Monday, January 28, 2008

Sunday, January 27, 2008

Test Post

Hopefully this is above the fold.

And this is below.

What the Huck?!? Bill Ralston Edition

Doing his bit for the long decline in public discourse on economics Bill Ralston tries to convince Herald readers of Labour's economic ineptitude.

Historians will look back in a couple of decades at the decline and fall of the Labour Government and lay much of the blame on Michael Cullen and his dead hand as Minister of Finance.

In his eight-year reign, the Government has amassed huge surpluses through over-taxation, putting pressure on the disposable incomes of already struggling households. His tolerance of high interest rates has strangled economic growth, his approval of record levels of Government spending has led to a huge growth in bureaucracy, waste and heavy compliance costs for business. His obstinate refusal to cut taxes will be seen as another long nail he inserted into the coffin of Helen Clark's three-term administration.


At the same time, voters will see 3.5-4 per cent inflation gnawing away at their income and savings while the value of their biggest asset, property, shrinks.
Far be it for me to critique the the arcane science of Ralstonomics but isn't there just a slender chance that interest rates are high because our economy is suffering inflationary pressures and that were it not for 'over taxation' both interest rates and inflation would be higher still. And I suppose it's just churlish to suggest that public spending isn't all about bureaucrats but also other things such as doctors and nurses. (Or that, in the case of the RMA, for example, more having bureaucrats actually helps reduce compliance costs).

What I would like to know though is what Bill Ralston, were he in Michael Cullen and Alan Bollard's shoes, would propose doing. Would he (the list is in decreasing order of plausibility):
  • Liberate Iraq to lower oil prices and reduce inflation?
  • Invade China to lower oil prices and reduce inflation?
  • Lower interest rates and reduce inflation? (While at the same time developing a perpetual motion machine to compliment his defiance of the laws of economics with equal defiance of the laws of physics)
  • Lower interest rates and taxes and reduce inflation? (While using the spinning corpse of JM Keynes to drill a hole to China to facilitate the invasion).
Ralston continues: (Click here to read the rest of this post...)
They [Labour] also triumphantly point to low unemployment, ignoring the fact that business is starved of labour and the high rate of employment is because more than a million Kiwis have fled to greener pastures overseas.
So what's he saying? That we should have high unemployment just so business can have surplus labour again. Boy that sounds like a vote winner.

I do have to concede that Ralston is right when he says that low unemployment only exists because 'more than a million' Kiwis have 'fled' overseas though. After all, as we all remember, when unemployment was through the roof in the late 80s and early 90s immigration was just so high and our population well over million more than it is today. Oh - hang on.

The economic genius of Ralstonnomics is not that it bares any relation to the real world but rather that he actually gets paid to write this stuff.

[Update: I added the bullet points this Monday morning; they weren't in the original post. Meanwhile Keith Ng engages in Ralson-watching par excellence at Public Address. As I said in comments under his post, public debate on economics in New Zealand would be much better served if Keith was a columnist for the Herald and Bill Ralston reduced to commenting on Deborah Coddington's blog]

Saturday, January 26, 2008

The Case for Economic Debate

No Right Turn has a link to an excellent Listener column by Brain Easton talking of the pros and cons of privatisation. Which reminded me of another recent Easton column on the quality of economic debate here in New Zealand.

Easton argues that:

The economic debate has moved from the general pages into the business section, limiting the public to the sterility of such questions as whether we should have tax cuts. There is no discussion about whether we have the production to pay for them. Celebrities and crime are given greater prominence. Occasionally, when there is a crisis, an economics story appears on the front page. The world financial system has been under severe stress since last August. But where do you see that mentioned in your paper, except when it gets close to home in the form of a local finance company collapse? Even then, little international context is given to the parochial story.

Instead of a vigorous public debate there is ignorance and self-promotion. Participants are out of touch with the general public. (Who would have guessed that a November AC Nielsen poll found those supporting increased public spending were more than double those prioritising tax cuts? The answer may be Helen Clark.) There are hardly any serious attempts to inform the public. We are back to the 1970s and 1980s: “Trust me – I am acting in your best interests.” Yeah, right.

When some hard decisions have to be made – and the international financial crisis is likely to require them – the public will be unprepared and uncomprehending, and will want to return to ineffective anti-market interventions.

My own personal fear is not so much of anti-market populism but rather of knee-jerk conservatism and blame the victimism when things go really wrong. But I do agree that New Zealand is incredibly poorly served by the quality of its public debate on economics. We have business groups with disproportionate voice, media conglomerates who (in the last election at least) appeared to be playing the role of the tax cut lobby, an unwillingness to discuss trad eoffs and an alarming degree of economic illiteracy in parts of the punditocracy. And we also have some major challenges ahead of us. Challenges which we will only overcome with sensible and inclusive economic debate in which the public can understand and own policy.

Here are two such challenges:

1. Climate Change: despite what proponents of extreme discounting think, people really do care about the fate of the planet and about the world they will bequeath to their descendants. The trouble with climate change policy though is that it requires short term costs for long term benefits. And this is something that is politically very hard to sell. Unless people have a real understanding of why policy is being made and why it is necessary. Right now, for the most part, all we get is anatomically inaccurate names for taxes and tractors on parliament.

2. Government spending: from health care to prisoner rehabilitation New Zealand struggles to deal with its social problems in part because we simply do not spend enough to tackle them. We don't spend enough because we don't have the tax revenue to do so. Now perhaps New Zealanders really prefer an individualist let them eat cake economy and low tax rates. Good for them if they do but, when discussing tax cuts (and why is it always tax cuts rather than tax raises?) let's at least openly examine the need for spending.

There are many more - the challenges of globalisation, local resource management, poverty - and the problem is that we just don't seem to be able to discuss these issues in a meaningful manner. (Not to mention race relations). And we really need to. At least if we want to continue inhabiting a country worth living in.

This is not an argument against the Electoral Finance Act

New socialist blog, Socialist Democracy has a post up against the Electoral Finance Act.

Amongst other points they argue:

My friend Bryce Edwards over at liberation has already set out many of the arguments why increased regulation of the electoral process is not necessarily a good thing, pointing out for example that the United States despite having one of the most restrictive sets of electoral finance laws in the world still in[sic] the political sphere is completely dominated by the rich and powerful.
Such hand waving tells us little of use. For a start is says nothing about how much worse things might be if the Unites States had no legislation. (Click here to read the rest of this post...)

Also, the legislative process in the United States is dramatically different from our own, meaning that laws need to pass a bicameral legislature and the the executive before being enacted. And neither of the main political parties in the US has anything near the internal discipline of our own. This means that law-making in the USA is messy in the extreme, with compromises and exemptions being appended to many laws. In the case of electoral finance law this makes it likely that laws will be riddled with loop-holes and quite possibly ineffective.

Finally, the fact that US has a political elite that is incredibly powerful, wealthy and politically active means that - quite possibly - even the best laws won't work there. In New Zealand, which is still a very unequal country but nothing like the US in terms of political inequality, it is on the other hand possible that effective constraints can be put in place.

If you want to argue about the Electoral Finance Act leave the US out of it. Concentrate on what the act will do here. Will it achieve it's desired ends. Will it have unintended consequences. Is it going to impede on key political freedoms. Socialist Democracy do some of this later on in their post but I'm still not convinced.

As far as I can tell, the act - while flawed - will make it harder for the wealthy to unduly and anonymously skew our electoral process. Some of the unintended consequences are more concerning, but I certainly don't buy the curtailing free speech argument. People will be as free as they have always been to speak on political matters. What will be changed is the extent to which wealth can be used to project this speech - a different matter altogether.

Debt and Development

Over a Crooked Timber Daniel Davis uses Dani Rodrik's One Economics Many Recipes as a starting point for an interesting (albeit rambling) post making the argument that debt is far more of a constraint on development than is commonly recognised (at least outside debt-relief activist circles).

His argument goes beyond the usual fare (money foregone on health and education) to make some interesting points including the argument that, if you assume, pace Rodrik, that successful development policy will be country specific, debt repayment, to the extent that it drives policy decisions, will lead to poor policy. And hence poor development outcomes.

Thursday, January 24, 2008

Barbara Ehrenreich, people!

