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Archive for June 2004

The insufficiency of the public choice critique of democracy

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The debate between hard-core libertarians like ABL who invoke arguments from public choice theory essentially to demonstrate that political decisionmaking always lead to low-welfare equilibrium traps and enthuasists for the democratic process like Dave Ricardo (who does not necessarily share the views of his famous namesake) as found in this comments thread suggests one very curious paradox. When invoking public choice arguments, hard-core libertarians end up unwittingly using the same debating tactics as paternalist critics of market transactions – that is, their case boils down to the fact the people don’t end up making the right choices which maximise their welfare. Against this comparison it could be argued that what distinguishes political decision-making from decision-making in the marketplace is that in political decision making interest-groups can mobilise to diffuse the large aggregate costs of their desired policies across the population so that each member faces a low per-capita cost, while capturing large per-capita benefits for themselves. Another distinction is that political decision-making leads to a one-size-suits-all outcome.

The classic example is a subsidy to a particular producer group where the bounty of X is divided between say, 500 producers while the deadweight costs of the subsidy are spread over 17 million Australians so that political decision-making doesn’t filter out decisions which end up in large aggregate deadweight costs, unlike markets (because Australians wearing their hats as consumers have no incentive to mobilise for that extra few cents to defeat the subsidy).

While this distinction has some power, the defender of unconstrained democratic choice, could, if he or she were clever enough, invoke the sorts of arguments used by hard-core libertarians to argue against antitrust and other interventions in the market process to neutralise the relevance of the first distinction noted above. For instance, hard-core libertarians frequently argue against product liability law and other pro-consumer legislation on the basis that consumers, if they wanted to, could learn more about the product or better assess their risks when deciding to go sky-diving or whatever the case may be, and if they don’t, then that’s just rational ignorance reflecting a utility-maximising calculus between the costs and benefits of acquiring more information. On the other side of the coin, proponents of antitrust intervention for instance have argued that there is a collective action failure that prevents consumers from pre-emptively boycotting an oligopolist trying to increase switching costs and therefore antitrust should scrutinise business activities that increase switching costs, sorting the ‘truly efficient’ from those that merely reflect attempts at monopolisation. Hard-core libertarians counter with the response that if consumers truly valued the future benefit of being able to buy from more than two sellers enough they would have boycotted the oligopolist but didn’t. Such anti-antitrust arguments appeal to (justified) charge that the proponent of government action is using as his benchmark some unattinable ‘nirvana’ of perfect markets.

But if that’s true then why isn’t the failure of voters to mobilise to defeat inefficient redistributive policies in a democracy also equally reflective of rational ignorance? Why isn’t ‘regulatory capture’ just reflective of efficient delegation? (given that existing transaction costs don’t justify closer monitoring, maybe the principal-agent problem resulting from such delegation is an efficient price to pay just like similar problems within the corporation).
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Written by Admin

June 30, 2004 at 3:19 pm

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Is Bill a bloviator?

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Along with many other things, I’m currently reading Bill Clinton’s autobiography which I picked up at Borders for $34.95. My first impression is that it’s a great and fascinating read. It seems to me that I’m in the very narrow minority here and I can’t quite understand why. Some of it might boil down to political bias but that can’t explain the bad reviews his memoirs have got from the NY Times, for instance. Much has been made of the fact that Clinton doesn’t tell enough stories and prefers to focus on his internal mental processes and how he interpreted/registered particular events.

Maybe it’s just me but I don’t think there’s anything wrong with that. When I read the autobiographies of political leaders I must say I’m often not very interested in the minutiae of their personal lives or campfire yarns but I am interested in what their thoughts were on various political events in their lives, the development of their beliefs and philosophical influences, if they changed their minds on particular things and if so why. Perhaps that’s not what you look for when reading the autobiography of a military leader for instance but it would be the appropriate focus for memoirs of political leaders. Bill Clinton is in many respects the classic policy wonk and so am I and I’m quite enjoying his memoirs told from a policy wonk’s perspective (on the other hand I would find reading military memoirs to be the equivalent of watching paint dry).

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June 29, 2004 at 6:48 pm

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Apostrophe atrophy?

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In her swipe at Lynne Truss’s punctuation bestseller Eats, Shoots and Leaves in Saturday’s Age Roslyn Guy suggests that perhaps we should abolish the possessive apostrophe.

She takes this suggestion from Kate Burridge’s Blooming English. The main linguistic argument in the possessive apostrophe’s (no, I am not abolishing it yet) favour is that it helps distinguish singular from plural possessives. To use her example:

Does ‘my sisters collection’ mean the collection of my sister or sisters? Burridge argues that we rarely have trouble telling whether this is singular or possessive in speech, that we can work it out from the context, and if we can’t we can use constructions like ‘the collection of my sister’ to make it clearer.

I can’t say I am convinced by this. One reason we can work things out from context in speech is that we usually know something about our conversational partner – whether there is one sister or more, and how many sisters might have a collection. With written documents we are less likely to know the full context, and rely more on information from the page. From a stylistic point of view,
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June 27, 2004 at 10:45 pm

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DESTructive amendments

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I don’t know about the economy generally, but too many laws are definitely bad for Australian higher education. In the scheme of misregulation of Australia’s universities the Higher Education Legislation Amendment Act No. 2, rammed through during the week (introduced Tuesday, passed Thursday), isn’t a big deal, but it is another instalment in the Department of Education, Science and Training’s attempts to stifle any university activity that does not meet with their approval.

