Robinson Crusoe’s labour shortage

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For some reason I started reading Daniel Defoe’s Robinson Crusoe [1719]. It’s one of those stories I thought I had already absorbed by osmosis. Shipwreck, desert island, Man Friday, expository myth for 18th century political economy, etc.

But there’s a lot in there that never made it into the versions we get as kids. For example, the purpose of Crusoe’s ill-fated voyage was cut out of the Pierce Brosnan Disney version¹:

They listened always very attentively to my discourses on these heads, but especially to that part which related to the buying Negroes, which was a trade at that time not only far entered into, but as far as it was, had been carried on by the Assiento’s, or permission of the Kings of Spain and Portugal, and engross’d in the publick, so that few Negroes were brought, and those excessive dear.

It happen’d, being in company with some merchants and planters of my acquaitance, and talking of those things very earnestly, three of them came to me the next morning, and told me they had been musing very much upon what I had discoursed with them of, the last night, and they came to make a secret proposal to me; and after enjoining me secrecy, they told me, that they had a mind to fit out a ship to go to Guinea, that they all had plantations as well as I, and were straiten’d for nothing so much as servants; that as it was a trade that could not be carried on, because they could not publickly sell the Negroes when they came home, so they desired to make but one voyage, to bring the Negroes on shore privately, and divide them among their own plantations; and in a word, the question was, whether I would go their super-cargo in the ship to manage the trading part upon the coast of Guinea? And they offer’d me that I should have my equal share of the Negroes without providing any part of the stock.

This was a fair proposal it must be confess’d…

1. Alright, I confess I haven’t seen the Pierce Brosnan Disney version (yet). I’m just making smug assumptions.

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Published in: on 30 May, 2007 at 10:43 pm  Comments (7)  

“What if I visualised a bunch of cheques coming in the mail?”

Channel Nine’s A Current Affair and Seven’s Today Tonight are both complete rubbish.  Obviously. But lately they’ve been enacting a great Australian comedy that Frontline could never have scripted, sniping at each other across the timeslot.

Last year there was the Wawa controversy. Nine’s 60 Minutes broke a story about a kid who was supposedly going to be eaten by his West Papuan tribe. Seven’s Today Tonight announced its shock that 60 Minutes would leave the boy to die, and sent host Naomi Robson to West Papua to rescue the boy, Wawa. Nine allegedly then tipped off Indonesian immigration and Robson was detained when she arrived. Seven also accused Nine of paying off 60 Minutes‘ sources $100,000 to refuse to guide the Today Tonight crew to Wawa’s village. It soon transpired that in fact this kid was not in danger of being eaten and the whole thing was good old-fashioned Aussie racial fantasy.

Then there was Tunnelgate, in which Today Tonight accused A Current Affair of causing a “near fatal crash” between a truck and a Mercedes in Melbourne’s Domain Tunnel.

Then things got personal, with Today Tonight going all upmarket a couple of weeks ago, running a BBC expose of the Church of Scientology, of which Nine mogul James Packer is reportedly a parishioner. Unfortunately the edge of this attack was somewhat blunted by Today Tonight‘s spruiking of its own favoured wacky occultism, The Secret.

So last night A Current Affair struck back. It entrapped one of The Secret’s investment gurus – David Schirmer – by inviting him onto the show for what he was expecting to be a puff interview, confronting him with some objective facts about missing money, and let him sputter about tragically for a few minutes, displaying all his powers of visualisation, positive thinking and self-belief to conjure the problems away.

I promise not to do this ever again, but here is a link to last night’s A Current Affair. If you get bored with all the exposition, fast forward to about five minutes into the story. It’s pretty funny, but I have to say I felt strangely sorry for the guy, and not all that much sympathy for anyone who has $96,000 to invest in a company calling itself Life Success Pacific Rim and promising 1000 per cent annual returns.

Once you watch that, take another look at the power of positive thinking as The Secret message board digests the interview:

Well, we all know what those interviewers are attracting into
their own experience. It’s like denying there is the existence of placebo effect. Anyway, David, we know that something huge is going to come out of this. It’s a certainty! And I know that David and so many people here are able to recalibrate their vibrations to open and embrace even more good and to send out more good. We create our own experiences and so do those interviewers. Abundance and blessings to all!

