Saturday, January 31, 2015

The Writing's on the Queensland Wall.


You've got to love our elites.

A little less than 3 years ago, Campbell Newman (Liberal National Party, "conservative, centre-right, libertarian") was elected Queensland premier by a landslide:

Party                                          Seats
LNP                                               73
QLD Labor                                          9
Crossbenchers                                      7

After yonks in government, plagued by all sorts of problems, ranging from ineptitude, corruption and anti-people policies not different from those of their opponents, QLD Labor was reduced to 9 seats!

Let me spell that out: In a 89-seat parliament with just one house, this gave the LNP absolute power to do and undo as they pleased. And, boy, they did. After a while, I just tired of writing about it.

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About a year and a half later, in circumstances similar to those in Queensland, Tony Abbott led the federal Liberal/National Coalition ("conservative, centre-right, libertarian") to landslide victory against a weak Labor government, plagued by infighting, where the main distinguishing feature of both parties was their names, "Labor" and "Coalition", not their policies.

Indeed, the big difference between the Queensland and federal results was that at a federal level, the Coalition did not fully control parliament: they control the House of Representatives (90 seats out of 150), not so with the Senate (33 seats out of 76, with 18 utterly unpredictable crossbenchers). This has stopped the federal government from replicating at a federal level, the catastrophe the LNP caused in Queensland. Not that they didn't try and manage to do a lot of harm.

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Yesterday was the Queensland state election. With 9 seats still undecided, the preliminary results are:

Party                                          Seats
LNP                                               33
QLD Labor                                         44
Crossbenchers                                      3

It's a remarkable defeat by any account. Adding insult to injury, Newman lost his seat of Ashgrove to QLD Labor's Kate Jones, whom he defeated in 2012.

----------

No doubt, pundits will discuss these results and its implications for Abbott and the Coalition. But what are the conclusions Coalition supporters will draw from this? Should we celebrate Newman's defeat?

Let's proceed by steps. First: what will those people make of this?

Judging by the puppeteer's tweet a few days ago:

(source)

The puppet only needs to get rid of an obnoxious advisor, not change his destructive, odious, class-based policies. As simple as that.

Judging by his own party colleagues, he just needs to spin things better. It's all about style and marketing. We'll buy the lemon, provided the used-car salesman talks us into it. Failing that, they'll kick him out and change the figure-head:


Second: should we celebrate Newman's defeat? Well, yes and no.

Yes, because Newman's defeat will at least stop further damage being inflicted on Queenslanders.

No, because, per se, Labor's victory will not reverse the damage already inflicted and there is no guarantee Labor will be much better.

So, personally, I think it's a kind of a limited victory. Better than nothing, I guess.

And this applies to both, the Queensland and federal levels: it's not a matter of fucking-Abbott or of fucking-Newman, it's not a matter of labels, it's not a matter of spinning things better, it's a matter of policies, stupid.


UPDATE:
01/02/2015: Here's Michelle Grattan's account of Malcolm Turnbull's views on leadership:
"Leaders must be 'explainers and advocates, unravelling complex issues in clear language', Communications Minister Malcolm Turnbull has said, outlining a strategy for selling hard economic messages."
Let's be sceptic. Maybe those weren't Turnbull's literal words, only Grattan's interpretation, after all, Turnbull is regarded as the smart one in the Abbott Cabinet.

Still, again you see the same thing. For our cognoscenti -- Grattan in this case -- the problem lies not in the policies, but in how they are sold to the public.

Incidentally, doesn't that sound like Turnbull's own sales-pitch as would-be PM?

Friday, January 30, 2015

Ylvis: "The (Marginalist) Fox"


Dedicated to marginalist mainstream economists (and their PoMo/PoKe long-lost twins)
"The secret of the fox, ancient mystery.
"Somewhere deep in the woods, I know you're hiding.
"What is your sound? Will we ever know?
"Will always be a mystery what do you say?" (Ylvis)

A couple of years ago brothers Vegard and Bård Ylvisåker (better known as the comedy duo Ylvis), from Norway, sang about an "ancient mystery" which, like the diamond-water "paradox", has bewildered sages since the dawn of history: "What does the fox say"?



