Disillusioned commentary on Australian financial sector, politics, business, media... with attention occasionally distracted to the world outside... and intermittent reminder that rage is a more life-conserving irrationality than despair.

Monday, January 31, 2005

Away in a manger...

Yes, it's a dog in there.

Reporting for New Scientist this week from Kobe, Emma Young writes ("Quake, flood, fire. Will we be ready?"):

... many of those involved say the World Conference on Disaster Reduction was a wasted opportunity. While there was much well-meaning rhetoric, little emerged in the way of firm disaster reduction plans or targets for saving lives. There was not even any agreement on how much money to spend on reducing the death toll caused by earthquakes, floods, droughts and tsunamis.

"The targets at the beginning of this process were very clear and strong and concrete. What we've seen is that over the diplomatic process of reaching consensus, they have been tremendously watered down. That is an enormous disappointment." says hazard vulnerability Ben Wisner of the London School of Economics.

While various initiatives were announced at the conference, there was no commitment to funding and, asks Young:

... will action really be taken next time it is needed? While the UK and Sweden pushed for hard targets... others, including the US, blocked such proposals.

The US Bush administration has preserved its hundred per cent record of cooperating with nobody.

Friday, January 28, 2005

The techtonic plates of English language move

The FIN observes in its lead editorial today, "Tort monster back in its cage", that recent legislative changes have resulted in a 31 per cent drop in personal injury claims before Australian state district and county courts. It then goes on to make the odd observation that, "[the state of New South Wales] was the epicentre of the litigation crisis, with two or three times as many claims as Victoria and Queensland in 2002".


The Economist's style guide defines "epicentre" as follows:

Epicentre means that point on the earth's surface above the centre of an earthquake. To say that Mr Putin was at the epicentre of the dispute suggests that the argument took place underground.

While there is much that goes on in Australia underground - literally or figuratively (ranging from gold mining to heroin distribution) - we don't think personal injury court cases commonly do so.

Let's not censure The FIN too severely though; the battle seems lost.

The Economist itself reported on April 24th 2003 in a story about UK gangland murders, that:

Murderousness is rife in Scotland, with more than a 100 killings in each of the past two years. Strathclyde's estates are the epicentre: five Glaswegians were killed in one 48-hour spell last month.

So what do we call the point on the earth's surface to which "epicentre" used to refer? "The point on the earth's surface above the earthquake's epicentre" perhaps?

Thursday, January 27, 2005

Forces continue to gather in the coming IP stoush

John Quiggin has an excellent op-ed piece in The Fin today, on "Innovation and the internet", pointing out that:

The US-Australia Free Trade Agreement, which came into force on New Year’s Day contained numerous provisions designed to strengthen ‘intellectual property’, that is, government-created monopolies designed to reward invention and the creation of literary and other cultural works. Among other things, the term of copyright was extended from 50 to 70 years and new protections were granted to pharmaceutical companies.

A rather more obscure event a couple of weeks later was part of a trend that seems likely to render the whole ‘strong IP’ agenda both obsolete and irrelevant. At a conference at Queensland University of Technology the Australian version of the Creative Commons license was launched. The Creative Commons license is a new kind of copyright, allowing free reproduction while reserving a flexible range of rights over attribution, commercial use and derivative works...

The rise of creative collaboration as a major engine of technological progress poses serious challenges for traditional models of innovation, based on proprietary research and development and targeted government funding for ‘strategic’ pure research. Increasingly, innovation will come from the members of networks driven largely by creative or social, rather than economic, concerns. Governments and capital markets should either support this process or get out of the way.

In the opposing camp:

About the only thing Hollywood hasn't thrown into the fray as it desperately tries to get the US Supreme Court to overturn a decision already agreed by two other courts, is the kitchen sink.
Oral arguments in the MGM v Grokster will be heard on March 29 when Hollywood will again try to use its financial and political might to browbeat America’s top court into ruling p2p companies can be held responsible if customers use their p2p software to infringe copyrights...

The Supreme Court's landmark decision in Sony Corporation of America v Universal City Studios (the Sony Betamax ruling) ruled a distributor can’t held liable for users' infringement as long as the ‘tool’ is capable of substantial noninfringing uses.

“In MGM v. Grokster, the Ninth Circuit found that P2P file-sharing software is capable of, and is in fact being used for, noninfringing uses,” says the EFF. “Relying on the Betamax precedent, the court ruled that the distributors of Grokster and Morpheus software cannot be held liable for users' copyright violations. The plaintiffs appealed, and in December 2004 the Supreme Court granted certiorari.”