Then watch Schirmer’s YouTube ‘rebuttal’, in which he displays an uncharacteristic lack of confidence:

Update: Raych has informed me about Nine’s own links to The Secret. The whole thing originated as a film made by a Nine producer, and Nine provided a quarter of the funding. But once it was made Nine declined to show it, it went straight to DVD, and the rest is history. (Apparently it did get a broadcast eventually in an infomercial slot.) The producer, Rhonda Byrne, got rich, left Channel Nine, and now lives in California. So there is perhaps some extra animus behind Nine’s takedown. Incidentally, the channel signed away its rights to any DVD royalties.

Update 2: Alright, predictably, a day on and already the links and the YouTube are dead as the damage control continues. Read as much as you could possibly want to know about all this at Whirled Musings.

Published in: on 29 May, 2007 at 11:39 am  Comments (15)  

Money beyond time and space

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It’s kind of a cheap shot (but still endlessly amusing) to attack neoclassical economics for a lack of realism in the assumptions of the models at its core. Neoclassicals are generally well-aware of their absurdity. Anyway, much of the neoclassical economics of the last two or three decades is empiricist to a fault, its problem being a lack of theory rather than an excess of it. The spine of general equilibrium theory has been replaced by an exoskeleton of econometrics.

But the fact remains that when neoclassicals turn to theory they tend to take physics as the guide, rather than the social sciences, and the consequences can be hilarious.

Lately I’ve been working on the theoretical section of my thesis, and have had to hit the books again to improve my sense of neoclassical takes on money, to contrast them with those of the Marxian and post-Keynesian theory that is my natural home. I picked up C. A. E. Goodhart’s Money, Information and Uncertainty as a textbook with a good reputation. (I have the 1st edition from 1975; the 1989 second edition is still in print.)

I don’t want to cast aspersions on Goodhart himself; it’s generally a good textbook, mainly because Goodhart has years of practical experience as a central banker and thus has a particularly sharp sense of the distance between monetary theory and real-world money. But respectability demands his engagement with the mainstream theorists. The first chapter of his book reviews the literature on how theorists have tried to explain money by first asking the the obvious question – would omniscient beings beyond time and space need money to organise their economy? And then moving on to the trickier problem of omniscient beings who are not beyond time:

In fact, a medium of exchange will be desirable in any economy with a time dimension. Because of differences between people in tastes, endowments, etc., exchanges will occur. Because of the existence of time, these deals will not all take the form of contemporaneous exchanges of goods or services, i.e. barter. So the process of exchange must involve the extension of credits and debits, i.e. there will be a medium of exchange through which current goods will be exchanged for future claims to payment. But in a world of certainty, without transaction costs, there is no reason why the ultimate payment need be made in the form of a specialised means of payment. Person A could sell goods to person B at time 1, confident in the knowledge that his claim on goods in return will be met by a transfer from person C at time t + n, while B may extinguish his debt by selling services at some other time to some other person.

In such a world of certainty the whole time path of the economy is effectively determined at the outset with both present and all future markets cleared at known relative prices. No one can default on an obligation, or purchase goods and services which over the course of time exceed the value of the goods and services which he can proffer in return, through the employment of his initial endowment of physical and human capital (plus transfer payments). Under these circumstances everyone knows to whom to send his products and where to pick up his own consumable goods in return. [p. ?]

(I’ve excised the footnotes replete with references to the vast literature where the specifics of this wacky dimension are considered in so much detail.) 

It is fairly obvious that without uncertainty there would be no need for money. But this is a trivial fact, not an interesting one. The fact only became interesting because it had to be pointed out that under the assumptions of the earlier neoclassical models, the existence of money did seem a puzzle. (This was one of Keynes’ main points.)

This does not mean that uncertainty ‘explains’ actual real world money. This is like arguing that the proper way to investigate the airline industry is to first consider whether such an industry would exist in a world without gravity, and then reach the conclusion that the airline industry is explained by the fact that we live in a world with gravity.