One day this catchy and rather funny pop song may figure prominently in economics textbooks thanks to some young and intrepid economist (maybe a PoMo/PoKe one?). Mark my words.


Tuesday, January 27, 2015

The Paradox of Value that Never Was.


With a diameter of 12,742 kilometres, Earth is a small planet. It's certainly much smaller than Jupiter (with a 139,822 km diameter).

Relative sizes: Earth and Jupiter. [A]

And, yet, humans evolved on tiny Earth, not on Jupiter (indeed, couldn't have evolved there).

Is this a paradox? Say, the Earth-Jupiter paradox? I mean, is it paradoxical that our planet, the home of all of humanity, the scenario of all of history, is small in relation to most planets in the solar system and revolves around a star, unremarkable among hundreds of billions of stars in a particular galaxy, unremarkable among hundreds of billions of galaxies?

It may be humbling, but I see no paradox there.

To see a paradox in the plebeian origins of our species, I'd first need to assume, maybe implicitly, something additional: that our species "deserves" a stately, special, or at least big, birthplace.

Since I don't assume anything additional, I don't find the Earth's small size or peripheral location conflicting with the fact our species evolved there. If you like, I've never spent a single sleepless night puzzling that out.

Historically, however, this was a serious matter for many.

----------

As Michael White (White 2002) and others have explained, many, too, claim to have found a paradox in the following passage from Adam Smith's "The Wealth of Nations":
"Nothing is more useful than water; but it will purchase scarce any thing; scarce any thing can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it."
The Library of Economics and Liberty (Econlib.org 2015) is a case in point:
"[Carl] Menger used this insight [i.e. marginal utility] to resolve the diamond-water paradox that had baffled Adam Smith (see marginalism)." 
Noted American economist Milton Friedman (Friedman 1999) provides another example:
"He [W. Stanley Jevons] resolved the classic diamond-water paradox—diamonds are a luxury, water a necessity, yet diamonds command a higher price than water—by showing that 'marginal utility'—the utility gained from having one more unit of something—not 'total utility' plays the key role in determining price."
Who should be credited with that, Jevons or Menger? Leaving that aside, if one believes that account, Smith and a host of other luminaries must have spent their nights tossing and turning, their thoughts devoted to solve that riddle: the diamond-water paradox!

But, is this really a paradox?

The parallel with the Earth-Jupiter "paradox" is evident. To be a paradox, it requires one to assume, perhaps implicitly, something additional. For instance, that what one gets in exchange for a good (say, water) should reflect its usefulness.

Since I don't assume anything additional, I see no paradox. Much more importantly, however, Smith himself appeared to see no paradox there. For one, he never wrote anything in WN to the effect that this was a devilish conundrum he had tried, unsuccessfully, to solve. (Check the link above!)

For all we know Smith was fully satisfied with his own solution: "what can be had in exchange" for water or diamonds (i.e. their values in exchange) does not depend on their usefulness (i.e. their values in use), but on their costs of production/labour time, as he explains later.

Friedman's quote above shows his own mistake: Smith never intended to explain value in exchange on the basis of use in value (i.e. "total utility").

For what it is worth, I think Smith wasn't too far off the mark.

----------

When mainstream authors like Friedman claim "marginal utility" solves a centuries-old mystery keeping economic thought from advancing, they are solving a "paradox" existing in their minds, only. It is a claim both self-serving and false. If someone ever badly needed a good night's sleep, it seems, it was them, for they weren't thinking straight.

"Marginal utility" seems to be their imaginary answer to an irrelevant question nobody, but themselves, ever asked.

References
Econlib.org, (2015). Carl Menger: The Concise Encyclopedia of Economics | Library of Economics and Liberty.
[online] Available at: http://www.econlib.org/library/Enc/bios/Menger.html [Accessed 26 Jan. 2015].

Friedman, M. (1997). John Maynard Keynes. Economic Quarterly 83.2:1-20.
[online] Papers.ssrn.com. Available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2129832 [Accessed 26 Jan. 2015].