Over at his blog, Paul Krugman provides us with some gallows humour financial crash style. He's got nothing on Barbara Ehrenreich though. Here she is in the Nation:

With all the talk about how to stimulate it, you'd think that the economy is a giant clitoris.

Wednesday, January 23, 2008

The Swimming Economist

Via Dani Rodrik:

Mr. Lin goes to Washington

Justin Lin is apparently poised to become the World Bank's next chief economist, following the departure of Francois Bourguignon. LIn is an inspired choice for a number of reasons. First and foremost, this is the first time that the Bank has appointed an economist from a developing world. Second, the appointment recognizes the importance of China. Third, Justin is an institution builder. (I was his guest at the China Center for Economic Research and was very impressed with what he has built there.) Fourth, Justin is a risk-taker. (How else can one interpret his defection to mainland China from Taiwan in 1979 by swimming across the strait?) And Justin is a very good economist on top. All are reasons to be happy about.

Before you starting picturing a muscled hulk striding the halls of the World Bank (Taiwan is 130km from the mainland) it's probably worth pointing out that his swim was actually between two small islands of the coast of China (one administered by Taiwan the other by the People's Republic). Still, given the year alone, it speaks of an intriguing life history.

Monday, January 21, 2008


There are essentially two types of people in my life right now*. Both are equally worried.

The first type are in possession of a house (or houses) and a mortgage large enough to deserve its own acronym. They pay much more in interest each year than I do in rent; and their 'investment' is only a good one if house prices continue their climb, and the Chinese their saving. Whenever the subject of the housing market comes up, their voices take on tones of forced confidence and their eyes start to twitch. "Housing prices have increased 300% over the last 5 years," they opine, "I see no reason why this won't continue".

The second type have neither a home nor mortgage, nor much prospect if ever having either unless they take the plunge as soon as possible. At social engagements they can often be heard making anxious statements such as, "crazy to buy at this price", "it's a bubble for sure, mate" and "what goes up must come down".

The question that keeps both types up at night is, obviously, 'what will house prices do now?' If you don't own a house and prices trend over the next 5 years as they did over the last, then you may never do. On the other hand, if prices stagnate (or even drop) then you've bought a real bad investment. Likewise, if interest rates rise significantly.

The answer to the all important question question of future price trends all comes down to the degree that we are in a speculative bubble. If it's a bubble, it ought to deflate eventually. If it's not - if some underlying reality of the housing market has changed - then things could continue indefinitely (perhaps not rising as fast, but still going upwards).

For what it's worth. I think it has to be a bubble. Have a look at this graph from this Brian Easton comment if you don't believe me.

But, then again, I would say that: I don't own a home.

*There's also a third type, who I try not to think about, who bought their home some years ago at a farcically low price and now wander round with Buddha like serenity.

Saturday, January 19, 2008

Relative and Absolute Poverty

When Jim Bolger famously claimed that there was no poverty in New Zealand he was echoing a common conservative talking point in which it is argued that, because we don't see deprivation matching that in the Third World, we aren't home to people who are truly poor.

As a version of the claim has been made again recently (this time as part of John Minto Hate Week and with the United States as the target country) I think it's worth having a quick look at poverty measures and the debate about its absolute and relative definitions.

While I'm not a statistician I've delved into this subject fairly thoroughly (indeed, I've given lectures on poverty measurement in the past); yet even I still find succinct explanations hard to give. This is, in part, because measuring poverty requires you to define poverty and - like so many elements of development - while we can all recognise poverty when we see it, rigorous, resilient definitions prove surprisingly elusive. Definitional consensus is, as this Google search shows, unlikely in the near future.

In order to keep things clear I am going to start by discussing poverty definitions first and then move on to the poverty lines that follow from them. (Click here to read the rest of this post...)

I will finish by discussing alternatives to monetary poverty measures.

Absolute Poverty
The standard definition of absolute poverty revolves around a set of basic needs. One is said to be absolutely poor if they do not have the means to meet this basic set of needs. In it's most minimal conceptualisation this set of basic needs is often equated with the basic nutritional requirements for survival, or more 'generously' adequate health. More 'generously' still shelter and other elementary necessities are often added into the equation.

An interesting exercise to try for yourself is to assume that our purpose as concerned citizens is to quantify suffering stemming from material deprivation (presumably because we want to reduce it). Starting with this assumption and considering only those aspects of wellbeing that can conceivable be altered by material means (so excluding things such as whether one's government respects human rights or not) try and list the basic needs that ought to be quantified in defining absolute poverty.

Here's my own list based on minimal requirements: nutritional needs; warmth and shelter; basic medical care; money to catch the bus to see one's relatives and have some sort of social existence; some small amount of savings so I am not worrying where my next meal will come from; an element of security.

Yours is probably different. Indeed, amongst all the absolute measures of poverty out there, there is no one formula. And this is part of the trouble with defining poverty in an absolute sense. The term absolute poverty sounds scientific and certain, yet this belies the fact that it is ultimately underpinned by value judgements which are anything but.

Relative Poverty
English researcher Peter Townsend provides us with the textbook definition of the alternative to absolute poverty - relative poverty:

Individuals, families and groups in the population can be said to be in poverty when they lack the resources to obtain the types of diet, participate in the activities and have the living conditions and amenities which are customary, or are at least widely encouraged or approved, in the societies to which they belong. Their resources are so seriously below those commanded by the average individual or family that they are, in effect, excluded from ordinary living patterns and activities. (Source: This PDF of the first chapter of Ruth Lister's book Poverty)
Townsend is often credited with bringing to prominence the idea of relative poverty; yet, as is so often the case, Adam Smith got there years before:
By necessaries I understand not only the commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without. A linen shirt, for example, is, strictly speaking, not a necessary of life. The Greeks and Romans lived, I suppose, very comfortably though they had no linen. But in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into without extreme bad conduct.
There is a strong case to be made for a relative rather than an absolute definition of poverty. As I noted above, despite the appearance of objectivity, absolute definitions of poverty are themselves the products of value judgements - relativities, if you will.

It might plausibly be possible to use the developing science of happiness to come up with set of basic needs based on factors scientifically shown to lead to reduced suffering. But, if we were to do this, and if current research is to be believed, the first thing we would probably stumble across is the next argument in favour of a relative definition of poverty. Simply put this is that human beings are inherently social creatures and our own wellbeing is inextricably linked to our ability to participate in society around us and act within societal norms. If we don't have the means for at least minimal participation then we will suffer through loneliness, ostracism and loss of opportunities. Moreover, the necessities required for normal social participation change as society changes. To illustrate this, consider the following: once upon a time, only the wealthy had telephones. Society accordingly, reflected this fact, and one could participate in it with relative ease without one. Now, only the poorest do not have phones and once again, society reflects this - if you don't have ready access to a phone a surprising number of things become remarkably difficult (contacting friends and family, making appointments, making inquiries, seeking work...). Things that not only would be easy if you had a phone, but also if you lived back in the days when no one else had one.

Given that humans as social creatures suffer when excluded from society around them and given that our purpose stated above was to quantify material deprivation which leads to suffering it seems reasonable then that our concept of poverty should include the want for resources to allow us to normally be part of society around us.

Even those totally unconcerned with the wellbeing of others may still find it prudent to be concerned with relative poverty. Social exclusion, after all, contributes significantly to crime. Minimising it, it would seem, is even in the interests of the wealthy.

There are other arguments - including those based around fairness and justice - which might also lead us to relative definitions of poverty lines but, to me, the points above are sufficient to make me a supporter of a relative definition of poverty. This isn't to say that there aren't problems with relative poverty measures though. And it's measures that I now turn to.

Poverty Lines
Actually measuring poverty accurately is a tricky business, but - fortunately for us - defining poverty lines is easy enough.

All you need to do is work out the dollar value of your poverty line and then declare anyone who earns less than this poor.

Ok, so actually it's not that easy. You also have to choose whether you are going to use an income poverty line (if you earn less than it you are poor) or a consumption one (if the dollar value of the goods you consume is less than the line you are poor). This difference is particularly important in subsistence economies where people may earn little but still have an adequate lifestyle through the goods they gather from the land.