Visit the EFF’s MGM v Grokster site for chapter and verse.

IBM conditionally became a White Hat when it clasped Linux to its corporate bosom, as though it were the long lost son of S/360 OS, and started slaughtering fatted calves to feed Linux developers. Three days ago, IBM released a bunch of patents relating to Open Source:

Bob Sutor's comments on IBM's release of Patents to Open Source -- Bob is the VP of IBM Standards. He says: "To be clear, this is not a "donation," but rather a pledge of the patents to seed and then maintain a patent commons for open source projects." Go here to see his other comments and his extensive list of links to articles on the subject from all the major developer and business publications. There is also a link to the Patent Description Document, which provides the nitty-gritty of the patent release.

And, Sun, not to be outgamed, is now allowing (more limited) open access to 1,600 of its patents.

If the push for an intellectual property Commons is to succeed, it needs well resourced companies like IBM and Sun to counter the political muscle of Big Media.

Wednesday, January 26, 2005

Shouldn't you be working harder?

Today is a public holiday in this country. Australia day celebrates the arrival of several boat-loads of soldiers and convicts from the UK on 26 January 1788, subsequent defeat of the indigenous Australian people in armed conflict, their decimation from smallpox and then subjection over more than two centuries to economic hardship and humiliation. It was only as the consequence of a successful referendum to change the constitution in 1967 that they were actually granted the status of being human, on an equal footing with the rest of the population.

However that is by the bye. The subject of this post is happiness.

Ross Gittins, economic editor of The Sydney Morning Herald, asks in his column today, "Feeling a twinge of guilt over taking today off so soon after Christmas and New Year? What are all these public holidays going to do for Australia's international competitiveness?"

Is laziness like this destroying civilisation as we know it?

Although Gittins does not mention it, US Treasury Secretary John Snow has recently blamed a lot of what's wrong with the US's international trade position with Europe and Japan:

The combination of rising deficits and the shrinking U.S. dollar is setting off another round of international finger pointing, according to the Times of England. John Snow, U.S. Treasury secretary, blames Europe and Japan for not growing fast enough to absorb more American products, particularly capital goods.

So what does Gittins have to say?

... if you take maximising our production of goods and services to be the object of the exercise (as some silly businesspeople and politicians seem to), working harder - that is, longer - isn't a sensible way to go about it.

You don't understand the first thing about how the rich countries got to be rich, and will go on getting richer, if you think we did it by working harder. Rather, we did it by working smarter - a little smarter every year.

How do you get workers to work smarter? In the way we've been doing since before the Industrial Revolution: by giving them more and better machines to work with. By giving them an extra pair of hands, so to speak.

This means developing and applying new technology and investing in more capital equipment.
In these days of the IT revolution, however, we've become more conscious of the need to work smarter by increasing our investment in "human capital" - the knowledge and skills our workers carry around in their heads.

The more the developing countries take over the world's production of manufactured goods, with China at their head, the clearer it becomes that our future lies in using increased investment in education, training and lifelong learning to raise the skill of our workforce - something we're not doing well enough at present.

To put all this another way, if the nation's interest is in amassing worldly wealth, you don't focus on production (output), you focus on productivity (output relative to inputs).

Any fool can increase output by increasing inputs (including hours worked). The genius of the capitalist economy is its long-proven ability to increase the output of goods and services much faster than the increase in inputs.

This economic magic is achieved by technological advance, backed up by the accumulation of physical and human capital.

Seen in this light, the question of how many days a year we take off pales into insignificant penny-pinching.

He then asks if maximising the output of goods and services actually is the object of the exercise(emphasis added):

... there's an even more fundamental objection to the attempt to make us feel guilty about holidays: it confuses means and ends.

Conventionally, the production of goods and services is a means to an end, not an end in itself. The end is what economists call "utility" or satisfaction, and the rest of us call happiness.
And the point is that utility derives from a combination of consumption and leisure. Part of the key to happiness is contrast and striking the right balance between work and leisure. You'd expect neither the person who never stopped working nor the person who never worked to be particularly happy.

The defenders of capitalism are always telling us we should produce more because the richer we are, the more we can afford to do what we want - to spend money on fixing the environment, for instance.

But here the same people are telling us we can't afford to take a few days off because we have to keep working and getting richer.

This is muddle-headed. It takes the end of leisure and reduces it to a means to the end of increased production.