The offending section looks innocuous, a change to how ‘course of study’ is defined. Up until now, students studying double degrees were doing two ‘courses of study’, in the future they will be doing – in DEST’s eyes, if not that of their own, their universities, or potential employers – one ‘course of study’.

For some students, this will be a very costly distinction. Under Commonwealth law, each course of study is either completely full-fee or Commonwealth supported. You can’t mix the two. This means that universities can no longer offer a double degree student one HECS place and one full-fee place. Instead, students must either pay full-fees for both (easily $20,000 more at the more expensive universities) or not do the second course.

The same rule against mixing full-fee and HECS will see many summer schools scaled down or abolished this year, because DEST has told universities that must not let HECS students who want to speed up their degrees take full-fee units. Universities say summer semesters are not economic on the miserable rates the government pays them for HECS students. If you are a HECS student who needs to accelerate your degree you’d just better hope there are enough overseas students who want a summer semester to make it viable.
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June 27, 2004 at 10:05 am

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Can an economy have too many lawyers?

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In Chapter 4 of The Elusive Quest for Growth, William Easterly debunks the idea that more ‘human capital investment’ (i.e. education spending) alone can be a solution to the problem of economic development in poor countries. This isn’t just a strawman position that he attacks – the first half of his book is devoted to documenting the various fads that have come and fone among development economists through the 20th century from the ‘foreign aid’ fad to the ‘capital accumulation’ fad to the ‘human capital’ fad. Easterley has an interesting passage in Chapter 4 on the ‘human capital fad’ that also has implications for developed economies like Australia:

“One clue as to why education is worth little more than hula hoops to a society that wants to grow comes from what the educated people are doing with their skills. In an economy with extensive government intervention, the activity with the highest return to skills might be lobbying the government for favours. The government creates profit opportunities by its interventions. For example, a government that fixes the exchange rate, prohibits trading of foreign currency, and creates high inflation has created the opportunity for profitable trading in dollars. Skilled people will want to lobby the government for access to foreign exchange at the low fixed rate and then resell it on the black market for a fat profit. This activity does not contribute to higher GDP; it just redistributes income from the poor exporter who was forced to turn over his dollars at the official exchange rate to the black market trader. In any economy with many government interventions, skilled people opt for activities that redistribute income rather than activities that create growth.

He then notes that one whimsical piece of evidence supporting this theory is that economies with lots of lawyers grow more slowly than economies with lots of engineers.
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June 26, 2004 at 12:53 pm

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Airheads under siege from objectivity

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Read this mildly amusing and insightful piece by PJ O’Rourke, then read this snipe by Ann Coulter wannabe Michelle Malkin and the readers’ comments that follow. It seems that PJ has earned the wrath of Malkin and her fellow true believers to the point of almost being disowned by them simply because he deigned to gently criticise the echo-chamber effect of some conservative talk-radio.

IMO the worst thing that can be said about PJ’s recent piece is that it isn’t as a laugh-a-minute as some of his earlier pieces, but then PJ has churned out more than his share of brilliant political satire. He’s entitled to the occasional boring piece. He’s one of the few libertarian right-wing satirists that even left-wing readers can find funny and that says a lot about his success. Also, unlike the equally echo-chamber Freepers, RWDB bloggers and Fox columnists that Malkin and her ilk now much prefer to PJ given his heresy, O’Rourke (1) is a class act; (2) does his research and actually knows things; (3) is a proper journalist who has been to various trouble spots in the world, unlike various armchair warriors who pontificate on their increasingly rounded arses (incidentally in his old collection ‘Holidays in hell’ one of the people he acknowledges and thanks is Robert Fisk, another real journalist).

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June 25, 2004 at 2:47 pm

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In praise of boring hip-pocket politics

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Commenting on my post on those dastardly neocons, Mark Bahnisch asks:

Nietzsche via Weber via Schmitt via Strauss. I’d be interested, Jason, in a little more commentary on why ‘fascist’ might be an appropriate appellation for the neo-con exultation of politics. There are two counter-arguments – first, that neo-liberalism is depoliticising and a dose of politics (understood as agonism rather than antagonism) would be a good left strategy, and secondly, I think fascism can be seen as destroying politics in that the civil society/state distinction on which politics rests is elided.

Firstly I’d like to clarify that I didn’t intend to brand the entire neo-con camp (or whatever the hell you choose to call them) with the Nietzschean tag. For instance, Paul Wolfowitz seems to me to be pretty open about why the US invading other countries is good and sincere about his liberal imperalism so you can’t accuse him of either Straussian talking in code or Nietzschean contempt for liberalism. However I think that such a charge can be laid against those conservatives like the ones I discussed in my post who are essentially of the ‘National Greatness’ school – whose commitment to conservatism has always been more about a muscular foreign policy than anything else – there is an underlying contempt in such groups with the day to day grind of hip-pocket politics (see for instance Buckley’s comments about how ‘disgusting’ it that politicians are talking about prescription drugs prices – as opposed to perhaps firebombing Mecca?).

Secondly Bahnisch thinks that ‘depoliticising’ may be a bad thing promoted by liberal views of the State. It depends on what you mean by ‘politicising’.
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June 25, 2004 at 2:22 pm

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