Then you have to decide whether your line is to be person or household based. And, if you're using households you'll have to worry about something dreadful called household equivalence ratios.

Finally, you'll also have to take into account the fact that in different places different goods will have different costs. The large variation in housing costs between regions in New Zealand is the reason why our government's low income lines are calculated based on income after with housing costs removed. The World Bank's gyrations over purchasing power parity reflect their attempt to control for the differing costs of goods in different countries.

Phew! And these are only the most basic issues.

Absolute Poverty Lines

Once you've accounted for everything listed above, constructing an absolute poverty line is relatively easy. Define your necessities, price them and, viola, you have a poverty line. Between locations this poverty line should only be adjusted to reflect differing costs of necessities (and possibly to reflect differences in needs such as those that exist between rural and urban dwellers) . Over time, the poverty line should only be inflation adjusted (possibly on the CPI/possibly on the prices of the necessities in question).

Relative Poverty Lines

Relative poverty lines are constructed, as their name suggests, by choosing a level of income (or consumption) relative to a society's average income (or consumption). Most typically the type of average chosen is the median. A figure one commonly sees is 60% of median income. The value of the line is rarely arbitrary; often the percentage chosen will be based on other research about the costs of minimal social participation (this is what Stephens and Waldergrave did in their research on poverty in New Zealand). Over time, this poverty line is then moved as the median moves.

The Problem(s) with Relative Poverty Lines

Relative definitions of poverty are better than absolute ones, in my opinion. But relative poverty lines are not without their faults.

First up, they are more easily dismissed by those who, for ideological reasons, don't want to believe the poor exist.

They are also meaningless for comparisons between countries with significantly different median incomes (comparing a poor by somewhat equal country such as Vietnam with a wealthy but unequal society such as the US, for example, could produce farcical results)**.

Similarly, they don't give credit for long run increases in GDP (and median incomes). If Germany's median income was to double over 20 years but its distribution of wealth was to stay the same you would see no decrease in poverty measured via a relative poverty line. I'm in favour of measuring poverty in relation to societal norms but it does also seem that some credit needs to be given to overall improvements in the standard of living.

And, paradoxically, if during a recession, median incomes fall but distribution is unchanged a relative poverty line will record no rise in poverty. This can't be right.

So what are we to conclude then - should we discard relative poverty lines. No, they still have their uses. One, ideal, solution is to use both sorts of lines. Carefully analysing the two so that they compliment each other's weaknesses. Maybe you'll get lucky and find poverty dropping under both measures. Or - if this isn't possible - use the tool most relevant to the task you are involved in. Or use whatever measure you have, but beware of, and upfront with, it's limitations.

Beyond Monetary Poverty Measures

"Money," Cindi Lauper once wrote, "changes everything". Unfortunately, alas, money measures, on the other hand, don't quantify everything. And there's a good case to be made about the limitations of quantifying poverty using monetary measures at all. It's too detailed to go into here and now, but I do want to point out that much recent research has gone into ways of measuring poverty in terms of outcomes rather than incomes.

Some examples of this are the UNDP's Human Poverty Index and New Zealand's Economic Living Standards Index. Amartya Sen's work on conceptualising poverty as capability deprivation is a related theoretical framework. In the long run, I think improvements in poverty measurement will come through these initiatives (not that they are without their problems).

And Finally
Lets be done with some poverty measurement silliness.

1. The New Zealand government's low income lines are not relative poverty lines. They are absolute ones. The appear to be relative because they are shown in the Social report as percentages of median income in 1998. However, for subsequent years, they have only been adjusted for inflation, they haven't been adjusted to reflect changes in median incomes. As such they should be properly considered an absolute poverty line. Particularly as the 60% figure is close to other research on what a family needs to earn in NZ to avoid experiencing deprivation.

2. Relative poverty lines aren't just measures of inequality, and poverty could be eliminated under these measures. Relative poverty lines are similar to inequality but they aren't (unlike true inequality measures) impacted on by changes in distribution of incomes over the median level. This means that you could (simply by raising the wages of those earning under 60% of the median wage) eliminate relative poverty while still having society wide inequality (differences between the median and the top and among those above the median).

3. If Bill Gates moved to a country with a relative poverty line, poverty levels would not discernibly increase. Or at least they wouldn't if the poverty line was based - as almost all are - on a percentage of the the median income. All he would do would be to shift the line by one person.

Some Links

Poverty Terms Defined
Lister's Book (Chapter 1, poverty definitions)
Krugman on Relative Poverty
New Yorker Article (not yet read but looks good)

*I cut a whole heap out from this section of the post to try and keep things simple. If you want more you may be interested in the following: Alan Botton's Status Anxiety; better analysis can be found in Richard Layard's Happiness [these speech notes may be ok] and Richard Wilkinson's the Impact of Inequality [review here].)
**Note, however, that John Minto never did this despite what David Farrar and Owen McShane would have you believe.

Friday, January 18, 2008


In honour of the continuing sound of quacks emanating from Poneke's blog. I've created a new link list over to your right. Countering Climate Quackery is a handy list of resources for countering 'climate sceptics'.

My current favourite is Greenpeace's Exxon Secrets, through which you can follow the dollar trail from Exxon to the climate sceptic of your choice. Our own Vincent Gray and Chris De Freitas make cameos. Of course, at the end of the day, it doesn't matter who's funding you: if you're science is right it's right. However, the list is interesting - especially given the oft' repeated sceptic claim that those climate scientists who are concerned about global warming are only in it for the research money.

I've also included Mark Lynas on my list. Lynas is someone I hope Poneke reads. I hope this because, in his first post professing climate 'scepticism', Poneke made the following argument about science, certainty and climate change:

Science at this global, theoretical level is never settled, despite the claims of the climate change lobby. Science is about testing and disproving theories to arrive at new ones to test and disprove again and again, always increasing scientific knowledge, not fossilising it in stone like the Ten Commandments, which some seek to do with climate science. Fortunately, science will not be fossilised and climate science will continue to develop.
In my reply I pointed out some of the problems using this argument against action on AGW. However, Mark Lynas, does a better job than I ever could:
Every qualified scientific body in the world, from the American Association for the Advancement of Science to the Royal Society, agrees unequivocally that global warming is both a reality, and caused by man-made greenhouse gas emissions. But this doesn’t make them right, of course. Science, in the best Popperian definition, is only tentatively correct, until someone comes along who can disprove the prevailing theory. This leads to a frequent source of confusion...that because we don’t know everything, therefore we know nothing, and therefore we should do nothing. Using that logic we would close down every hospital in the land. Yes, every scientific fact is falsifiable – but that doesn’t make it wrong. On the contrary, the fact that it can be challenged (and hasn’t been successfully) is what makes it right. a close follower of the scientific debate on this subject I can state without doubt that there is no dispute whatsoever within the expert community as to the reality or causes of manmade global warming. But even then, just because all the experts agree doesn’t make them right – it just makes them extremely unlikely to be wrong. That in turn means that if someone begs to disagree, they need to have some very strong grounds for doing so – not misreading a basic graph or advancing silly conspiracy theories about IPCC scientists receiving paycheques from the New World Order...

Yes, scientific uncertainties remain in every area of the debate. But consider how high the stakes are here. If the 99% of experts who support the mainstream position are right, then we have to take urgent action to reduce emissions or face some pretty catastrophic consequences. If the 99% are wrong, and the 1% right, we will be making some unnecessary efforts to shift away from fossil fuels, which in any case have lots of other drawbacks and will soon run out. I’d hate to offend anyone here, but that’s what I’d call a no-brainer.

A Grand Coalition

I'm no good at election predictions so this post needs to start with the disclaimer: only the most idle of speculation follows.

Speculation which starts with the proposition that the Maori party ends up in the position of government-maker after the election (i.e. neither major party can form a government without their support).

What might this mean? (Click here to read the rest of this post...)