White, M. (2002). Doctoring Adam Smith: The Fable of the Diamonds and Water Paradox. History of Political Economy, 34(4), pp.659-683.

Image Credits:
[A] "Rough visual comparison of Jupiter, Earth, and the Great Red Spot. Approximate scale is 44 km/px." January 14th, 2007. Author: Brian0918 on NASA images. Image in the public domain. Wikipedia.

Sunday, January 25, 2015

Greece and Australia: Jan 26.


The Greek people voted for Syriza today, January 26 (Australian time). I imagine many "objective" journalists must be having little fits.

source
But it's too soon to celebrate. So, let's hope Syriza does not follow the same path to "respectability" lefties seem to crave. The respect of the enemies of the people is not a good thing.

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Here is Australia Day or Survival Day, depending on your perspective. Little to celebrate.


Wake Up, people! (See here)

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UPDATE:
26-01-2015. I had forgotten the big issue today. PM Tony Abbott decided to award the Duke of Edinburgh a Knighthood of the Order of Australia. Kinda "promoting" a colonel to sergeant.

This apparently caught all pundits by surprise.

Poppycock. I take Abbott's side on this. Every single Australian knows people like Abbott see society this way: you must suck up to your betters and oppress those below you. The only surprise is that he practices what he preaches.

Saturday, January 24, 2015

Domingo/Kaufmann/Wagner: "Lohengrin".


[A]

"Act One [prelude] [B]
"The banks of the river Scheldt.
"Near Antwerp, King Henry the Fowler of Saxony has assembled a group of Brabantine nobles and commoners to discuss affairs of state. He is dismayed to find the local political situation in disarray … and suddenly a knightly figure is seen approaching in a small boat drawn by a swan …"



"Act Three [finale, 'In fernem Land': i.e. in a foreign/distant land]
"The banks of the river Scheldt.
"… He narrates the story of the Holy Grail and its keepers, and how he … was sent …"


Unfortunately, I could not find both videos taken from the same production of Richard Wagner's "Lohengrin, romantic opera in three acts", so we have different orchestras, choirs and conductors: three different interpretations. Still, one can appreciate Lohengrin's leitmotif in both videos (hint: pay attention to the music accompanying Plácido Domingo). Wagner gave great importance to them.

Besides its undeniable beauty (I'll confess: I am a fan of Wagner), "Lohengrin" in many ways exemplifies the ideals of the nineteenth century European (indeed, global) romantic artistic and cultural movement: focus on individuals and emotions, nature reflecting those emotions, exotic/medieval settings, the hero, struggle against all odds, tragedy and fate, among others. It has a clear popular appeal (see here, however, for the other side of the romantic coin).

A more modern and equally magnificent (in fact, critically acclaimed) performance of "In fernem Land" follows below. The tenor is Jonas Kaufmann, in the role of Lohengrin. The contrast between both performances should prove instructive. While still recognizably romantic, viewers will find it visually different; the idea is to give the performance a more modern look, consonant with modern sensibilities (hint: compare both tenors' body languages, facial expression, and clothing and stage lighting).

Note, however, the soprano, Anja Harteros, in the role of Elsa von Brabant, trying to stop Lohengrin's speech and her final dismay: their fate is tragically sealed by Lohengrin's answer to her otherwise natural question.



Image Credits and Notes:
[A] The beautiful photo opening this post comes from Justin Mier's blog, specializing in photography; I believe he is the author, to whom all credits are due and all rights belong. It seems appropriate to this subject because one could almost see the Swan Knight emerging from the fog and approaching the shore.
[B] All quotes from the booklet included with the CD box set The RCA Opera Treasury - Lohengrin (1997, BMG Classics).

Friday, January 23, 2015

Climate Change at Davos.


The 1% rides to the planet's rescue … on 1,700 private jets! (yes, that's not a typo: SEVENTEEN HUNDRED!)

source

Whoever said the "bourgeois and the intelligentsia" don't "carry the seeds of all human advancement"?