It tries to make us into misers, who think the fun comes from making and counting money, not from spending it. It's like being too busy preparing a meal to sit down and enjoy it.
Though this is the most elementary and conventional economics, the funny thing is that economists regularly foster the misconceptions of businesspeople and politicians by using a nation's total production of goods and services (gross domestic product) divided by its population as the standard measure of its prosperity and economic success.

The trouble with this is that it focuses on production rather than productivity. It thus implicitly assumes that the person who slaves night and day to amass goods and services is more successful, and more happy, than the person who sets a high value on leisure - even where that person has high productivity, meaning they can well afford to take time off.
For years this measure of GDP per person has been used to show the Americans are far richer than the Europeans and conclude there's something wrong with the European economy that needs "reform".

But recent research has demonstrated that Europe's level of productivity is similar to America's, meaning that the Yanks' higher GDP per person is largely a product of their decision to take shorter holidays and generally work longer hours. The Europeans, on the other hand, prefer more leisure and less work.

It's a free choice. Despite all the propaganda we hear from the workaholics, there's nothing in orthodox economics that says the Americans have done the right thing and the Europeans the wrong thing.

Nothing in common sense, either.

So the sensible answer to the question that this post asked, whether John Snow likes it or not, is, "no!"

Monday, January 24, 2005

So that's all right, then

This one nearly passed us by... AP report on Friday:

The number-two Pentagon official said yesterday reducing American casualties in Iraq was more important than bringing United States troops home - and pointed to the rising Iraqi death toll as evidence that the American strategy was working.

"I'm more concerned with bringing down our casualties than bringing down our numbers," Deputy Defence Secretary Paul Wolfowitz said in an interview with PBS television's The NewsHour.

"And it is worth saying that since June 1, there have been more Iraqi police and military killed in action than Americans."

The sight of Freedom being Spread is a glorious sight indeed. Its colours seem to contain a lot of red.

Lowe blows

Ian Lowe is emeritus professor of science, technology and society at Griffith University and has recently been elected President of the Australian Conservation Foundation following the previous incumbent's startling switch from environmentalist to politician, a switch set to rival that of Cindarella's coach at midnight.

Lowe writes a weekly column in the Australian edition of New Scientist.

Last week he reported that, according to a study released by the Australian Bureau of Statistics:
While the proportion of [Australian] people saying they are satisfied with the quality of piped water increased from 64 per cent in 1994 to 70 per cent last year, the numbers buying bottled water grew in the same period from 3 per cent of households to more than 20 per cent.

Why would that be?

All Australian metropolitan water supplies are safe to drink and, while Adelaide water probably holds the wooden spoon in palatability, it didn't kill me when I lived there.

Economists describe some goods as positional. We buy them, not for their inherent properties but because in some way they say who we are (or who we want people to believe we are). Buying Mt Franklin bottled water instead of asking for a jug from the tap, or even better, buying imported Perrier water makes for us a show of supposed discernment that less knowledgeable and less affluent people cannot afford.

Mercedes Benz motorcars, private schools for the children, Mexican beer and French champaigne may all have qualities that we prefer above those in more widely used products, but their key attraction is positional.

Lowe has another interesting observation in New Scientist this week.

He writes:

Attempts to report science in a balanced way can give a misleading impression. That was the conclusion of an interesting analysis of reporting of climate change in the US press...

The majority of reports put roughly equal emphasis on science which shows that fossil fuel use is changing climate and on the persisting view that the changes are are part of natural variability.

Economist Paul Krugman put it this way, five years ago:

... the mainstream media are fanatically determined to seem evenhanded. One of the great jokes of American politics is the insistence by conservatives that the media have a liberal bias. The truth is that reporters have failed to call Mr. Bush to account on even the most outrageous misstatements, presumably for fear that they might be accused of partisanship. If a presidential candidate were to declare that the earth is flat, you would be sure to see a news analysis under the headline "Shape of the Planet: Both Sides Have a Point." After all, the earth isn't perfectly spherical.

Nothing's changed.

Science... but not as we know it, Jim

Headline in the Sydney Sunday Sun-Herald yesterday:

Sea water provides the energy
to put wind back in your sails

Reporter Daniel Dasey reports on a startling development - an American-designed yacht which extracts its energy from sea water.

Perhaps Dasey was unlucky I thought: maybe the sub-editor who crafted that headline had an M.A. in Phoenician, and didn't understand about thermodynamic equilibrium. But no.

He goes on to write:

The secret of the independence from fossil fuel lies in the fact that water is composed of hydrogen and oxygen.

To generate power, the yacht sucks water on board where it undergoes a purification process.

The water is then channelled to an electrolysis unit where it is broken down into hydrogen and oxygen.