Instead a real explanation for money is going to be partly historical and partly functional, and actually quite messy. But the neoclassicals don’t like messy:

Despite its patent unreality, the abandonment of a certainty, or a certainty-equivalent, economy as the main paradigm of the system causes serious difficulty for economic analysis. Most of the studies of market behaviour, of price determination, or equilibrium, of Pareto optimal conditions, have been undertaken within the context of a system which can be collapsed into one period, in an important sense in a timeless system. The rigorous analysis of an economy in which market decisions under incomplete information take place in sequence – described as a ‘sequence economy’ in the growing literature – is only now beginning and is proving to be rather complex. [p. ?]

Published in: on 26 May, 2007 at 12:44 pm  Leave a Comment  

They don’t know how lucky they are

There’s something deeply Australian about being born in New Zealand. It’s as Australian as the Anzacs, pavlova, Crowded House, John Clarke, Russell Crowe, etc. The number of New Zealand citizens living in Australia equals more than a tenth of the home country’s population. Every now and then we get guilt-tripped and/or budget-incentivised to go back.

New Zealand culture suffers from an especially virulent strain of ‘banal nationalism’. The ‘overseas experience’ is as Kiwi as pavlova, the Anzacs, Crowded House and Fred Dagg (I’ll leave Russell out of this one). Permanent emigration, on the other hand, is terribly un-Kiwi. It used to be, though, that leaving New Zealand – especially for Australia – said more about the emigrant than the country, kind of like if a visiting international celebrity was asked, “What do you think of New Zealand?” and they responded by criticising the weather. Robert Muldoon said he wasn’t too worried about the drift across the Tasman because it raised the average IQ of both countries.

Nowadays, though,  the emigration rate is treated in the media and in politics as an affront to the nation, and not the kind of affront to which you respond caustically, but the kind that you know, deep down, you deserve. The emigration rate is now Something Which Must Make New Zealanders as a Whole Search Their Souls and Find a Way to Restructure the Tax System to Favour Entrepreneurs, Marketing Professionals, and Lawyers. “It’s not you, emigrants, we realise that, it’s us.”

Former Labour prime minister Mike Moore (he lasted a record-breaking eight weeks) has a piece in the Australian Financial Review today revisiting this time-worn trope. His financial adviser suggested he live abroad for six months of the year so as to avoid liability for New Zealand tax. This unpatriotic suggestion provoked a round of the aforementioned soul-searching.

The main reason so many New Zealanders move to Australia is obvious. Moore would like to put it down to tax rates, but in fact it’s income. Wages are higher at every income level, significantly higher. Partly that reflects the vestiges of the arbitration system and more powerful unions, but it also depends on the fact that per-capita GDP is a third higher.

Aha! The Moores will say. That proves the point. Microeconomic reform! Tax reform! Decisive political leadership! Catch up with Australia!

But that is a far too optimistic view of the difference policy can make economically. New Zealand has already out-micro-reformed Australia. The Employment Contracts Act was a fifteen-year head start over WorkChoices. Inflation has been fought more tenaciously than anywhere in the world. Fat lot of good it has done. The sad reality is that Australia has things New Zealand will never have – massive mineral resources, critical mass as a global financial centre, and even some residual manufacturing industries. Tax reform ain’t going to do anything about that. It’s called uneven geographical development and it comes with capitalism.

At any rate, though, I think most Kiwis still take the Muldoon line about average IQs. Everyone knows that regardless of the comparative economics, a lot of New Zealanders will always leave to see the world simply because New Zealand is so small. No offence intended, and none taken. Many of them will drift back eventually, anyway. When a few years ago “patriotic 27-year-old marketer Richard Poole” launched an ad campaign with signatures from 700 young urban professional expatriates, informing the home country that they wouldn’t be likely to return without some serious tax breaks to encourage entrepreneurialism, the healthy reaction was a resounding: “You absolute cocks. We didn’t realise you had left.”

Published in: on 24 May, 2007 at 11:40 am  Leave a Comment  

Through a greenscreen darkly

Millions of paperbacks from Penguin’s Golden Age now rest in secondhand bookstores all around the English-speaking world. By Golden Age I mean the wonderful range and designs of the 1960s and early 1970s, until the rationalisation following Pearson Longman’s buyout in 1970. The non-fiction Pelican imprint was pretty adventurous, publishing a whole range of series that have become the blue-spined backbone of my secondhand collection – from cut-price economics and social science readers to the New Left Review collaborations.

