Thursday, January 27, 2011

My letter to the Listener–Joanne Black and journalism that counts…

We are accustomed to thinking of great journalism as involving exposes of events such as Watergate brought to a naive world (which is supposed to be ever grateful) by intrepid heroes of the press. The value of both the process and content embedded in that notion is questionable and eventually boring.

More rarely good to brilliant journalism fulfils a much more significant if under rated function. Such is the case with Joanne Black's piece on Pike River (Listener January 29, 2011).

This has to be amongst the best journalism has to offer. It is executed to the highest of standards when measured as it should be, albeit subjectively, across multiple dimensions.

I hate to think how much agonising went into crafting every word and sentence yet it reads as easily as tough to compose writing should - effortlessly.

The challenges in producing such work are boundless. This piece is timely, relevant and competes with numerous other opinions. It articulates thoughts many of us may have had but were too afraid to express. 

The hallmark then is courage that is sensitive but uncompromising.

It should perhaps be said that the editorial decision or granting of freedom to publish involved no small degree of courage either.

If I over state the efforts involved - which I doubt - the column is of course, the more remarkable.

These journalistic accomplishments may sit on the back page but their quality deserves our front page attention.


Wednesday, January 26, 2011


The time has come to reveal squoozernomics to the world. Squoozernomics involves a proposition advanced by my youngest daughter (a political studies exponent) and the subject of intense empirical verification efforts (rather than falsification attempts) by my eldest daughter (another social science grad).

Part of the appeal of studying squoozernomics is that its tenets involve widely held beliefs – and not just amongst social scientists or the unwashed.

The hypothesis is that under capitalism there is a systematically and constantly (and irritatingly it seems) at work a process known as “turning down the squoozer” on various goods and services hitherto supplied in more generous quantity, quality or both. The genesis of turning down the squoozer is hypothesised as lying in the mean spirited nature of those who inhabit the supply side of the numerous transactions which take place in the economy.

Notable examples of “turning down the squoozer” include – reductions in the number of biscuits in a packet, making the Moro bar smaller, failure to supply hot water with coffee in cafes, and, most recently, Starbucks offering a choice of either mustard or tomato sauce but no longer both with the American hotdog. Evidence of the fact that such “squoozer turn downs” are motivated by mean spirits is exemplified by the fact that Starbucks has “two huge bottles” of both sauce and mustard parked close to the counter.

Those turning down the so called squoozer are alleged to have scant regard for and are indeed known to ignore quality, long run reputation, repeat business or any other benefit in their rampant pursuit of fulfilling their mean and base instincts.

This is apparently “obvious”.

Neither confirmation nor falsification of the hypothesis can be readily achieved by repeated empirical study. The value of the proposition lies less in such work as in the questions the proposition raises as well as what its wide uptake says about the ability of analysts of squoozer events to think on both the supply and the demand side of the equation.

In these early days of potential refutation I note that:

  • it is the self interest of the consumer (the sqoozee) which drives their irritation just as it is the self interest of the producer which leads to the turning down of the squoozer (confirming the basic Adam Smith propositions on human behaviour);
  • The squoozee seems oblivious (according to leading empirical studies) to the cost savings bestowed upon him or her by the “turning down” (contrary to the expectations of Alfred Marshall’s marginal analyses); and,
  • The wish for “static squoozer rates” betrays a desire for perfect but unattainable worlds in which squoozee demand is constant in time and space (confirming the ubiquitous nature of the Demsetz’ nirvana and greener fields fallacies).

These are but three areas worthy of further research. Squoozernomics then, offers much to improve the communication of the workings of basic economic processes.

Meantime – let’s have the mustard.


Wednesday, January 19, 2011

Do economists need a code of conduct?

Jan 7th 2011 by R.A. | The Economist

This week the American Economic Association will take up this question. Many academic economists have financial ties to industry, government or other organizations, and critics say this biases their research. Do these associations create a conflict of interest? If so, how should it be addressed? Do academic economists need their own version of the Hippocratic Oath, a formal code of conduct, or a more vigorous policy of disclosing potential conflicts of interest?

Some interesting responses to this question included:

by Lant Pritchett click here for his full response.

This is not how an academic community should conduct itself. We should stand for allowing truth to emerge from a dedication to the evaluation of ideas, arguments, and evidence based on scholarly and disciplinary discourse.

by Tyler Cowen click here for his full response.

