Roger Douglas 'Sees Marx's Point of View', leaves ACT

This press release is interesting, this is probably one of the biggest developments in NZ politics in a long time.
From the release:

Sir Roger Douglas MP has dramatically announced his departure from the ACT party, effective as of today. He states that he experienced an epiphany while being accosted by veteran protestor John Minto outside Parliament. Minto's characteristic brand of emotion-free logical analysis struck a chord with the architect of New Zealand's radical neo-liberal reforms.

Further down:

"I just really started thinking," said Sir Roger "about how the multinational corporations control our lives and how capitalism is really just about keeping down the working class. All that bourgeoisie talk about incentives and prices is just rhetoric to help us funnel money to our rich cronies"

Sources close to Douglas tell me that he is talking with Joel Cosgrove about acquiring a high ranking on the Worker's Party list, perhaps 4 or 5.

In Defence Of Plastic Bags

The New Zealand Government has announced that it is considering a plan to impose a 5c charge on plastic bags. I am all for Pigovian taxation for environmental (or other) purposes, but I do not support this proposal.

The best justification for such a tax would be an externality-reducing one (although for some reason the revenue is intended to go to the supermarkets, so it is not technically a tax but a price floor). What externalities are there from plastic bags? They are not very biodegradable, so they hang around in landfills for a long time. It is probably a bit of a push to describe this as an unpriced externality, as we actually pay for the maintenance of the landfills through local body rates. It might be reasonable then to use the money to run the landfills, as it is probably very hard to charge people per plastic bag they throw out, yet heavy plastic bag users impose higher costs on the landfills. However, this is not the plan. Furthermore, I am led to believe that our landfills are far from overflowing. So I don't see any pressing environmental hazard from having them fill up with plastic bags.

Perhaps the externality comes from people that throw them away outside landfills? I don't see this is a major environmental problem facing people - I certainly don't notice clouds of plastic bags clogging up downtown Wellington. Perhaps I am missing them. Certainly plastic bags can harm animals. Google image search plastic bag pollution and you will see some horrific photos of animals being smothered by bags. However I am not sure that this is a huge (in terms of scale) problem (although if I am wrong please correct me). As a lifeguard I only very rarely see plastic bags in the ocean, and they are usually very easy to pull out and get rid of. If the problem is more widespread then this is a reasonable justification for the plan. But my intuition is that it is relatively small, and that there are measures in place to prevent this already (to the extent that it can be).

There is certainly carbon in plastic bags, and seeing as landfills occasionally engage in controlled fires (I believe), perhaps this is the start of a carbon tax. However I would be greatly surprised if the Government (especially this one) plans to implement a carbon tax one good at a time. Furthermore we aren't taxing (or raising the price of) the carbon producing action (the burning) so this would be a relatively inefficient way of correctly pricing this externality.


So I don't think there is an externality-based justification for taxing plastic bags. The final option is simply that the Government considers them a demerit good, that people just should be discouraged using for the sake of it. This seems to be the tack Nick Smith is taking in the article I linked previously. I am unsure as to why this would be, and it is certainly a surprising approach from a Government that railed against paternalism while in opposition.

I suspect it is simply to make themselves appear 'pragmatic' and 'centrist', and I imagine it will probably work in that sense.

Highly Irrational

Me, that is. Apparently it's in the eyes. At least, according to Lula de Silva, the President of Brazil (via Willem Buiter). Apparently he said this:

This crisis was caused by the irrational behaviour of white people with blue eyes, who before the crisis appeared to know everything and now demonstrate that they know nothing.

This stance at least has the benefit of absolving the Jews from their role as perennial scapegoats.

On Earth Hour

Earth Hour is a somewhat polarising event, with some hailing it as an important stepping stone towards avoiding global catastrophe, while others openly mock it.

The first thing to note on Earth Hour is that it is obviously intended to be a symbolic gesture. Anyone who says that turning your lights off for an hour won't avert global warming is confused - no one is suggesting that it will, such a thing is obviously ludicrous. In fact, (the admittedly tendentious) Not PC blog shows us that electricity consumption spiked just prior to Earth Hour, showing that total electricity consumption was probably relatively constant over the whole day. Obviously if Earth Hour has any value, it is a symbolic one.

My worry however, is that supporters of Earth Hour make the reverse error to its opponents - assuming that their actions do more than they actually do. I worry that people will not intuitively realise that they are being symbolic and actually consider their actions part of the solution, and thus revise downward what else they would do. Earth Hour is a poor substitute for serious action.