Penguin Australia was no exception. It rode the wave of student radicalisation to put out editions like Australian Capitalism: towards a socialist critique [1972] But Penguin was playing both sides of the fence. I recently picked up Australian Management and Society: 1970-1985 [1971], edited by Devon Mills. It’s a collection of essays by management gurus avant la lettre and, even better, futurologists.  It is, as you would expect, tragically but humourously dated. You can hear the Kraftwerk as you scan chapters like “Cybernetic Systems and Cybernation” and “Data Banks and the ‘Cashless Society'”. The cover is a wonderful pixellated representation of what appears to be a bald, fat manager:

Australian Management and Society

I have to confess to not having read the whole book. But I’ve been drawn to the last chapter, in which a “syndicate” of economic historians and economists present four scenarios of how the future might pan out up to 1985. These scenarios are written in shorthand timeline form, with a stirring combination of sweeping world historical drama and corporate law minutiae:

1979: On Black Friday in January, all-shares index falls heavily. Government closes stock exchanges for one week in hope that panic will subside, but slump continues for three months. During this period federal election is held. Labour [sic] has sweeping victory…

1981: Gargantua & Sons Inc. of Montana, which dominates Australian baby foods, leads way by enlarging board to twelve and distributing its shares among its Australian directors, thus retaining full voting rights over its Australian enterprise.

The four alternate realities are presented in order of increasing hysteria. In the first, a Labor government comes to power and wreaks havoc with the companies law, seemingly backed by a new party called Student Power.

In the second, Japan and China sign a ‘friendship treaty’, while Indonesia beats the Philippines in a short war, before funding New Guinean radicals for “major acts of violence and dissent”, which “hastens Australia’s decision to grant independence to New Guinea”. Said independent country quickly gets military assistance from the USSR and commences a “confrontation policy” to block Australia-Japan maritime traffic through the Torres Strait. European migration to Australia dwindles. A new political party led by the Chief of General Staff wins office on a platform of “nationalism and discipline” in 1978, and the companies law presumably suffers. (Where is Student Power when you need it?)

In future #3 the US and its ally Australia withdraw from Vietnam but are soon bogged down fighting insurgents in Thailand, while another Red force emerges in the Malaysian jungles. This precipitates a run on the US dollar, and the world splinters into trade blocs. The IMF is stretched to the limit and the world staggers towards depression. Thankfully, the companies law remains unscathed.

Finally, in the fourth alternate reality, Australia spirals into open inflation on the back of wage rises after a lengthy strike in transport and metal trades. China invades Laos and Cambodia, seemingly unprovoked. The US suffers a balance-of-payments crisis (possibly a result of a transdimensional leakage from future #3). Devaluations, recessions, etc. Australia joins American ally in keeping an eye the Chinese from a base in the Philippines, and an Australian spyplane is shot down on the far side of the Yalu River.  Government becomes largest employer. New political party arises demanding the secession of Western Australia. European immigration declines while China takes a proposal to the United Nations demanding immigration rights into Queensland and Northern Territory. All twenty-year-olds are drafted into the military.

The Coalition wins in 1978 but the Liberals are able to govern alone and ditch the Country Party. Japan produces a cheap substitute for wool and floods world markets. There is a large inflow of Asian goods into Australia. Capital inflow ceases. Strikes, recession, etc. Government lowers wages by 11 per cent across the board. Western Australia secedes.

China renews its lobbying at the UN for settlement rights in unpopulated parts of Australia. The US supplies Australia with nuclear warheads and rockets. Australia becomes one of the two most highly taxed countries in the world. Closer settlement schemes are commenced to get to remote regions before Chinese. New political party called Social Credit is a roaring success in the 1982 state elections. Western Australia signs trade agreement with Japan.

Chinese special forces land in Northern Territory. All Australian males under the age of fifty commence military training. Social credit policies are applied at the national level and the states are abolished following a referendum, with consequent deleterious effects on companies law. In 1985 Chinese insurgents arrive in the Gulf of Carpentaria. The US and Britain veto United Nations intervention.