Probably not a National-Maori Party Government. While both parties have made occasional noises suggesting that they could work together, I think that this is very unlikely. For a start, the Maori party will want legislation in exchange for votes, and much of what they ask for (such as the repeal of the Seabed and Foreshore Act) will be anathema to National Party voters. For National, the price paid for such a partnership would be vote loss big time. Also, even with the Maori Party, National may well still need the support of other right of centre parties to form government. Something that may simply be impossible if NZF and ACT have policy bottom lines which clash with those of the Maori Party. Finally, Hone Harawira at least, has distinctly leftwing policies on a whole range of issues, not just those relating to Maori. And while Pita Sharples and some other Maori MPs have shown a willingness to flirt with National's economic policies in the past, if push comes to shove I think they would find it very hard to stomach any real rightward economic lurch. Harawira, I imagine, would be almost impossible to keep on the National side of the floor. As a coalition it would be an unstable one, to put it mildly.

Yet, as Colin James points out, partnering with the Maori party might be little easier for Labour. There's the obvious animosity between Helen Clark and Tariana Turia. And while I imagine that, in their ideological hearts, many Labour MPs would love a coalition that saw more pro-Maori policy, I also think that their vote counting heads would quail at the thought of what it might do to their support in 'middle New Zealand'. Finally, if the coalition is anything other than Labour, the Greens, and the Maori Party, the problems noted for National above about coalition partners might be just as extreme for Labour.

Having said all this, I think a Labour-Maori partnering is more plausible than a National-Maori one. There's an ideological divide there but at least it isn't quite so deep and doesn't cut across as many issues.

So maybe we will see Labour, the Maori Party and the Greens in power after the next election. If it's workable, I'd love it.

There is, however, one other coalition possibility that no one seems to talk about but which, to my mind, could plausibly come about. This is a National-Labour grand coalition - something similar to the current situations in Germany and Israel.

Given the absolute absence of love lost between the two big parties at present, such a partnership might seem like a total non-starter. But I'm not so sure. First, there's the German and Israeli precedents. Second, there's the fact that on some issues the parties aren't really so far apart. There are others, of course, where the divergence is great (and that's why I really hope National doesn't end up in government) but, purely in terms of supporters lost, the two parties might actually sustain less damage hitched together than partnered with the Maori Party. And the votes they lost would tend to scatter towards the parties on their ideological flanks (Act and the Greens). Parties whom they could form future coalitions with.

Anyhow, I'm no beltway insider - I have no idea how likely this outcome is, even assuming that election night produces a situation which makes it possible.

And I am certainly not saying I want it to occur. (Indeed, the only aspect I'd enjoy would be the episode of collective pant wetting engendered in the Right blogosphere).

All I'm saying is that it does seem to be a possibility. If not at the next election at least at some point in our MMP future.

Thursday, January 17, 2008

The Top Marginal Tax Rate

Lane Kenworthy has an interesting discussion on the merits of raising the top marginal tax rate in the US. His conclusions: doing so will increase government revenue and is unlikely to slow economic growth.

Hat Tip: Mark Thorma

Wednesday, January 16, 2008

What the Huck! (Owen McShane Edition)

Recently, writing about the farcical level of inaccuracy in a Garth George 'column' Gareth Renowden pondered whether the Herald's fact-checker was on leave. Self professed scientist Owen McShane adds weight to this speculation with a Huckabeean display of innumeracy in his most recent column.

The target of which was --- wait for it --- John Minto and his heretical views on property rights. For what it's worth, my own views on the role of property rights in economic development may, quite plausibly, be closer to McShane's than Minto's. But if you are going to opine in New Zealand's paper of record on property rights and poverty it helps if you have a clue.

And Owen McShane quite clearly doesn't. (I'm being nice here, it's also possible that he does and that he is simply being dishonest)

The catalyst for McShane is Minto's claim that:

The US has the highest levels of poverty in the Western world (more than 30 million) despite one of the highest per capita incomes in the world. Why would this be?
...and so McShane races to the US's defence:
Minto tells us that such Americans can only create poverty because "the US has the highest levels of poverty in the Western World (more than 30 million)" and asks, "Why would this be?"

Well, the answer is simple. The United States Official Poverty Rate (the OPR) is based on calculations that are available from 1959 onwards. For the total population of the US, this rate declined by nearly half over this period, from 22.4 per cent in 1959 to 12.7 per cent in 2004. It seems Americans do know something about reducing poverty.

Also, millions of Americans can be declared to be in poverty because the UN poverty index is based on the percentage of the population with disposable incomes of less than 50 per cent of the median.
Astute readers will notice a subtle segue here. McShane starts by talking about US official poverty stats before moving on to those compiled by the UN, which he then goes on to criticise because they are based on a relative poverty line (50% of median income). Now there's actually an interesting debate to be had about the respective merits of absolute and relative poverty lines, but McShance sure isn't interested, and I don't have the time to go over it in detail so it will have to wait for another post. The important point here though is that Minto's number of over 30 million isn't based on any UN estimate - it's based on the US's own official poverty stats [large PDF file]. And the United State's poverty line is not a relative line in any sense. It is absolute, based on inflation adjusted basket of basic needs.

McShane, who one bets has never experienced anything like poverty at any point in his life then adds that:
American families not only have hot and cold clean running water, flush toilets and electricity but typically have one or more cars, at least one television, several telephones and even own their own homes.
So, what he essentially saying here is that - in the richest country on Earth (and one which gets rather cold in winter I hear) - you may well not be poor, even if you don't have hot water, a flush toilet, and electricity. And, if he considers a car a luxury, he should try getting round without one in your typical public transport deprived US city.

Next up is a true clanger:
The UN test means that when the median American household income reaches US$1 million a year, a family living on US$499,000 a year will still be deemed to be living "in poverty". Using the New Zealand index, they could be earning $600,000 a year and still be "in poverty".

Which is just factually false. New Zealand (to our shame) doesn't have official poverty lines. Rather 'low income' lines are used, based on 50% and 60% of the median income in 1998 (adjusted for inflation). This may seem like a relative poverty line, but it is not. God only knows why MSD use percentages to reflect what is actually an absolute figure (based on a dollar value in 1998 thereafter adjusted for inflation) but the fact of the matter is that, assuming the methodology stays the same, if - 20 years from now - median income has increased to $US1M a year, NZ's the low income lines will not have gone up accordingly - they will have been adjusted for inflation, that is all. (Reference: here). Also, these 50% and 60% figures aren't entirely arbitrary; research by Charles Waldergrave and others came up with a needs based poverty line for New Zealanders that was roughly the same as the 60% figure.

This out of the way things just gets worse:

I am not at all sure why Minto assumes that Americans are experts on creating poverty rather than wealth. Some poverty indices have truly bizarre outcomes - especially those which focus on where families sit relative to average income. Minto bewails the fact that the very rich in the US have very high incomes.

One way to reduce poverty might be to persuade them to up stakes and take their wealth to other less fortunate nations.

However, if Bill Gates decided to migrate to a poor country like New Zealand, his settlement here could increase the number of New Zealand families officially living in poverty because his vast income would considerably increase the average household income. And hence throw hundreds, if not thousands, more families, and even their children, into poverty.

Which would only be true if New Zealand, or any country for that matter, used a poverty line based on mean rather than median incomes. (Otherwise Bill Gates's big move would only shift the poverty line ever so slightly). For what it's worth, I have heard about poverty lines based on mean incomes but I've never seen them used in practice and none of the poverty lines that McShane mentions in his column are based on means. So why does he start talking about them now? Either because he doesn't know the difference between means and medians or, more likely, because he is being utterly slippery to try and obfuscate the fact that the United States does, indeed, have a serious poverty issue.

Why he felt the need to write this tosh I don't know, but it's hardly to the Herald's credit that it chose to publish it.

Late Capitalism* (in which the Chinese Government Buys the Banks)

This, from Andrew Leonard, is a must read. The three sentence summary: Wall Street takes a pounding from the unraveling financial crisis and who rides to the rescue? State investment funds from the Middle East and Asia. They are, in a sense, buying the banks.

(Hat Tip: Dani Rodrik)

*Just so no one chokes on their coffee - don't believe in late capitalism, but I sure do wish I could make heads or tales of the current crisis.

Tuesday, January 15, 2008


In comments David Farrar has replied to my post on Moore, Minto and himself. He writes:

Oh I didn't advocate property rights alone is the answer. I do advocate that it is a necessary element though as without them no economy has even shown much ability to lift people out of poverty.