Sunday, January 18, 2015

Samuelson and Friedman.


For some reason, lots of people have been remembering the late Milton Friedman and even other dead twentieth century economists, once famous and now mostly forgotten. Nobody, however, seems to remember Paul Samuelson, usually regarded as Friedman's Keynesian nemesis.

Samuelson (1915-2009), himself, seemed to have had good memory until his death.

This is him reminiscing on Friedman, in June 2009, for The Atlantic's Conor Clarke:
"Friedman had a solid MV = PQ doctrine from which he deviated very little all his life. By the way, he's about as smart a guy as you'll meet. He's as persuasive as you hope not to meet. And to be candid, I should tell you that I stayed on good terms with Milton for more than 60 years. But I didn't do it by telling him exactly everything I thought about him. He was a libertarian to the point of nuttiness. People thought he was joking, but he was against licensing surgeons and so forth".
(Samuelson comments on Ben Bernanke, Greg Mankiw, and others, as well; he also mentions Alan Greenspan and his youthful admiration for Ayn Rand.)

A few months earlier, Samuelson had been considerably less appreciative of Friedman. Samuelson to Nathan Gardels from NPQ (January 2009):
"And today we see how utterly mistaken was the Milton Friedman notion that a market system can regulate itself. We see how silly the Ronald Reagan slogan was that government is the problem, not the solution. This prevailing ideology of the last few decades has now been reversed.
"Everyone understands now, on the contrary, that there can be no solution without government. The Keynesian idea is once again accepted that fiscal policy and deficit spending has a major role to play in guiding a market economy. I wish Friedman were still alive so he could witness how his extremism led to the defeat of his own ideas."
Apparently, 94-year old Samuelson wasn't immune to hostile reactions (like Peter Robinson's for Forbes, in February) following his January interview.

----------

Does this silence from American Keynesians reflect history's verdict on Samuelson?

----------

Update:
22-01-2015. Lord Skidelsky, unlike American Keynesians, does remember Paul Samuelson fondly. If the title of his Project Syndicate piece today is anything to go by, it does seem like Samuelson lost to Friedman: "The Fall of the House of Samuelson".

Friday, January 16, 2015

Chris Hadfield in Australia


Almost two years ago I posted a link to the video below. I'm repeating the link today.


As it turns out, Chris Hadfield visited Australia in August last year. I learned of that only a few days ago, thanks to an interview he gave to Jane Hutcheon, for ABC News.

Hadfield is an interesting guy. The interview touches several things, including the tragedy of Columbia. He seems a decent, straight-talking fellow.

Another highlight for me was his first-person account of launching day, from getting dressed to the moment they reach weightlessness. Really fascinating stuff. I'm glad he visited Oz and that Hutcheon seized the opportunity (congratulations to her for that). Like I said before, he is the coolest guy in outer space.

Australian residents can check on ABC iView. I'm not sure overseas residents will be delivered the file from iView, but they can get it here.

Monday, January 12, 2015

Wren-Lewis and Krugman vs. Critics.


Simon Wren-Lewis (economics professor at Oxford University, a fellow of Merton College, see here) is annoyed. This gets him "really cross":

Internet troll commenting on SW-L's blog: "Unfortunately, this is what happens when you contaminate the GT [General Theory] with inter-temporal economics".

And

Internet troll: "Sachs is very much the quintessential Great Moderation New Keynesian".

Wren-Lewis doesn't think so; I have no dog in that hunt, so I won't take sides.