Fantastic, huh? One wonders at the forecasting possibilities of today’s more powerful Cybernetic Systems and Data Banks. And the authors of these national nightmares? One is none other than Geoffrey Blainey, who in a more familiar dimension achieved national notoriety in 1984 when he used his powers of futurology to warn of an Asian Australia, and quickly became John Howard’s favourite historian.

Published in: on 22 May, 2007 at 8:00 pm  Comments (4)  

Eine Anekdote von Herrn Keuner

Antigram has a wonderful little Brechtian fable which I think I will make the official epigram of this year’s Australian federal election. Though, truly, it is universal.

Published in: on 18 May, 2007 at 11:34 am  Leave a Comment  

State versus strikers

As if to emphasise that anti-strike laws didn’t arrive with WorkChoices and won’t leave with it either, on Monday the Federal Court fined the Construction Forestry Mining and Energy Union (CFMEU) and a building contractor for asking for and giving strike pay.

The incident in question happened in August 2003, under the pre-WorkChoices Workplace Relations Act. A building worker died in Shepparton, and in line with union policy, workers at another site in Melbourne stopped working until a safety audit was conducted on their own site. They returned to work the next day. Their contractor employer, B&P Caelli Constructions, paid them for the day off, which was a breach of the Act.

Along comes the Australian Building and Construction Commission (ABCC), which was set up by the Federal government in 2005 as an extra police force for the the building industry. It’s not clear how the Commission heard about the two-year-old case, but since its main raison d’etre is to police labour organisation in construction, it’s pretty clear why it would prosecute both parties.

Last September the Commission lost, and judge Tony North attacked the provision in the law prohibiting pay during a safety audit stoppage. [Masanauskus, Australian Financial Review, 12 September, 2006] But on Monday the Commission won its appeal. According to the union, about $500,000 was spent on prosecuting a total of $11,000 in fines.

Like I said the other day, eventually strikes are going to run seriously up against these laws, which are tighter under WorkChoices, and the ALP doesn’t look like changing them. The right to strike is not on the agenda, and though Labor is promising to replace the nasty ABCC with a specialist branch of its proposed workplace regulator, a day after this fine was imposed Gillard was promising that a Labor government would continue to take a “zero tolerance policy” in the construction industry.

 [Rachel Nickless, “Court gets tough on strike pay”, and Mark Skulley, “ALP: we’ll tighten the reins”, Australian Financial Review, 16 May, 2007]

Published in: on 17 May, 2007 at 10:25 am  Leave a Comment  

Mixed market signals

So the other week I arrived home one evening to find a massive garage sale in the park across the road. All kinds of things, beds, sofas, kitchen appliances, and a family standing around dejectedly, looking like they weren’t getting much business. I started sauntering over to take a look, when Raych stopped me. “That’s not a garage sale, you idiot,” she explained. “They got evicted.”

Oh. So this rental crisis thing is starting to bite.

On the other hand, when their place got listed, it was for $200 per week, for a two-bedroom terrace. That’s really cheap. Then when our neighbours gave notice around the same time, their place was listed for quite a bit more, $350 or so. But the agent couldn’t rent it, and it was listed again with a lower price. Next week, same thing happened. As of this week we still have no neighbours.

I have to admit that my street is unusual in that it’s in a part of Sydney with a bad reputation – Redfern, on the edge of the Block. But it’s five minutes from Sydney Uni, and just around the corner from Darlington and Chippendale, about which we are hearing all these stories of the throngs turning up for apartment viewings. So I woudn’t have thought it was completely immune to this rental market tightness.

Anyway, yesterday the NSW Department of Housing released its quarterly rental stats for the March quarter, so I thought I’d compare anecdotal evidence with the hard stuff. They’re based on bond lodgements, so I think they only track new tenancy agreements, but that should still give a good indicator of what is happening.