Once you have property rights, then there is other stuff to do.
In the broadest possible sense I agree with him, I guess. What I really need to do now is write a full post on what is complicated topic...

Also, In a recent post on climate change, I wrote the following, starting with a quote from a denialist climate quack letter to Ban Ki Moon:
The average rate of warming of 0.1 to 0. 2 degrees Celsius per decade recorded by satellites during the late 20th century falls within known natural rates of warming and cooling over the last 10,000 years.

Which may be true (I haven't double checked) but even so - so what? Once again: we know that we are increasing CO2 in the atmosphere, we know that - everything else being equal - more C02 will mean higher temperatures, and we know that temperatures are increasing in a manner that we can't attribute to any natural phenomenon. Why - given all this - would we need a faster rate of warming than ever observed before to provide us with proof of AGW?
I've just been browsing Gareth Renowden's wonderful website Hot Topic and I read this (written about the same letter):
The current rate of warming is roughly 20 times faster than the last period of rapid climate change, when the world warmed by 5C (on average) over 5,000 years as we emerged from the last ice-age. The current rate of warming is much faster than “natural variability”
So either our letter's writers were spinning utter bullshit or they were disingenuously selecting the one record (satellite data) which might have allowed them to "honestly" make such a claim. Either way there is only one appropriate reply:


Flat Tax? Fat Chance

In a display of bipartisan contempt for bad methodology both NoRightTurn and David Farrar have criticised ShapeNZs poll, undertaken for the New Zealand Business Council for Sustainable Development, which Peter Neilson recently enthused about in the Herald on Sunday.

Neilson wrote, citing suvey data:

But a cut in personal and corporate taxes to a flat rate of 20c will draw more approval than disapproval among Green-Maori-New Zealand First-Act voters because major cuts like these would be paid for by new forms of revenue, such as increasing GST from 12.5 per cent to 20 per cent, while fully compensating people on benefits and lower incomes for the price rises and other day-one impacts.
As both NoRightTurn and DPF point out, the survey Neilson relies on is unreliable because of its self-selecting population sample. Also, if this press release is to be believed the survey itself smells rather fishy:
ShapeNZ asked people to chose between three tax reform options: cutting top personal income tax rates from 39c to 30c; cutting the top personal and corporate tax rates to 28 cents, or introducing a single rate of 20 cents, paid for by increasing GST from 12.5% to 20% (while fully compensating people of low incomes and benefits for price rises resulting from the GST increase).
So, when asked to choose between three tax cuts, people chose - wait for it - a tax cut! Well I never. It's hard to escape the feeling that one way or other the survey in question was going to lead to a column about tax cuts.

Survey aside, the economics behind the idea of a flat tax are poor too.

Despite what proponents claim, there is little evidence that flattened tax structures stimulate economic growth. What they will achieve though is rising inequality. Something that is harmful for a number of reasons.

Moreover, given the significant rise in GST, for most Kiwi's the 'tax cut' is not what it seems:
  • For the approximately 16% of New Zealanders who's top tax bracket is 33c/dollar there's no guarantee that they would end off much better off as the drop in income tax may well be offset, for the most part, by a rise in GST.
  • And for those New Zealanders who currently earn between $9,000 and $38,000 (nearly half our population) there'll be next to no improvement on the income tax side of things, while some/many/most/all of them will end up worse off thanks to the rise in GST*.
  • And for country's least wealthy: they may be compensated for higher prices caused by GST but that won't change the fact that the income tax they pay will increase. (Source for all statistics).
The tax cut would be a wonderful windfall for our most wealthy though.

I bet they didn't tell you that in the survey.

*Whether it is some, many, most or all will depend on where the low income threshold for GST rebates is set. If it's set low then it may be all of these tax-payers. If it's set high, fewer will be worse off but taxes themselves will also have to be raised to offset the fiscal loss.

Arguing Against Oneself

In David Farrar's fit of pro property rights fisking, which I wrote about yesterday, DPF makes the following statement:

In fact, 46% of those “in poverty” in the US, actually own their own home.
DPF may not realise it, but he's arguing against himself here.

Unfortunately, he doesn't give us the source for his 46% figure, which strikes me as remarkably high (possibly because it comes unchecked from a right wing website? or possibly because US income poverty figures capture a significant number of retirees, who do own their own homes). However, taking the number at face value, it actually undermines his argument. After all, if property rights are all that is required to eliminate poverty then why do nearly half of those living in poverty in the United States own their own property? This alone - if Farrar's number is what it seems - would suggest that more factors contribute to poverty than an absence of property rights.

Of course, the point that DPF is trying to make is that there really isn't much poverty in the US after all.

If he really believes this DPF ought to spend some time in poverty free Compton or somewhere similar.

Or he might want to consider the fact that life expectancy for the "'"poor"'" in Harlem is less than the average life expectancy in Bangladesh.

Monday, January 14, 2008

More on Moore on Propterty Rights

John Minto doesn't like what Mike Moore has to say about property rights. So he writes a column about it in the Herald. And for poor David Farrar Minto's heresy becomes unbearable. So he rushes out a fisking:

John Minto has an opinion piece in the Herald responding to Mike Moore’s piece on alleviating poverty. Minto, of course, disagrees.

The US has the highest levels of poverty in the Western world (more than 30 million) despite one of the highest per capita incomes in the world. Why would this be?

Minto is not talking about absolute poverty here, but relative poverty. The bottom 10% of the US still have an average income massively higher than most in the third world.

In fact, 46% of those “in poverty” in the US, actually own their own home. The “relative poverty” line in the US in 2006 is US$10,488 or around US$30 a day.

The World Bank defines extreme poverty as less than $1 a day and moderate poverty as less than $2 a day.

In East Asia, the proportion living on under $2 a day has fallen from 69% in 1990 to 27% today.

How-ever in Sub-Saharan Africa, those living in extreme poverty, less than $1 a day, has increased from 41% in 1981 to 46% in 2001.

Now this is not to say that that things are perfect in the US - far from it. But the difference between $30 a day and $2 a day is massive. So Minto’s rejection of “property rights” as helping poverty is nonsensical.

Moore has come to the conclusion that it is the absence of enforceable property rights that lies at the heart of poverty. This has done no good for those living in poverty in the US or New Zealand but apparently he believes it will do wonders to drive poverty from developing countries.

The opposite is true. Property rights are there to benefit the wealthy and the middle class. They mean much less, if anything, to people in poverty.

One just has to look at China, and see the massive uplift of people out of poverty, as they have moved from an economy where people have no property rights, to one where they now have a significant rule of law relating to property rights.

There is a reason East Asia has lifted so many people out of poverty in recent decades, while Africa has got worse. It isn’t coincidence.

DPF is, alas, being a little disingenuous here (well I never!). The US is one of the few developed countries to use an absolute rather than a relative poverty line (NZ is another, although ours is not technically a poverty line). Nevertheless, in the funny way these things work (I need to do a proper post on this), the poverty in the US is technically relative poverty [Update: Actually, on reconsideration, I'm not so sure about this - the basket of goods that the US poverty line is based around is itself based on bare necessities for a healthy life in the US - still more than bare necessities in the Philippines but it's quite contestable that this is absolute poverty]. However, this doesn't mean it isn't real deprivation. Mostly not of the severity that can be found in the developing world but real nonetheless. And, anyhow, the comparison Minto is making isn't between the US and India or Sub-Saharan Africa but with the West:

The US has the highest levels of poverty in the Western world (more than 30 million) despite one of the highest per capita incomes in the world.
I have to confess I'm not really sure of the overall point of Minto's column (it's not one of his best) but I think the passage above has an important insight. This is, very simply, that property rights, while a necessary condition for capitalist economic development are not a sufficient condition for the elimination of poverty. The recipe for successful poverty elimination is the subject of a blog post of its own (not to mention a lifetime's study) but for the time being I will link to two good counter arguments to the it's all about the property rights folks. The first by Dani Rodrik and the second by John Gravois (a handy antidote to De Sotophillia).

As it happens, Farrar's case study of success - China - is a good example of the complexities of successful development (complexities that defy 'it's all about property rights' or any other simple narrative').