But, why would a troll's comments piss Wren-Lewis off? Well:
"However this comment (and others like it) makes me cross for the following simple reason. Many economists and non-economists of the right try and portray mainstream economics as naturally supportive of their political programme. Right wing think tanks name themselves after one of the pioneers of economics. It is normally nonsense: mainstream economics is all about market failure, diminishing marginal utility favours redistribution etc. Of course there are counter examples (Pareto optimality), so it would be wrong to say that economics leans to the left as well.
"However when some of those on the left say yes, mainstream economics is all the things that those on the right say it is, they share a mutual conspiracy to distort the truth. When you are trying hard to convince policy makers and journalists that what those on the right are arguing for is not implied by mainstream thought, people from the left pop up to undermine what you say."
In his weekly column, Paul Krugman makes the same point, much more briefly:
"Not that there's anything wrong with being heterodox in general; but a lot of what we've been seeing misidentifies the problem, and if anything gives aid and comfort to the wrong people."
There are many things in Wren-Lewis' quote, but in short: what annoys him (and Krugman) is the potential political implications of allegedly unfair criticism. In other words, consciously or not, both men are admitting that the economic organization of society is not a matter of polite discussion and scholarly reasoning among enlightened elites. Policy is not science by other means (I'd add, neither is science as clear cut).

They aren't the first to feel that way, but they did put it clearly enough. Both men sincerely believe what they preach and perceive the criticism as unfair. Worse: criticism may make it even harder to "convince policy makers and journalists" (and perhaps the public at large): it may "give aid and comfort to the wrong people".

No doubt they would never put things this way, but they seem to have in mind a sort of "united front", a kind of alliance, or at least academic non-aggression treaty between themselves and the diverse "heterodox": "us" against "the wrong people".

Their concern is understandable and it may even make some sense. At any rate -- and speaking on my behalf -- I'm rather sympathetic to them, even while I'm somewhat less enthusiastic about their immediate policies and certainly oppose their long-term, deeper theoretical views.

You see, us, Marxists, have experienced first-hand truly unfair, genuinely malignant, undeniably bad faith, demonstrably illiterate, stubborn, unthinking criticism and opposition (sabotage, in one word). Why, many of Wren-Lewis and Krugman's own mates (but not only them!) are really good at that. Their buddies don't seem too keen on a "united front": they want acolytes and whipping boys (or hippies to punch, if you prefer), not allies. For us (only us, this time) they are part of the "wrong people".

Given that, has a "united front" any chance?

Further, who can stop trolls from doing what trolls do? Could Wren-Lewis or Krugman promise to keep their buddies on a leash?

So, sorry professors, based on experience, there is no way of this ever changing. Personally, I feel no urge to criticize either of you, but the same need to win hearts and minds motivating you motivates your critics, as it motivates Marxists, and anti-Marxist jihadists (indeed, anyone with an interest in economics).

Frustrating as this may be, you guys better get used to it, as Marxists had to.

Sunday, January 11, 2015

Ideology is Back!


"Anyone who says to you: 'Believe me, I have no prejudices,' is either succeeding in deceiving himself or trying to deceive you." Joan Robinson.

The subject of ideology is becoming hot once again in the econo-blogosphere. The story so far:

Dec 8, 2014, Zubin Jelveh, Bruce Kogut, and Suresh Naidu (JKN henceforth) published a brief note at 538.com, summarizing their working paper on ideology:
"So we set out to test the idea of nonpartisan economics on a large scale. In a recent paper, we researched whether economists' political leanings were associated with their professional work. The answer: yes."
They presented a chart for one among several tests, purportedly showing economists' susceptibility to ideology.

Mother Jones' Kevin Drum replied the same day:
"[I]t sure looks to me as if … economists as a whole are remarkably unbiased. I mean, look at that chart again. I would have expected a much steeper line. Instead, what we see is just the barest possibility that ideology has a very slight effect on economists' findings.
"If these results are actually true, then congratulations economists! You guys are pretty damn evenhanded. The most committed Austrians and the most extreme socialists are apparently producing numerical results that are only slightly different. If there's another field this side of nuclear physics that does better, I'd be surprised."
The next day Matthew Martin found that the regression line included in the original chart in the 538.com was too sensitive to two outliers and agreed with other bloggers that "an effect of this [small] size cannot explain a noticeable fraction of the total variation in economists' result" (link).