For my part I think that any 'solution' to the problem of climate change can't on simply convincing people to reduce their own externalities. You have to implement either a cap and trade scheme, or a carbon tax (which I prefer) and make people bear the cost of their transactions. This is basic economics, but it is taking a devastatingly long time to penetrate the web of vested interests that is the public policy machine. I fear that gimmicks like Earth Hour only prolong the process.

Dennett's Dangerous Idea

My favourite philosopher recently gave this talk at the superb annual TED symposium.

The inversion of logic that Dennett explains here, is one of the more subtle consequences of adopting a evolutionary outlook on life, one that most people fail to appreciate. Design without a designer seems fine when talking about nature's feats of engineering, like the wing or the eye. But when the Darwinian lens is trained on human thought, people are surprised by the implications.

Responses to Dennett's line of argument are generally more or less complicated versions of this: "But....um....I experience my experiences. Thats what gives them meaning, you reductionist fool!". The design of our subjective experiences seem to need a meaning attached to them. And while we can accept design without a designer, the concept of meaning without a 'meaner' is harder to grasp.

Obviously, I have glossed over a lot here, but I suspect this point underpins much of constructivist approaches to understanding society. Why must patriarchy have a function? Why do we need a 'death of the author' to justify alternative readings of literature? Why is political language inevitably a form of social control? The answers to these post-structuralist (or whatever) questions are only really crucial if one is unable to grasp that collective trends can simply emerge from the ebb and flow of individual behaviour.

Decoupling design from a designer should imply something similar for meaning. We should look inwards to find out how we attach meaning to things, rather than appeal to some wispy holism. Dennett channels Darwin to give a possible solution to this existential conundrum.

Racism in New Zealand

This annoys me a lot. I was going to write a blog post about it, but it has been done far better by others who share my opinion on the matter.
So instead, I wrote a letter to the Human Rights Commission:

To whom it may concern,

I have recently been distressed to read in the newspaper that the New Zealand Government is actively encouraging firms to select their employees on race-based lines. These sorts of policies are widely (and correctly) derided when racist groups like the National Front promote them, but it seems that in a downturn we are all expected to become honorary racists.

I am particularly upset to see that the Human Rights Commission has not, to my knowledge, made any public statement on this appalling state of affairs. Supporting Human Rights is presumably your raison d'être, yet when the Government promotes their abolition you shy into a corner and keep your mouth shut. It makes me just a little bit ashamed to be a New Zealander.

Tom Mathews

And a letter to the paper:

Dear Sir,

It distresses me to read in your pages (24/03) that Jonathan Coleman, on behalf of the Government, encourages firms to make country of origin an issue when selecting their employees. Society is rightly outraged at xenophobia when racists from the National Front seek to promulgate it, but when our elected officials take over from them our mouths seal shut. For shame.

Tom Mathews

The important point in my mind is not that these sorts of moves are economically misguided (although they are). It's just that it is just plain racist. I have tried to emphasise that in my letters. If you feel the same, I encourage you to do similar. The NZ Human Rights Commission can be reached at infoline@hrc.co.nz, the Dominion Post at news@dompost.co.nz.

Unfortunate

Via the NBR, we learn that the Labour's new President under his guise as the EPMU is planning strikes for some cabin crew. I don't think that price floors unions provide are outrageous in some situations of monopsony or low demand-side competition in the labour market, and they can also help ease information flows in the economy, thus increasing efficiency.

However:

Zeal flight attendants represented by the EPMU recently voted to reject the company offer of a 4.5% pay increase for 15 months....the EPMU is seeking base salary increases of up to 26% and allowance increases of 70%.

I have no sympathy for this on the part of the EPMU. Trying to claim such massive payrises in a worldwide recession (and in a market with several looking to buy labour) is preposterous, and will no doubt lead to hugely increased unemployment for those they purport to represent. Unions in New Zealand seem to be generally working under the assumption that whatever harms the firm is good for the worker. They will be proven wrong, but only at the expense of the most vulnerable members of society they claim to serve.

It is often said in criticism of collective bargaining that there is no union for the unemployed, but I am starting to think that they are fortunate because of it.