I FAVOUR such codes, but I'm not sure they will help much. First, most economic research doesn't matter in the first place. Second, the research which does matter very often is distorted anyway.

See here for all responses.


Wednesday, January 12, 2011

Politics is a poor process for resolving issues

In his book Government Failure and Over Government Arthur Seldon points out that:

"confrontations" in the market are small, and solved by higgling and haggling over price, the peace-maker. In a state economy or state industries, decisions are centralized to planning boards, committees, commissions, councils, government departments, that nominally "represent" the very much larger number of workers, managers, and consumers who will benefit or suffer. Change is therefore more likely to be opposed, repressed, inhibited, postponed. When it takes place it is contrived, jerky, discontinuous, lumpy, convulsive. Disturbance, dislocation, disruption are large-scale. Friction is inflated.

He goes on to point out that representative government can be distorted by lobbying of special interests. This may be an unavoidable cost when the government is producing public goods, but it's inefficient and unfair when the government is providing private goods (heath care, food, housing) through overreach.

The book is reviewed at Aguanomics – a great economics blog. The review alone has pithy points worth reading.


Tuesday, January 11, 2011

The long history of law and economics

Roman law in the dark ages I read from Leonard Mlodinow The Drunkard’s Walk: How Randomness Rules Our Lives, was based on the practice of Germanic tribes. Things were somewhat different to what we are now familiar with – but there are similarities. The rules of testimony are a case in point.

The veracity of a husband’s denial of the claim that he was having an affair with his wife’s toga maker would have been determined not by his performance in front of a prickly opposing counsel but by whether he would stick to his story after being poked with a red hot iron.

Mlodinow – a statistician rather than an economist notes that bringing back that custom would likely increase the number of out of court settlements dramatically.

Incentives mattered to Romans too.


Friday, January 7, 2011

Top 10 tunes suggest slow beat for economy into 2011

- NZIER Insight 22  by: Dr Johannah Branson, John Ballingall,  and Peter Nicholls  with assistance from Jessica Matthewson, 24 December 2010.

The bands fighting it out for the coveted Christmas No.1 are in tune with the latest forecasts for the economy

When we have less money to spend, we not only buy less music, but it seems we also buy different types of music. A recent study of pop music preferences over the past 501 years found that during tough economic times we are more likely to listen to “tougher” artists and songs. Instead of escaping into bright and bubbly pop songs, we turn to more serious and meaningful songs from older and more established artists, for understanding and comfort. The rhythms of recession tend to be darker, longer and slower – like the economy. More cheerful, lighter and faster music booms when the economy does.

So what does New Zealand’s musical preferences suggest about the economic outlook for 2011? Using a highly scientific method, our in-depth analysis of the current New Zealand Top 10 songs (see hyperlink above) aligns well with our take on the economy. The outlook is mixed and messy, like the tunes played by a drunken DJ.

Music stores and other retailers are downbeat this holiday season. Consumer spending has been humming quietly for the past 12 months and, despite ringing tills in the November and December sales, hasn’t risen to its usual Christmas crescendo this year. As the echoes of recession fade, households are still cautious about their spending and focused on repaying debt whilst waiting for employment, wages and the housing market to pick up the beat.


Sunday, January 2, 2011

Rejecting drivel in favour of thoughtful writing

Journalists and commentators wishing to write tolerably well about economic matters in 2011 should avoid the following cant:

Prices which start by “skyrocketing.” Especially when “sellers outnumber buyers” and prices fall from “exorbitant”  or perhaps “gouging” levels to “fair” and “just.” Next if this “vicious cycle” goes on too long prices fall to “unfair” as a result of “dumping”.

Beware too the man in the street who believes he knows that either unions or corporations have more “bargaining power” than do their victims and can “exploit” them.

Watch out as well for consumers who can “afford” medical care and those who can “barely afford” it but “need” housing and see food as a “basic necessity”.

Beware businesses which “impose” various “profit margins” which are “obscene” and “unwarranted” typically through “passing on costs of labour” or working their “monopoly” causing workers’ wages and prices to “spiral”. Like numerous things apparently, this is “inflationary.”

Be on the alert for the “living wage” which needs to be “protected” as a “priority from “unfair competition” especially from “foreign labour.”

Little need be said of “Mum and Dad investors” who should be “fully informed.”

These pointers come from or are inspired by brilliant economics writer Deidre McCloskey. To really improve your writing read her Economical Writing.