China's economic success is not simply a case of the triumph of property rights. China has only recently - long after growth had taken off - began to formalise property rights. It's true that some form of de facto property rights did exist in China prior to this and that this probably contributed to the country's economic success but China has also benefited from:
  • A relatively healthy, well educated population (communism can take credit for this).
  • Integration into the global economy on its terms (and using strategic tools like an undervalued currency).
  • A currency that has not been a commodity.
  • Not having IMF structural adjustment rammed down its throat.
  • A remarkable mix of formal and informal institutions that have somehow proven conducive to economic development.
If David Farrar and Mike Moore think that property rights alone will rid the world of global poverty they are dreaming.

The Year that Was...

...was the year that - for the first time in human history- globally, more people lived in cities than in rural areas. We now live in a predominantly urban planet.

The Depth of World Poverty

Some time, when I have a bit more time, I need to write a post on the composition and meaning of global poverty data, but this (page 12 of a large PDF) is staggering regardless of the details of data composition.

One billion people live on less than $1 a day, the threshold defined by the international community as constituting extreme poverty, below which survival is questionable. That number encompasses a multitude of people living in varying degrees of poverty—all of them poor, but some even more desperately poor than others. To better answer the question of whether the very poorest are being reached, we first divided the population living on less than $1 a day into three categories according to the depth of their poverty:

• Subjacent poor: those living on between $0.75 and $1 a day
• Medial poor: those living on between $0.50 and $0.75 a day
• Ultra poor: those living on less than $0.50 a day

This allowed us to look below the dollara-day poverty line to determine who the
poorest people are, where they live, and how each group has fared over time. We found that 162 million people live in ultra poverty on less than 50 cents a day. This is a significant number of people: if all of the ultra poor were concentrated in a single nation, it would be the world’s seventh most populous country after China, India, the United States, Indonesia, Brazil, and Pakistan.

As it is, the ultra poor are overwhelmingly concentrated in one region—Sub-Saharan
Africa is home to more than three-quarters of the world’s ultra poor. Sub-Saharan Africa is also the only region in the world in which there are more ultra poor than medial or subjacent poor. In contrast, most of Asia’s poor live just below the dollar-a-day line; only a small minority of the population is ultra poor.
Remember what that 50c a day line really means is: lived off ( so consumed as opposed to earned) less each day than 54c could have brought you in the United States in 1992.

Thursday, January 10, 2008

The Scope and Scale of Global Poverty

From Roger C. Riddell's book, Does Foreign Aid Really Work? (page 121):

Estimates by different UN agencies...suggest that each day upwards of 34,000 children and 16,000 adults die from hunger and preventable diseases which can be traced directly or indirectly to poverty related causes. This amounts to around 18mn people a year. The vast majority of these deaths occur in the poorest 65 countries of the world, and are largely preventable...The annual number of deaths from poverty, predominantly taking place in poor countries, is equal to two and a half times the population of London. It is equivalent to 100 average-seized jumbo jets (each carrying 500 passengers) crashing each day, leaving no survivors. Two hundred and thirty thousand people are estimated to have died in the Asian tsunami and its aftermath; this number dies every five days from the extremes and diseases of poverty.

[Emphasis Mine]

Climate Change Denial's so Hot Right Now...'s all over the blogs, the Herald, The New York Times, Manukau.

For the life of me I can't understand the burrowing ostrich mentality which prompts people to pump out disinformation hoping to forestall action on what is likely to be a very serious problem (and one which will affect us all - sceptics and credulous - alike).

A textbook example of the disingenuity that emits from the deniers camp is the recent open letter to Ban Ki-Moon from a self proclaimed group of climate experts. As always, the vast majority of the 'experts' are not climatologists. And, as always, what they write is misleading (to put it very mildly).

Let's look at one short extract:

z Recent observations of phenomena such as glacial retreats, sea-level rise and the migration of temperature-sensitive species are not evidence for abnormal climate change, for none of these changes has been shown to lie outside the bounds of known natural variability.

z The average rate of warming of 0.1 to 0. 2 degrees Celsius per decade recorded by satellites during the late 20th century falls within known natural rates of warming and cooling over the last 10,000 years.

z Leading scientists, including some senior IPCC representatives, acknowledge that today's computer models cannot predict climate. Consistent with this, and despite computer projections of temperature rises, there has been no net global warming since 1998. That the current temperature plateau follows a late 20th-century period of warming is consistent with the continuation today of natural multi-decadal or millennial climate cycling.

One at a time:

"Recent observations of phenomena such as glacial retreats, sea- level rise and the migration of temperature-sensitive species are not evidence for abnormal climate change, for none of these changes has been shown to lie outside the bounds of known natural variability."

Quite true! And quite besides the point, as none of the aforementioned observations are claimed as key evidence for Anthropogenic Global Warming (AGW) . They do, however, correspond with satellite and other instrumental measures of temperature warming and, as such, provide collaborating evidence - and they give us some idea of the consequences of AGW - but they aren't the key evidence. The crucial evidence for AGW is the rise in temperatures (observable in surface and satellite records) combined with the rise in Greenhouse Gases (GHGs). GHGs, which we know, thanks to Carbon Isotope measures, are human produced; and which we can expect, thanks to our understanding of basic atmospheric physics, to increase temperatures. Moreover, no known natural process, (such as solar radiation), which could otherwise be causing temperature increases is currently trending in a manner which is constant with observed temperatures. This is why the vast majority of climatologists believe that current global warming is human produced.

And while it is true that, current fluctuations in glaciation and the like, fall within the bounds of
'natural' variability, and while there is no reason to believe that AGW will lead to climate change greater than that experienced naturally by our planet in the past, this is no cause for complacency. Natural variability has seen temperatures so warm that crocodile-like creatures lived near the Poles. Do the 'scientists' who signed the letter really believe that humanity could endure the transition associated with such climate change and not experience significant costs in terms of human welfare.

The average rate of warming of 0.1 to 0. 2 degrees Celsius per decade recorded by satellites during the late 20th century falls within known natural rates of warming and cooling over the last 10,000 years.

Which may be true (I haven't double checked) but even so - so what? Once again: we know that we are increasing CO2 in the atmosphere, we know that - everything else being equal - more C02 will mean higher temperatures, and we know that temperatures are increasing in a manner that we can't attribute to any natural phenomenon. Why - given all this - would we need a faster rate of warming than ever observed before to provide us with proof of AGW?

Finally they state that "there has been no net global warming since 1998." Once again they are being disingenuous. 1998 was a particularly warm year thanks to El Nino. This is understood and explained and isn't a threat to computer models or climate predictions. What's more, if you actually run proper trend lines through the 1998 to present data there are still trends of warming. (Two very good posts explaining this are here and here).

God this gets tiresome.

Dick's Quacks

Via Tumeke's blog index we discover that one time runner and now Manukau City Councilor Dick Quax has a blog. Good for him. Unfortunately, Dick has been duped by the climate change deniers quacks.

He writes (or more accurately cuts and pastes):

Over 400 prominent scientists from more than two dozen countries recently voiced significant objections to major aspects of the so-called "consensus" on man-made global warming. These scientists, many of whom are current and former participants in the UN IPCC (Intergovernmental Panel on Climate Change), criticized the climate claims made by the UN IPCC and former Vice President Al Gore.

The new report issued by the Senate Environment and Public Works Committee’s office of the GOP Ranking Member details the views of the scientists, the overwhelming majority of whom spoke out in 2007.
Let's set aside for a moment the fact that the report is the product of Republican senator James M Inhofe, a perennial climate change denier who, purely by coincidence, receives rather a lot of money from the oil and gas industry and who once called novelist Michael Crichton to provide expert testimony on climate change to the senate. Even taking this into account, 400 dissenting experts ought to be reason doubt the science.

Um, no.

The report, you see, is the product of the following methodology (or something very similar). One of Inhofe's staffers appears to have simply trawled the internet for dissenting positions on climate change from anyone who might reasonably be called a scientist. Not climate scientist mind you but scientist. This includes social scientists such as economists as well as TV weathermen, and theoretical physicists (one at least who appears utterly batty). There are some bonafide climatologists on the list but they are a small minority. They are also a very small minority in their own profession. There is also our very own Dr Vincent Gray, who is noted as an IPCC expert reviewer. Which sounds pretty impressive. Or it least it would, if it weren't for the fact that anyone can become an expert reviewer of the IPCC reports. You just have to ask. As far as I can tell Gray isn't actually a climatologist either.