Refined Virtuosity

Some of you might have borne witness to Sachin Tendulkar's (pictured to the left) dismantling of the New Zealand attack over the last few weeks. His 163* in the 3rd ODI and the 160 he compiled in the Hamilton test were masterpieces of batsmanship - nearly chanceless, perfectly measured and compactly elegant. His durability and sustained genius is amazing, having debuted as a 16 year-old nearly 20 years ago, and we are lucky to witness his rare talent for probably the last time in this country.

He has obviously been blessed with adundant natural ability. But he has tempered this with an assiduous work ethic which was captured today by the good folk at Cricinfo. While Yuvraj Singh (pictured below), Ishant Sharma and probably others hit the boutiques in Auckland, Tendulkar attended an optional training session. I find this phenomenal. After more than 25 000 international runs and 85 centuries, he still leaps at the opportunity to hone his skills.

This neatly demonstrates a point which is often taken to be a profound ethical criticism of nativist theories of ability as well as being used as an easy rhetorical device to guillotine high achievers in society. People are just "born with it", and from then on its simply an unstoppable rolling maul to success. Wrong. If Sachin relied only on his natural gifts, he probably would have ended up as a very good batsmen, maybe averaging in the mid-40s and being the among the best of his time. Instead, he has recognised his endowment of talent, and focused his productive energy on extracting the best possible value from it. That is why he is amongst the best ever.

More broadly, focussing on things like genetic inheritance of talent or favourable socio-economic context as explanatory variables for success seriously devalues the efforts of the individual. It is an example of a holism which pervades social analysis, a dangerous brainchild of the Standard Social Science Model which I so detest.

The individual should always be the primary unit of explanation. Also, the Indian cricket team rules all.

Interesting Graph

Via an old press release from NASA. This puts in perspective those persistent claims from global-warming denialists that the earth has been cooling over the last few years. It would be easy to attribute such foolish obscurantism to an inability to think in the long term, but I think it is more likely simply to reflect ideological blindness.

The Days of the Old School-Yard

In his essay Why do Intellectuals Oppose Capitalism?, the late Harvard philosopher Robert Nozick hypothesised that the considerable disdain with which many public intellectuals view capitalism was a result of their school-yard days.

The schools, too, exhibited and thereby taught the principle of reward in accordance with (intellectual) merit ... The wider market society, however, taught a different lesson. There the greatest rewards did not go to the verbally brightest.

Essentially, Nozick suggests that individuals that did well in class but struggled in the more 'anarchic' environment of the playground naturally seek a return to a centrally planned system where they were more successful.

Recently I stumbled upon the most compelling piece of evidence for this hypothesis I have seen to date. Witness this piece from Chris Trotter called "Rise of Life's Bullies".

If schools really were about preparing us for life, they'd not only teach us how to endure bullies, they'd teach us how to become one. What is a bully, after all, but a person who has embraced the basic principles of social organisation more ruthlessly than his or her peers?

Indeed, Trotter seems to think the market is indistinguishable from being bullied at school. It is unsurprising then that he views it with such disdain. He even attempts to offer an evolutionary justification for the apparent prevalence of bullying:

Millennia have taught us that when the powerful start exercising their power, the smartest thing for those not involved to do is to stand well clear. Those brave (or foolish) individuals who, in ages past, displayed their empathy too openly, or recklessly intervened on behalf of the victim, were clearly placing themselves at an evolutionary disadvantage.

This is not strictly true - there are many evolutionary advantages to a certain level of altruism. We routinely see recpirocal altruism and kin selection, to name just two. Trotter's intuitions about human behaviour are highly negative - and seeing as many such intuitions are formed at a young age, perhaps this lends weight to Nozick's thesis.

The Missionary Position

Forget actual bankruptcy for a second, how about some of the moral kind. From Africa:

Pope Benedict says Africa's people were suffering disproportionately due to food shortages, financial crises and climate change.

The gall of a man who bears responsibility for the deaths of countless Africans through the church's policy on condoms to admonish anyone on the sufferings faced by said Africans is mind-boggling. 

Acapella Stylings

Udayan posted previously on a music video he liked.

I happen to think this one is excellent. It doesn't have any political undertones as far as I am aware however. But I thought it was worth sharing.

Protectionism as Welfare?

The case for this is argued here.

Essentially, the author admits that it is a given that protectionism harms the country. But most of this harm, he asserts, will just fall upon the 'coastal elites'. It will create jobs for the poor. Therefore we should do it. An uncharitable reader of the article might be tempted to suggest that the author therefore sees only benefits, i.e. hurting the rich ceterus paribus is a desirable goal. Means-testing people to determine whether their interests are worth protecting is not an admirable position (as perhaps implied here). However I aim not to be uncharitable, so I mention this interpretation only for your personal interest.