No question, hydrogen can be extracted from water, a process almost as magical as extracting heat beads from the resulting ashes in your barbecue - because water is essentially hydrogen ash. A kilogram of hydrogen, when burned or used in a fuel cell (the resulting product, water, is the same in either case) produces around 120 megajoules of energy. To produce it by electrolysis "breaking down" water requires rather more energy than that.

Where would the electricity come from? Solar cells on the sails perhaps? God?

Why not simplify the process; cut out the hydrogen stuff, and simply propel the yacht with an electric motor, with auxiliary batteries like the Toyota Prius?

And if somebody is desperate to over-complicate matters by turning water into hydrogen and oxygen and then turning it back again, why bother to purify sea water? Hydrogen extracted from a litre of water has much the same energy as a litre of petrol.

Was Dasey the butt of some obscure practical joke, or is this what passes for science in the quality press?

Saturday, January 22, 2005

An article of nun's clothing

For a change from money, war, politics, international exchange rates, prisoner abuse and suggestions about what you should do if you are retrenched next month (dying's good), Language Log explains how an intimate part of female anatomy became mistaken for a nun's wimple .

Guns or butter?

A classic question in Economics 101, first posed by Paul Samuelson, revolved around the trade-off between money spent on defence (or, as non-Americans call it, aggression) and the money alternatively spent on goods and services for consumption.

So what might be the actual trade-off today?

Chris Langley reports in New Scientist this week ("The best defence", p19) that the world's military spending is expected to have passed one trillion dollars for the first time in 2004. Over 40% of this is spent by the United States ("and to what end?" peace activists in Iraq might ask).

Deplorable as it might be, the flow of money into the war industry is not a tap that can be turned off overnight, anymore than animal activists can stop the flow of dead chickens to the world's dinner tables overnight.

But what else might personkind (we write "mankind" as we don't want to go the way of Larry Summers, after all) do with just five percent of that money?

The Economist set out last year to find out.

In the Copenhagen Consensus project it assembled a panel of distinguished economists and asked them, "if you had $50 billion to spend to improve the lot of mankind, what would be the priorities?"

The top four, for those who can't be bothered checking the link, are control of HIV/AIDS, provision of micronutrients to combat malnutition, global trade liberalisation and control of malaria.

Feasible? Yes.

Likely? Less likely than continued production of anti-personnel land mines.

What other species creates tools to specifically gnaw off each others' feet?

Friday, January 21, 2005

WTO Free Trade Agreement

The Australian government prides itself on the progress it has made and continues to make in negotiating bilateral "free" trade agreements, but it is worth noting the following, in a report prepared by the Consultative Board of the World Trade Organization that was released on Monday:

"The Board is deeply concerned by the current spread of Preferential Trade Agreements (PTAs). It is unconvinced by the economic case for them and especially concerned that preferential treatment is becoming merely a reward for governments pursuing non-trade related objectives. Meanwhile, non-discriminatory, most-favoured-nation treatment - a fundamental principle of the WTO - is close to becoming exceptional treatment. *Governments need to show restraint or risk more damage to the multilateral trading system. The first test of any new initiative should be that it clearly improves trading and development prospects of beneficiaries and does not harm the interests of those outside."

The report goes on to refer to the developing "'spaghetti bowl' of descriminatory preferences". Local writers have previously expressed misgivings about the worth to Australia of bilateral free trade agreements (the one with the US in particular, given especially that a main plank is not freedom, but restraint, of trade in intellectual property). Now that the WTO itself has expressed concern about the economic case for bilateral agreements, isn't it time for our government to have second thoughts on trade policy?


Not until Washington tells it to.

Canada may be stuck in the right armpit of Uncle Sam, but Australia is prostrate at its feet.

What we are about

Economic rationality meets human emotion... WTO protestors reject the former; many economists (irrationally in the face of all evidence) fail to allow for the latter. Might it be possible to simultaneously make both mistakes? We shall see.

We are located in Australia (not the land-locked, German-speaking country abutting Italy, Germany and the Czech Republic, but the large, largely desert island that some American and Australian politicians believe, wrongly, is the 51st United State).

We read:

  • The Australian Financial Review
  • The Economist
  • New Scientist
  • The New York Times
  • The Sydney Morning Herald
And other things besides.

Regrettably, except for the last two (which require registration), much of this content is limited to subscribers. We will try to paraphrase or quote sufficient for it to be apparent whether our commentary on these is biting and incisive, or ill-considered and idiotic.

So, what are the rules for writing a blog? Only one: start.

So, here it is.