So - to summarise - Inhofe has, from the millions of public proclamations made around the globe by our planet's millions of scientists, managed to find 400(!!!) instances of different people casting doubt on the existence of anthropogenic climate change. This sounds like more like an exercise involving Avogadro's number than a serious challenge to any scientific consensus.


Wednesday, January 09, 2008

What the Huck!?!?

We already know that Mike Huckabee doesn't believe in basic science such as evolution; now there's evidence that he doesn't believe in basic mathematics either:

Huckabee says that the FairTax would mean a 23 percent sales tax rate on all items. First of all, the real tax rate proposed is 30 percent. The FairTax would add 30 cents to every dollar spent, but since 30 cents is 23 percent of $1.30, the FairTaxers call the rate 23 percent.
To be honest, I can't believe I just read this.

Remember kids, this is the man who could control America's nuclear arsenal before the end of the year.

Tuesday, January 08, 2008

Reports of France's Demise May be Somewhat Exaggerated

Some interesting employment graphs from Paul Krugman.

A Brief Description of Conspiracy Theorists

If I were asked to provide a single defining trait to describe conspiracy theorists I would choose:

Conspiracy theorists: those whose near absolute scepticism of official narratives is matched only by their complete credulousness when it comes to alternative explanations - particularly those involving secret groups of people plotting treachery in the dark.

So - to choose the World Trade Center as an example - there's simply no chance that some things may just have been coincidence, or honest mistakes. And that some of the 'cover up' which followed may have merely been the inept covering up their asses as opposed to the truly evil covering up the unspeakable.

None of this is possible. On the other hand though, any theologian or retired engineering professor or celebrity libertarian who makes claims of conspiracy is assumed automatically to be honest, an expert, and in no need of double-checking.

In a similar vein, while the official narrative of 9-11 is poured over for any inconsistency, no such concern is shown for the flipping great inconsistencies in any alternative narrative that could be created.

As Matt Taibbi puts it:

What is the theory of the crime, according to the 9/11 Truth movement?

Strikingly, there is no obvious answer to that question, since for all the many articles about "Able Danger" and the witnesses who heard explosions at Ground Zero, there is not -- at least not that I could find -- a single document anywhere that lays out a single, concrete theory of what happened, who ordered what and when they ordered it, and why. There obviously is such a theory, but it has to be pieced together by implication, by paying attention to the various assertions of 9/11 lore (the towers were mined, the Pentagon was really hit by a cruise missile, etc.) and then assembling them later on into one single story. But the funny thing is, when you put together all of those disparate theories, you get the dumbest story since Roman Polanski's Pirates.

The specifics vary, but the basic gist of what They Say Happened goes something like this:

A group of power-hungry neocons, led by Dick Cheney, Paul Wolfowitz, Bush and others and organizationally represented by groups like the Project for the New American Century, seeks to bring about a "Pearl-Harbor-like event" that would accelerate a rightist revolution, laying the political foundation for invasions of Afghanistan and Iraq.

Your basic Reichstag fire scenario, logical enough so far. Except in this story, the Reichstag fire is an immensely complicated media hoax; the conspirators plot to topple the World Trade Center and pin a series of hijackings on a group of Sunni extremists with alleged ties to Al Qaeda. How do they topple the Trade Center? Well, they make use of NORAD's expertise in flying remote-control aircraft and actually fly two such remote-control aircraft into the Towers (in another version of the story, they conspire with Al Qaeda terrorists to actually hijack the planes), then pass the planes off as commercial jetliners in the media. But it isn't the plane crashes that topple the buildings, but bombs planted in the Towers that do the trick.

For good measure -- apparently to lend credence to the hijacking story -- they then fake another hijacking/crash in the Pentagon, where there actually is no plane crash at all but instead a hole created by a cruise missile attack, fired by a mysterious "white jet" that after the attack circles the White House for some time, inspiring the attention of Secret Service agents who point at it curiously from the ground (apparently these White House Secret Service agents were not in on the plot, although FBI agents on scene at Ground Zero and in Shanksville and elsewhere were).

Lastly, again apparently to lend weight to the whole hijacking cover story, they burn a big hole in the ground in Pennsylvania and claim that a jet went down there, crashed by a bunch of brave fictional civilians who fictionally storm the fictional plane cabin. The real-life wife of one of the fictional heroes, Lisa Beamer, then writes a convincingly self-serving paean/memoir to her dead husband, again lending tremendous verisimilitude to the hijacking story. These guys are good!

Up to a point scepticism is a healthy attribute. But it's also one that needs to be applied even-handedly.

Monday, January 07, 2008

Mike Moore! Defender of Democracy!! (oh, and property rights)

Via an excited David Farrar, we discover Mike Moore writing something that is not utter nonsense.

The source of this excitement is a Herald column in which Moore comes out in favour of democracy, if not coherence.

The article by Mary Dejevsky in Friday's Herald suggesting that a benevolent authority is better than democracy couldn't be more wrong.

Poor democracies have always outperformed authoritarian societies. Democracies score 20 to 40 per cent better even in poor nations, whether it be life expectancy, infant mortality, or farm production and clean water.

Democracies are less corrupt, more efficient because leaders are held accountable, and an active civil society and free media are the watchdogs, the cleansing air of transparency, and the adaptability of democracy drives up better results.

There has never been a famine in a democracy, no two democracies have even gone to war, and where there are democracies the numbers of civil wars go down. No evidence was produced to back up the claim that dictatorships do better.

Democracy is more than having a vote, it's also about freedoms such as property and human rights. This interests me because I'm a congenital do-gooder and know-all.

Some of this is correct.

As DPF points out, democracies have, depending on how you define the term democracy, waged war against each other*. And regardless of how you define democracy, it's hard to escape the fact that at least one democracy has waged covert wars against others it disliked (USA take a bow).

And, in terms of economic growth, there is only weak evidence to suggest that democracies perform better.

There is no evidence, however, that they perform significantly worse. And there is empirical evidence that shows that democracies are more resilient to economic shocks and that they pay higher wages compared to non-democracies with the same GDP.

Democracies, as we know from Amartya Sen's famous work, are also much less likely to experience serious welfare catastrophes such as famines (indeed, IIRC, Sen's work shows that there no democratic country with a free press has ever experienced a severe famine).

The bit I really don't get though is Moore's bundling of property rights into the democratic package. Most human rights of course are integral to democracy. You can't be a true democracy with out freedom of speech, for example. But property rights? In my opinion, any country voting to abolish them would be making a massive mistake. But, so long as they did this via the democratic process, with the chance of future repeal via the same process, how would this be un-democratic?

*The actual claim (quite probably still wrong) that you see in books on democracy is, I think, more along the lines of "no two democracies have gone to war since WW2".

Bedtime for Conservative Canards

One of the many, mostly silly, conservative talking points that pop up with dreary regularity in the Great New Zealand Debate is the claim that speed cameras and speeding fines are simply a government revenue gathering exercise. (DPF obliges with examples here and here*).

The nonsensical nature of this claim is revealed by the following statistic:

All fees and fines put together contribute a whopping 1% to crown revenue. This figure is made up of much more than just speeding tickets too, meaning that the actual contribution of speeding fines to government revenue is trivially small. The government could eliminate all speeding fines tomorrow and still run a comfortable surplus.

So why don't they?

Presumably because the actual reason for levying speeding fines is the official one: to punish people for breaking the law** and to try and make our roads safer.


*To be fair to David Farrar I should note that he does - grudgingly - approve of speed cameras in some circumstances. This is more than can be said about many NZ conservatives.
**And while we're on the subject, have you ever noted the way that law and order conservatives tend to be all for the strict enforcement of all laws except those that might conceivably inconvenience their mighty selves.

Bigger than Bill English

The folks at Tumeke have created an index of New Zealand blogs. The blogs are also ranked - using a methodology I don't understand. But hey (and isn't understanding overrated anyhow?) I'm happy to see that:

  • I made the list
  • I made the top hundred
  • I ranked higher than Bill English.