The argument suffers from a flaw which is endemic in anti-trade positions - incorrectly or inadequately considering the effects on countries other than one's own.  The argument presupposes that it is morally acceptable to hurt the rich to help the poor, but doesn't consider that unemployed Chinese are poor on a level that reaches far beyond the most destitute of Americans. The reason protectionism would create jobs for poor Americans is because it would stop firms employing Chinese people to do the same job. 

Unless you are prepared to argue that Chinese people are worth less than Americans, no-one can possibly accept the argument as presented. I would hope the author isn't prepared to do that, but unfortunately I am not too sure. I suspect (once again) that it is a case of inadequate reflective equilibrium - people have essentially xenophobic intutions which conflict with their other views, but for some reason they have not noticed this and thus have not resolved the tension in their world-views.

As an aside, to someone like me with pro free-trade views, the comments are actually a little terrifying. E.g.

We are in a trade war, and losing because of the almost religious fervor of "free trade" advocates in the Commerce and Trade departments. That's like fighting a real war with a bunch of born-again pacifists as our Generals and Admirals.

This just shows to me once again that at the level of public discourse, anti-trade argumentation is on a par intellectually with creationism.

The Beautiful Young Crew

Lawrence Arabia, a serenely melodic paragon of the burgeoning NZ indie-pop scene has just released a new album, Chant Darling. The first single is called 'The Beautiful Young Crew', and the music video tells a darkly comic political tale. I think it is an example of how music and other narrative arts can augment ordinary political discourse, and shouldn't just be dismissed as mere entertainment. Also, it is just a sweet song.

Ethical Investment

This post on Frogblog got me thinking about so-called Socially Responsible Investment.

My two thoughts on the post in question were:

1) If frog has, as s/he appears to claim, gone through the NZ Super Fund Equity Holdings line by line and determined which parts of it are ethical and which are not, that is very impressive. It is a long list.

2) We should be careful of assuming that investing in WalMart (or by the same argument, developing countries) is bad because their workers aren't  well-off. As Paul Krugman once said, bad jobs are better than no jobs.

However, I wanted to make this a post on the general concept of ethical investment. 

I think that national investment funds should not invest in the following situations.

1) Where the market and/or Government has incorrectly priced externalities. E.g. highly polluting industries that are not subject to Coasean bargaining or socially efficient Pigovian taxation. This will encourage firms to restrict externalities themselves - see this interesting paper for further explanation. Of course, this is not a new idea. 

2) Pursuant to the first, in situations involving repugnant transactions. We should not invest in dealers of child sex-slaves, for example. This is not at all a clear criterion, however.

In the 'pro' column, there doesn't appear to be a morally relevant difference between doing something ourselves and paying someone else to do it. A gangster that orders a drive-by shooting is culpable, even if he doesn't carry it out himself. I think child sex-slavery should be minimised, so facilitating the raising of capital for its continuance would be inconsistent.

In the 'con' column, People's moral compasses don't always completely overlap. You'll notice that with child prostitutes I dishonestly set myself up a very clear case. For example, frog from frogblog thinks that we should not invest in weapons companies. Many libertarians think that guns provide important protection against a tyrannical Government. Yet both their money would be in the pool. How should the moral criteria be set for a fund which constitutes money from the entire (tax-paying) populace?

To borrow one of my favourite Rawlsian concepts, it seems reasonable to have a moral framework determined by a loosely defined overlapping consensus of morality. Even if the majority consider an investment morally appropriate, we should not force the minority to invest in it, as it is forcing them to be morally inconsistent(*). We should only invest in things generally agreed on to be morally appropriate. It seems reasonable to set a (quite low) lower bound on this  - racists might object to investment in firms owned by non-Europeans, for example. We can probably bring ourselves to ignore their cries.

Some issues are less clear-cut than this, for example investing in sweatshops. This is where we can borrow a second idea from Rawls, the well-known concept of reflective equilibrium. Essentially, on issues where there are clashes in interpretations of the situation but a broad agreement on many principles, we can solve the issue by argumentation, to ascertain which party is more consistent in its principles. We might agree that we want to maximise both the utility of the sweat-shop workers (or of their country in general) and our own through profit-making, with probably a higher weighting on the former. It wouldn't be unreasonable to rank them lexicographically, in fact. It seems then that we could refine any further intuitions we might hold (that we shouldn't give money to exploitative factory owners, etc) with recourse to evidence as to the agreed basic principles.