Overall, rents in Sydney have definitely been rising quite fast. 6.7% rise in the median rent across Sydney in the year to March. And worryingly, the March quarter itself saw a rise of 3.2%, an acceleration. But the rise is concentrated in the Middle and Outer rings, i.e. from Burwood and Canterbury west, from Willoughby north, and south of Botany Bay. In the Inner Ring (which covers a lot of ground), the median rent grew 1.3% in the quarter to March. Which isn’t that small on an annual basis, but isn’t that big either, and is a slow-down from the rest of the year.

Things are even more mixed once you look closer at the Inner Ring. Here the stats are broken down into dwelling type and unfortunately not aggregated. There are big differences between what is happening to one-bedroom apartments and four-room houses, as well as between different suburbs. (So, for example, four-bedroom rents in wealthy Mosman have skyrocketed by 40.7% over the year to March, while in Ashfield they have fallen 5.3%.)

I’m in the Sydney local government area. But those stats could be a little misleading because it includes all kinds of areas – the heart of the city, Surry Hills and Kings Cross as well as Redfern, Alexandria, etc. Overall the median rent for two-bedroom dwellings has risen 10.3% in the year, and 4.3% in the quarter to March – an acceleration. But the median rent on four-bedroom places, where a lot of students will live, has fallen by 2.5% in the year, and by 4.8% in the quarter, which implies a reverse.

In neighbouring Marrickville, median rents have completely stabilised for one-bedroom units, the rise has decelerated for two-bedroom dwellings (1.6% in the quarter, 10.3% in the year), and rents are rapidly falling on four-bedroom dwellings (4% in the quarter to March). Only for three-bedroom houses is the rental squeeze still going on.

You can even zoom in further and check it out postcode by postcode. Sure enough, in my postcode, the median rent on two-bedroom places has gone into reverse big-time, falling 5.8% in the quarter!

As for what this all means, I’ll leave that for another post. But at an individual level the moral is clear – if your landlord is encouraged by all this talk about a rental squeeze and tries to jack up your rent, check the stats and you might find out your bargaining position is better than you thought.

Published in: on 15 May, 2007 at 10:41 am  Comments (2)  

A different audience, a different tune

The front lead in today’s Sydney Morning Herald is “Rudd ready to backflip on AWAs”. In the Australian Financial Review it’s “Rudd holds hard line on IR reform”. Whatever.

So I tutor a course called ‘Economics as a Social Science’. Today the topic for discussion is ‘Power in the economy’, an introduction to the institutionalists. I could not have come up with a better hypothetical case study. My question: How (the hell), when at last count 59% of people oppose WorkChoices (24% support), and when the party’s standing in the polls is largely a product of that opposition, is the Australian Labor Party having so much trouble committing to getting rid of it?

I think Rick Kuhn and Tom Bramble give a pretty good answer over at MR Zine:

The megaphoned message about fairness is directed at white and blue collar workers who make up about two thirds of the labour force.  Most are worried by the Howard Government’s industrial relations regime.  The electoral explanation of this tune is valid, but insufficient.

The tune that puts union officials in their place was played on the dog whistle because it might have alienated too many workers if broadcast at a lower pitch.  But Rudd, Gillard and their advisers hope that its shrill notes can be heard, despite the competing megaphone message, by small business owners worried about changes to unfair dismissal rules and the abolition of individual workplace agreements.  The logic here is electoral, but it reveals something deeper about the forces acting on and in the ALP.

The majestic cadences that convey the contribution of Labor’s approach to industrial relations to the national interest contain the specifics of the policy.  It cannot be understood in purely electoral terms.  Despite its inclusion of the megaphone theme, Rudd’s policies on relations between employers and employees reduced the impact of Labor’s best issue and damaged the ALP’s electoral prospects.  The Party’s popularity fell in the poll immediately following the announcement of the policy because it is WorkChoices Lite.

The other dayRudd refused to repeat on the radio statements he had made at the anti-Work Choices rally. Different tunes for different audiences. Now it seems Gillard and Rudd are playing good cop-bad cop. One message per speaker so as to avoid that embarrassment. Thus the mixed messages from this morning’s papers.

Published in: on 14 May, 2007 at 3:00 pm  Comments (10)  

Context on Horta election

Reading the Maps has a great post summarising Maps’ recent output on the East Timor military intervention and putting the elections in its context.

Published in: on 12 May, 2007 at 11:10 am  Leave a Comment