In a comment to Martin's post, a few days later, Z. Jelveh explained that:
"Just wanted to point out that do [due to?] a communication error the incorrect chart was posted on 538. The correct version is now up and is from Figure 9 in the paper."
The JKN paper is fairly long (80 pages: 38 of text, plus 42 of references, tables, figures, and appendix); it's also very complex, statistically and IT-wise (Jelveh, a Ph.D. candidate, seems to be the computer guy in the JKN team). Frankly, I would be surprised these early and lightning-fast replies reflected an in-depth appraisal of the paper and probably refer only to the 358.com summary.

At any event, Drum's article gives away why his reaction was so quick: the paper casts doubt on the impartiality of economists! That's a serious no-no.

I am no competent to emit any pronouncement on the statistics and computer stuff involved. However, I did find something that makes me somewhat skeptical of the paper, without denying the authors' innovative efforts.

The paper's Introduction, as motivation, cites two news stories involving two prominent economists nominated for the public office. One was "blocked by the Senate, with one senator remarking that he was 'an old-fashioned, big government Keynesian'"; the other withdrew his candidacy "after opposition from liberal groups over prior support for deregulation and relationships to the financial sector".

This was supposed to demonstrate that economists are broadly seen as susceptible to ideological influences (I wholeheartedly agree with them on that).

But their examples admit another reading: who are the ideologues in those examples, the economists or the politicians who opposed them? Maybe both? If this alternative reading seems unclear to the authors -- as it is apparent -- then one is unfortunately left with doubts about their results: how can one quantify something as tricky as ideology, when one is not clear what it is?

This suspicion only gets worse, as the authors apparently conflate "American political party membership" with "ideology" (revealed even in their choice of subindexes: d for "Left" and r for "Right"). After all, considering fiscal policy, a Republican President, like Dwight Eisenhower, would probably be classified as "Left" when compared to a Democratic President, like Bill Clinton (in other matters, Clinton would probably be to Eisenhower's "Left"). Both would be considered "Right" compared to senator Bernie Sanders, and "Left" compared to the KKK or to the senator Joseph McCarthy. Are economists immune to this?

In connection to Drum's remark above: are there any "committed Austrians and the most extreme socialists" in JKN's database? It's hard to tell, based on the list of top ngrams JKN offered.

----------

Robert Vienneau identified another strand of debate, unconnected to the JKN paper and featuring Paul Krugman, Simon Wren-Lewis and others. As usual, the whole thing revolves around the Keynesian family feud (although the illegitimate side of the family uses the "heterodox" to diplomatically refer to the legitimate children, inviting thereby the other non-Keynesian heterodox to join the fray against the "orthodox").

Vienneau, however, missed this post by prominent Austrian economist Peter Boetke, complaining the other mainstream economics is too Left (SRSLY???). Anyway, Boetke's appraisal is another no-no for the other mainstream economists: aren't they supposed to be "inhumanly impartial"? At least Austrians are clearly not "impartial": they side with the other side. Credit for the honesty, I guess.

Matías Vernengo shirtfronts da Man, da Krug-Man, that is.

Chris Dillow (maybe you could say an Analytical Marxist; I call them neoclassical Marxists, pdf) intervenes "to take a little heat out of the orthodox vs heterodox debate". Good luck with that.

Friday, January 9, 2015

Smith, Weissberg, Mandell: "Feudin' Banjos".


I have mixed feelings towards John Boorman's 1972 film "Deliverance", with Jon Voight, Burt Reynolds, Ned Beatty, and Ronny Cox.

There are several things in that movie that make me uncomfortable. Among them, the fact they didn't credit the author and performers of the piece below:



But, credit where credit is due, "Feudin' Banjos" (also referred to as "Dueling Banjos") is a great piece and it was composed by Arthur "Guitar Boogie" Smith (apparently performed for the film by Eric Weissberg and Steve Mandell).

Frankly, I like the piece. I also liked the contemptuous dignity in Lonnie's face (played by Billy Redden) at the end of the scene. One is left to wonder how many times Lonnie has seen people like the urban middle-class Bobby Trippe (played by Ned Beatty).

It's sad how rural Americans (once depicted in John Steinbeck's "The Grapes of Wrath" as the noble Joads, full of greatness in their misery) have been debased in the eyes of their fellow Americans.