Are Australian Economists a Bevy of Camp-Following Whores?
I have an article at The Conversation on the results of a survey of the policy views of members of the Economic Society of Australia. Along with poorly worded questions, the survey suffers from a selection bias problem. The survey is arguably more representative of those ESA members interested in public policy than of economists more generally.
Judy Sloan beat me to the punch in commenting on the response to the minimum wage question. As Sloan quotes Jim Buchanan:
no self-respecting economist would claim that increases in the minimum wage increase employment. Such a claim, if seriously advanced, becomes equivalent to a denial that there is even minimum scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests. Fortunately, only a handful of economists are willing to throw over the teaching of two centuries; we have not yet become a bevy of camp-following whores.
Except for the majority of ESA members, it seems.
UPDATE: John Tierney considers selection bias in the US academy.
posted on 26 July 2011 by skirchner in Economics, Politics
(1) Comments | Permalink | Main
Be Careful What Jim Grant Wishes For
A gold standard won’t do what Jim Grant says it will:
Supporters of the gold standard like to point out that since creation of the Fed in 1913 the dollar has lost 95% of its value. Well in 1913, the dollar was convertible into an ounce of gold at $20.86 an ounce. So while the dollar has lost 95 percent of its value, gold has appreciated even more rapidly than the dollar has depreciated. If gold had kept its value in 1913, its value today would be somewhere between $400 and $500 an ounce. Accept for argument’s sake the claim of supporters of the gold standard that the recent run up in the value of gold was caused by a loss of confidence in the dollar. Would it not be reasonable to conclude from that assumption that if the dollar were made convertible into gold, people would then start selling off their gold, the threat of dollar depreciation having been eliminated?
But wait. If people started selling off their gold, the value of gold would decline. If the real value of the gold fell from its current value back to its value in 1913 when the dollar was convertible into gold at $20.86, the value of would lose two-thirds to three-quarters of its value. We are talking about two or three hundred percent inflation. Does that make feel more confident about the value of your savings?
posted on 19 July 2011 by skirchner in Economics, Financial Markets, Gold
(0) Comments | Permalink | Main
Friedman Was a Hedgehog
John Cochrane: ‘economic events should be unforecastable, and their unforecastability is a sign that the markets and our theories about them are working well.’
posted on 16 July 2011 by skirchner in Economics, Financial Markets
(0) Comments | Permalink | Main
How the Financial Crisis Inquiry Commission Suppressed Dissent
Peter Wallison responds to the Report of the Democratic Staff of the House Oversight and Government Reform Committee:
The report of the Democratic staff of the House Committee on Oversight and Government Reform—although it attempts to call my conduct into question as a member of the Financial Crisis Inquiry Commission—actually indicts the Commission. The facts are these. From the outset of its “investigation” the Commission’s chair, Phil Angelides, was intent on reporting that the financial crisis was caused by greed, misconduct and lack of regulation of the private sector, exculpating government housing policy from any significant responsibility. Evidence of this can be seen in the fact that in December 2009—before any investigation had been done—Angelides handed the commission members a list of hearings that the Commission would hold over the succeeding 8 months. Those hearings focused on the private sector’s role in the financial crisis, and paid scant attention to the government’s role. This was fully in accord with the interests of the House and Senate Democrats, who were intent on establishing this narrative as a basis for enacting the Dodd-Frank Act, which sought to impose substantial new regulation on the U.S. financial system.
posted on 16 July 2011 by skirchner in Economics, Financial Markets
(0) Comments | Permalink | Main
Federal Election Betting Market Odds and Carbon Sunday
Simon Jackman updates federal election betting market implied probs. See if you can spot carbon Sunday!
Sadly, Malcolm Turnbull still doesn’t get it.
posted on 14 July 2011 by skirchner in Economics, Financial Markets, Politics
(0) Comments | Permalink | Main
GSE Debt: ‘Treasuries with Higher Yield’
Why worry about US Treasuries when they’re buried in agency debt:
The expansion of agency debt not only imposes risk and realized losses on taxpayers—we recall the $160 billion that the U.S. Treasury has been forced to put into Fannie and Freddie to prevent their financial collapse—it also increases the cost of Treasury’s direct financing by creating a huge pool of alternate government-backed securities to compete with Treasury securities, and thus increases the interest cost to taxpayers.