One final point: Does ethical investment cause your portfolio to make less profit? It seems obvious that it would, as you are selecting investments for criteria that are independent (or even negatively correlated with) profit. There appears to be mixed evidence on this score. But that is a topic for another time.

* This is more controversial than it seems, if you think through the domestic political implications. The point needs more expansion. The blog post however does not.

Resigned Realism?

From Kiwiblog:

Let me let you into a secret. No matter what the Government says publicly, aid policy is always tied into a country’s foreign policy.

Well.

Some argumentation is offered to bridge the gap:

... frankly it is bizarre to suggest we should give money out in a way where we ignore NZ’s interests.

Certainly we wouldn't want to be giving out money in ways which actively harmed our interests, like giving maps of New Zealand to terrorists. But...

1) Is it that preposterous to want Governments to be altruistic? In a sense you could see it as correcting for a market failure, in that people generally act under a morally unjustifiable geographical discount rate with respect to altruism. That is an argument I broadly believe, but will not make the case for it right now.
2) Abolishing world poverty is in the long term interests of NZ (climate change issues aside). Imagine if we had a prosperous Africa buying our agricultural products. It is difficult to underestimate the economic benefit of this.

I am of the opinion that aid to developing countries should (but probably never will) be greater than that you give to citizens within your own country, if you choose to do so. I will expand on this argument in a future post perhaps.

Statistics Humour

Source.

Update: Frustratingly, I can't get it not to cut off the side, but you get the idea.

Financial Market Regulation vs Labour Market Regulation

I thought it was relatively clear that the financial market is different to the labour market, therefore regulation would have different effects on the two. There is no direct financial analogy to a minimum wage (what Government would set a price floor on financial products?) just like there is no direct labour analogy to a minumum liquidity ratio, for example.

It would seem then that market failure in one doesn't directly imply market failure in another. A good explanation of the market failure inherent in much banking comes from Richard Posner:

A banker is not going to forgo a risk that should it materialize would wreck the economy, because his forbearance would have no consequence, as long as his competitors continued running the risk; it is a classic case of external costs, requiring government intervention.

The whole article is here, it is mainly Posner arguing against pay caps for bailed out banks. I highlight this quote because although it seems reasonable for the financial industry I cannot think of a comparable example for the labour market. Is there a particular set of circumstances in the free market for labour that is set up in a similar Prisoner's Dilemma - type scenario of encouraging defection and worse outcomes for all? I am sceptical.

So again, although there may be market failure in the financial industry, it doesn't necessarily follow that market failure is inherent in every human activity. This is something to keep in mind when people associate financial market deregulation with all other forms of deregulation and general economic liberalisation. It may be true that these things are also bad (although I am not of this opinion) but to conflate the two is facile.

From The Standard article I linked:

Of course the (Wall Street Journal), being the free market cheerleader it is, totally approves of (the 90 Day Probation Bill) (yes, despite the current economic situation and its causes- one can only imagine what it would take to shake such faith).

(The first two brackets are mine, the third is not.) I am not aware of an argument that claims that the contraction in available credit (which we assume is the cause of the crisis) was caused by overly fluid labour markets. If anything, this is exactly what we need to help us weather it.

Putative Quantitative Easing

The Bank of England may lower interest rates to half a percent, but apparently losing money from your savings account (after inflation and tax) isn't enough to get people spending again.

The BBC suggests that they will try some more creative monetary policy, ie, quantatitive easing. It will be interesting to see how this pans out. If it is successful, I wonder if people will stop clamouring for fiscal stimulus? I highly doubt it. Apparently, Rahm Emmanuel has said this:

“You don’t ever want to let a crisis go to waste: it’s an opportunity to do important things that you would otherwise avoid.”

Greg Mankiw (above link) reads this as an ominous warning for supporters of limited Government. However it is unclear whether he considers himself among them, having been an economic advisor to a President with a record of highly expansionary fiscal policy.

That is probably a bit unfair. But I let my point stand about quantitative easing. If it works, I predict no backoff in arguments for fiscal stimulus, especially from those interests most likely to be 'stimulated'.

If it doesn't work, then said proponents can probably justifiably up the ante on their pleading.