true creativity.
(An Anthropologist on Mars, 1995, Vintage, 1996, p 253)

August 1, 2012

Science

Commonwealth Science and Industrial Research Organisation


Observations


There is a great deal of evidence that the Earth’s climate has warmed over the last century.
  • Warming is apparent in a range of climate indicators including increasing temperatures over land and in the oceans, and increases in sea level.
  • Global average temperatures have risen in line with climate model projections for the last 20 years, while global average sea levels are rising near the upper end of the climate model projections.
  • [The] observed changes to the climate system are consistent with changes expected due to increasing greenhouse gases.
It is very likely that most of the warming over the last 60 years is due to increases in greenhouse gas emissions due to human activity.
(p 1)


Greenhouse Gases

  • Greenhouse gases (GHGs) influence the Earth’s climate because they interact with flows of heat energy in the atmosphere.
    The main GHGs influenced directly by human activities are carbon dioxide (CO2), methane, nitrous oxide, ozone, and synthetic gases. …
  • The amount of warming produced by a given rise in GHG concentrations depends on ‘feedback’ processes in the climate system …
    The net effect of all climate feedbacks is to amplify the warming …
  • The atmospheric level of CO2 (the most important GHG influenced by human activities) rose from about 280 ppm in 1800 to 386 ppm in 2009, and is currently increasing at nearly 2 ppm per year.
  • CO2 levels are rising mainly because of the burning of fossil fuels and deforestation.
    Over half of this CO2 input to the atmosphere is offset by natural CO2 ‘sinks’ in the land and oceans …
  • To have a 50:50 chance of keeping human-induced average global warming below 2ºC, it will be necessary to stop almost all CO2 emissions before cumulative emissions reach one trillion tonnes of carbon.
    The world has already emitted more than half of this quota since the industrial revolution, and (at current growth rates for CO2 emissions) the rest will be emitted by the middle of this century.
  • Climate change is a risk management issue — the longer we take to act and the weaker our actions, the greater the risk of dangerous outcomes.

(p 15)


Projections

  • The best estimate of annual average warming by 2030 (above 1990 temperatures) is around 1.0ºC across Australia …
  • Drying is likely in southern areas of Australia, especially in winter, and in southern and eastern areas in spring, due to a contraction in the rainfall belt towards the higher latitudes of the southern hemisphere. …
  • Intense rainfall events in most locations will become more extreme, driven by a warmer, wetter atmosphere.
    The combination of drying and increased evaporation means soil moisture is likely to decline over much of southern Australia.
    An increase in fire-weather risk is likely with warmer and drier conditions.

(p 35)