So although agencies are not “officially government debt,” they undoubtedly increase the required interest rates on Treasury securities, in my judgment, and thus increase the federal deficit. The greater the amount of agency securities available as potential substitutes for Treasuries, the greater this effect must be. As a manager of a major institutional investor told me recently, “We view Fannie and Freddie MBS as Treasuries with a higher yield—so now we own very few Treasuries.”
posted on 14 July 2011 by skirchner in Economics, Financial Markets
(0) Comments | Permalink | Main
Taxploitation II: Tax Reform for Incentive, Growth and Smaller Government
CIS has released a collection of readings Taxploitation II: Tax Reform for Incentive, Growth and Smaller Government. I have a chapter on capital gains tax, which updates an earlier policy monograph on the subject to reflect the outcome of the Henry tax review.
As I note in my chapter, the Henry review should have been an embarrassment to most Australian journalists writing on the subject of capital gains tax and tax expenditures. George Megalogenis characterised the Henry review as ‘cheeky’, which is as close as he comes to acknowledging that the review’s conclusions and recommendations invalidate most of what George has written on these subjects. Australian journalists have misread (or simply failed to read) the fiscal implications of the Treasury’s tax expenditure statements. They are certainly not alone in doing this, but that is no excuse.
posted on 13 July 2011 by skirchner in Economics, Fiscal Policy
(0) Comments | Permalink | Main
MNI-Deutsche Börse Economic Forecasting Competition – Final Round
Congratulations to Jos Theelen of the University of Amsterdam, who took out first prize in the MNI-Deutsche Börse Economic Forecasting Competition. Along with Daiwa Capital’s Mike Moran and myself, Jos was the only other person to place in two of the three forecasting rounds.
This was my first foray back into forecasting since the financial crisis and it was interesting to see that many of the pre-crisis forecasting relationships still hold. The final June round was particularly brutal, however, given the bearish turn in the US data.
Hopefully, MNI-DB will turn this into a regular event. There are too few independent, public tests of economic forecasting ability.
posted on 13 July 2011 by skirchner in Economics, Financial Markets
(2) Comments | Permalink | Main
Unhypothecating the Flood Levy
If your first pay packet of the new financial year is a bit lighter, it is probably due to the flood levy, the first discretionary federal tax increase in over a decade. Robert Carling wrote a paper for CIS in 2007 on the misuse of tax earmarking, of which the flood levy is a good example.
Tax increases should not come as a surprise following the unfunded fiscal stimulus of 2008-09. Announcing an unfunded fiscal stimulus is equivalent to announcing a future tax increase. It is just a matter of when the increased tax burden will have to be paid. The increase in household saving that accompanied the stimulus suggests that households understand this.
Announcing the details of the re-jigged Rudd-Turnbull CPRS at the end of the same week that many taxpayers will experience their first discretionary federal income tax increase in over a decade is a curious political choice to say the least. It can only add to the unpopularity of the new CPRS.
posted on 08 July 2011 by skirchner in Economics, Fiscal Policy
(0) Comments | Permalink | Main
Some Agreement and Disagreement on FDI in Australia
Paul Barratt agrees with me that foreign investment in Australian agricultural land does not raise questions of sovereignty or food security. However, he argues that foreign investment may give rise to other ‘national interest’ concerns. Barrett gives as an example the proposal by Chinalco to increase its stake in Rio Tinto. Yet the concerns raised by Barrett in this context were investigated and dismissed by the ACCC. Similarly, the Australian Taxation Office has a very broad mandate and strong powers to address the transfer pricing issues raised by Barrett.
The point of my article in the Australian Financial Review was not to say that commercial transactions should be outside the scope of regulation. As I noted in my op-ed:
Australia has a robust regulatory framework around land use and business investment more generally. Politicians should put their trust in these frameworks, rather than seeking new mechanisms for political interference and meddling in commercial transactions.
The Foreign Acquisitions and Takeovers Act (FATA) and the FIRB do not add anything useful to the regulation of business investment in Australia that is not already addressed by other agencies, upon which the FIRB relies heavily for advice. FATA and the FIRB exist only to provide a mechanism for political interference in the market ownership and control of Australian equity capital. Parliament should legislate to regulate business investment in the national interest, regardless of ownership. But this can be done effectively without the FATA or the FIRB.
posted on 07 July 2011 by skirchner in Economics, Foreign Investment
(0) Comments | Permalink | Main
‘I Don’t Like It’: Australia’s Hansonite Political Class
I have an op-ed in today’s AFR arguing that Australia’s politicians are united as much by a desire to meddle as by xenophobia in their opposition to foreign investment in agricultural land. Text below the fold (may differ slightly from edited AFR text).