Inadequate Arguments Against Aid - 2

I was at a development related event recently when, during questions after a presentation, a person stood up and made a questionment which went something like this:

Why are we giving aid overseas when 23%* of our own children, here in New Zealand, are being raised in poverty.
Poverty, including child poverty, is a serious issue in New Zealand, but as an argument against giving aid claiming that 'we have poverty here too' is just silly.

It's silly because, while poverty in New Zealand is real, it is - with only a tiny number of exceptions - nothing like poverty in the developing World. According to best available estimates, close to half the World's population live off less each day than could have been purchased in the United States for $2.16 in 1992. They are, in other words, achingly poor. Comparing the $2.16 figure with New Zealand's own official low-income lines (poverty lines) is difficult for a variety of reasons, but my own back of a very small envelope calculations** suggest that our 60% of median low-income line is roughly 5 times higher than the World Bank's $2 a day line. Lant Prichard, a former World Bank economist, has done the actual calculations, creating a poverty line based on the average poverty lines of the World's richest countries. This won't be exactly the same line as our own, but it will still be an appropriate approximate gauge of poverty in New Zealand. Prichett comes up with a poverty line of US$10PPP/day. So, once again, the difference is a factor of 5. Similarly if you compare any of the human development indicators between New Zealand and the worlds poorest countries it becomes apparent that poverty in New Zealand is a totally different creature to that in the developing world. Infant mortality rates are a fraction of those in developing countries. Life expectancy and literacy are much, much higher...

In short, poverty in New Zealand, while real, simply isn't of the same magnitude or intensity that it is in most of the developing world.

The questionment is also silly because it implies that we spend large amounts of money on aid at the expense of our own domestic anti-poverty efforts. But this simply isn't true. The government currently spends less than 1% of tax take on aid. By contrast it spends 72% of tax take on domestic social services. Granted, not all of social service spending goes to the poor, but a significant proportion does. (On top of this, there are also tax take decreasing schemes like Working for Families). Personally, I wish we spent more on tackling poverty in New Zealand; however, it is just wrong to imply that aid spending is stopping us from doing this. Aid spending is trivially low. And we could increase both aid spending and domestic anti-poverty programmes simply by increasing the top marginal tax rate.

I can't speak for the questionment maker and I guess they must feel differently. But I can't see any reason for valuing the life of a New Zealander higher than anyone else on this planet. I'm willing to concede that the nature of our social contract provides a reason for spending more of our taxes on New Zealanders than on people in other countries. But we already do this. Much, much more. And given that there are people in the world whose needs are unquestionably more acute than our own, is it really asking too much to suggest that we offer them a helping hand?

*The actual number given by the questionment maker was 30%. This is a common misconception. During the height of the neo-liberal reforms the proportion of of our country's children who lived in households earning less than 60% of the median income rose as high as 35%. However, it has dropped significantly since and now sits around 23% (source).
**Namely: (1) The fact that the World Bank's line is a consumption poverty line not an income line; (2) The fact that the World Bank's line is corrected for purchasing power parity - to obtain a correct comparison we would have to, rather than exchange rates, use a PPP calculator to change from USD to NZD; (3) Issues with household equivalence ratios. Using the back of a very small envelope, substituting market exchange rates for PPP, and availing myself of of a household equivalence table once given to me by a MSD statistician I get the following:

New Zealand's 60% of median low income line in 2007 per day for a one person household = NZ$25/day
The US$2.16PPP line adjusted for inflation is (according to an internet calculator US$3.08.
Using market exchange rates this = NZ$4.04.
This calculation is is very, very, very rough but it gives you some idea in the difference between our own poverty line and that used by the World Bank (more than a factor of 5).

War is...

...above and beyond everything else, incredibly sad.

Friday, January 04, 2008

I am Legend (a very short review)

Sadly it seems that someone got their legends mixed up. What starts as stylish and chilling ends up all gooey and God saves the day. The scariest thing about I am Legend is probably the fact that religiosity now appears compulsory if you want a US box office smash.

A Couple of Climate Change Links

The sad tale of the latest attempt to discredit the Oreskes study.

It's the sun! Um, no.

Scientific Journals are biased against skeptics! Nope.

Global Temperatures have cooled since 1998! Not really.

10 key denier talking points (debunked unfortunately).

Wednesday, January 02, 2008

Aims high but shoots self in foot.

Sigh - media professional and skeptic Poneke has a post on media hysteria and climate change.

It ought to be interesting but, unfortunately, it ends up bogged down in falsehoods and misunderstood science.

Poneke is right that the media's treatment of climate change is - like many other complex issues - at times sensationalist and often lacking in useful information.

He/she is also correct that Tuvaluans are not yet - as claimed Al Gore - flocking to NZ to flee their flooded islands.

And he/she has a point that there is a tendency amongst reporters and commentators to attribute particular weather events to climate change when, due to natural variations, this is something we cannot accurately do. We can say things such as "such events may become more frequent due to anthropogenic global warming" or "this event may have been a product of human induced climate change" but we can't say, with certainty, that event X was caused by our pumping of GHGs into the atmosphere.

Unfortunately, after that Poneke starts to burble a bunch of climate change denier talking points. Which rather undermines the whole exercise.

One at a time:

1. "...sea levels haven’t risen yet..." Oh, yes they have.

2. "But it [climate science] is yet barely more than a series of computer predictions about what could happen over the next 100 years if we keep spewing ever-increasing amounts of carbon dioxide and methane into the atmosphere."

Actually, it's quite a lot more than computer predictions. First, we have our knowledge of atmospheric chemistry and physics (which has been well understood for a long time). Second, we have an observed rise in CO2 and other GHGs (which we know, in the case of CO2, thanks to Carbon Isotope measures, to be mostly human produced). Third we have an observed temperature trend which is inline with what we would expect from points 1 and 2.

This alone gives us good reason to suspect that, if we keep increasing GHGs that temperatures will keep increasing. It is - conceivably - possible that some feedback mechanism could offset this. However, there is no such mechanism in existence that we know of.

Even without computer models, there is every reason to worry about climate change.

Computer models add to this though. What's more, they when we run them over historical climate records they do a good job of recreating them. In other words they are a useful tool in climate prediction.

3. "Science at this global, theoretical level is never settled, despite the claims of the climate change lobby."

True, perhaps, but besides the point. When we take action in response to future risks we invariably do so in the absence of certainty. But clearly this doesn't mean we shouldn't act to avoid something that appears very likely to occur. Think about this for a second. If you jump out of a plane without a parachute you don't know for certain that you won't die. But the chance is high enough to stop you from taking the plunge. If our approach to risk aversion was based on certainty and certainty alone we'd all already be dead. But it isn't; risk management, when done well, is based on the best information at hand. And - in the case of climate change - that information suggests that we need to act.

4. "Whatever long-term changes happen with global climates, they will fall far short of the Armageddon scenarios painted by the news media."

I don't know what media Poneke's been reading but you can avoid the media altogether and stick to peer reviewed research and still paint a very frightening scenario.

5. "Climate has always changed."

Yes but this time we are causing it, and this time the world is packed to the rafters with 6.6 billion odd people, all of whom who depend on our planet's web of ecosystems for sustenance. If we, trough climate change and other environment damage causing actions, cause these to unravel, or even simply change to a less productive equilibrium, suffering will follow.

6. "Europe was warmer than now 1000 years ago and much colder than now 500 years later. The world has warmed slowly since, but with modern reversals such as the period from about 1940 to 1980 when it cooled again, leading to the media’s 1975 Ice Age panic. There are almost certainly other issues affecting climate than human activity, and science will inquire and refine the theory over time."

Um - so what? Europe may have been warmer than now in the Medieval Warm period but the globe as a whole was not. And, anyhow, no one is arguing that the Earth's climate does not vary naturally (the causes of natural variations are already reasonably well understood). The point is that the current variation is being caused by us and, if it goes unchecked, people will suffer. (By the way, the cooling in the middle of the last century is well understood and the ice age panic was not backed by scientific consensus to anywhere near the same degree as AGW is.)

If Poneke had really wanted to discuss the deficiencies of media coverage of climate change he/she could have started with the Oreskes Study. Instead we get the usual debunked nonsense, which is a pity given that the blog is well written and usually full of interesting analysis.