Alan Oxley makes related arguments in today’s Australian.
continue reading
posted on 02 July 2011 by skirchner in Economics, Foreign Investment
(0) Comments | Permalink | Main
Chinese Perspectives on Investing in Australia
With Sinosteel pulling the plug on a $2bn iron ore mine, the Lowy Institute has come out with a timely survey of Chinese Perspectives on Investing in Australia. The Lowy analysis highlights the role of government policy in causing confusion among Chinese investors. It singles out what it calls ‘public (but undocumented) comments in 2009 by a FIRB official.’ I assume the author means these comments, which are now on the public record following an FOI request.
The Lowy analysis is disappointing in arguing that if the FIRB did not exist, we would have to invent it. It even suggests setting up a FIRB presence in China. Given that the Treasurer has sought to regulate Australian FDI in China through some of the conditionality imposed on Chinese acquisitions in Australia, that would be perversely appropriate. It seems that geography is no boundary to the Treasurer’s discretion. Australia’s dysfunctional regulatory regime for FDI is a problem not only for Chinese investors, but for anyone engaged in cross-border acquisitions of Australian equity capital.
posted on 24 June 2011 by skirchner in Economics, Foreign Investment
(0) Comments | Permalink | Main
All Their Own Work
FRANKLIN D. RAINES, chief executive of Fannie Mae, May 16, 2000:
It was Congress that chartered Fannie Mae and later Freddie Mac as private shareholder-owned corporations, so Congress deserves the lion’s share of the credit for the successes of the secondary market and the housing finance system today. What Congress did turned out to be absolutely brilliant—it created a system that harnesses private enterprise and private capital to deliver the public benefit of home ownership. And it maximizes this public benefit while minimizing the public risk, and without spending a nickel of public funds.
From Morgenson and Rosner’s Reckless Endangerment.
posted on 13 June 2011 by skirchner in Economics, Financial Markets
(1) Comments | Permalink | Main
Joe Stiglitz and Fannie Mae
From Morgenson and Rosner’s Reckless Endangerment:
Fannie Mae also published its own series of studies on housing, known as Fannie Mae Papers. In these reports, Fannie would ask prominent academics to discuss topics near and dear to the company’s heart. In March 2002 Joseph Stiglitz, a Nobel Prize winner, and Peter Orszag, who would later become the head of the Congressional Budget Office under Obama, along with Jonathan Orszag, published a paper entitled “Implications of the New Fannie Mae and Freddie Mac Risk-Based Capital Standard.” The noted academics pushed back against the companies’ critics who argued that both Fannie and Freddie posed significant risks to the taxpayer. For example, their paper concluded that even though Fannie and Freddie held much smaller capital cushions than other financial institutions, these would never have to be used. “The probability of a shock as severe as embodied in the risk-based capital standard is substantially less than one in 500,000—and may be smaller than one in three million,” the authors wrote. “If the probability of the stress test conditions occurring is less than one in 500,000, and if the GSEs hold sufficient capital to withstand the stress test, the implication is that the expected cost to the government of providing an explicit government guarantee on $1 trillion in GSE debt is less than $2 million.”
Not even close.
Fannie Mae’s financing of academic research on such a large scale meant that few housing experts were left to argue the other side of any debate involving the company. Any discussion involving Fannie Mae in these papers was designed to defend the status quo. One bank lobbyist was interested in hiring academics to write papers that might take a different point of view on housing issues. But most of the experts in the area had been co-opted by Fannie Mae. “I tried to find academics that would do research on these issues and Fannie had bought off all the academics in housing,” the lobbyist said. “I had people say to me are you going to give me stipends for the next 20 years like Fannie will?” The answer was no. The discussion was over.
posted on 12 June 2011 by skirchner in Economics, Financial Markets
(0) Comments | Permalink | Main
Is There a Free Market Economist in the House?
In this week’s Ideas@TheCentre, I anticipate the results of a survey of the policy views of the members of the Economics Society of Australia, drawing on similar surveys of US economists by Dan Klein, Charlotta Stern and Robert Whaples.
posted on 10 June 2011 by skirchner in Classical Liberalism, Economics
(0) Comments | Permalink | Main
Page 10 of 97 pages ‹ First < 8 9 10 11 12 > Last ›
|
