The dude at Macquarie …

The Reserve Bank of Australia just decided, somewhat unexpectedly, to keep interest rates on hold.  Channel 7 news needed to spin it into a story, though, so they did the usual thing of getting a talking head from the mythical (in Australia, at least) Macquarie Bank to say something.  Unfortunately, there was a guy in the background who chose that moment to look at topless pictures of Miranda Kerr.  Here’s the clip.  The guy starts looking at them at the 1:00 mark.

I don’t think he’ll be fired.

It looks like he was opening images from an email and that gives him a little cover.  If the sender was a Macquarie employee then they will have some serious problems, it being considered worse to send “offensive” material than to receive it.

The dude will probably get an official reprimand and he might not get the same pay rise as others in his team next time ’round (at the least, he was just demonstrably slacking off from work), but I think that’ll be about it for him.

I think that Macquarie will look at their email and web-browsing policy again and consider increasing the paranoid parameter of their filters.  There are plenty of algorithms for detecting skin tones in images and I’m 99% sure that they’ve been incorporated into email filters. It’s just a question of turning them on.

I think they’ll also reconsider their policy on having their talking heads stand in front of an office like that. I know they do it to look more important — I’ve taken 3 minutes out from my dazzlingly busy schedule to explain that your mortgage payments won’t change today, but will probably go up in a month or two. Gosh, don’t I look impressive? — but exactly this sort of stuff is the risk with which it comes.  I’ve seen other stupid things going on behind US presenters, so I don’t think they’ll stop the practice, but they might consider staging the background a little more than just sticking a big cardboard Macquarie sign in there.

In the end, it just shows what everybody working in an open-plan office already knows: the exact position and alignment of your desk is of crucial value.

Doris

Something like 11 years ago, my brother got a dog.  She was a border collie – blue australian cattle dog cross (the two most energetic breeds that exist) and, because my brother has always had a knack for naming things, he called her “Doris, the dog.”

A few years ago my brother bought his own place in town and so moved out of the cottage in which he’d lived at Mum and Dad’s place.  Doris had always been a country dog and wouldn’t have done well in a small back yard, so he didn’t take her in with him (the cat, named “Cat,” did go).  Instead, Doris stayed out with Mum and Dad and my brother would come out to play with her while telling our parents that of course he was there to see them.

Doris was, in many ways, an insane dog.  When my parents moved to The Hill seven years ago, she was introduced, most painfully, to the local jumping cactus (more properly called Tiger pear, or scientifically, Opuntia aurantiaca).

A quick aside.  Jumping cactus is a vicious little bugger, because the segments are quite small (often just a centimetre or two) and the spines are fantastically long (two to three centimetres).  The spines are barbed and the plant segments attached to each other by the loosest of connections, so the faintest possible touch will lead to one of them sticking in your trousers, shoes, foot or what have you.  The barb on the spines (like a fish hook) means that they will not come out simply when pulled, but need to be ripped out in a manner that, if it’s your foot it’s emerging from, will bring tears to your eyes.  Here’s a picture of the stuff attached to somebody’s boot:

Tiger pear is native to South America and was stupidly brought to Australia in the 1800s as an “ornamental garden plant.”  It is now all over south-east Queensland and north-east New South Wales to the west of the Great Dividing Range and threatens to move over most of south-east Australia.

[The map comes from weeds.com.au]

Anyway.  When my parents first moved to The Hill, poor Doris managed to step on some of the ghastly stuff and somebody — I don’t remember who; probably Mum — had the joy of holding her down and tearing the spines out of her foot with a pair of pliers.  Doris was always a smart dog and didn’t blame the humans for this pain.  She knew what was responsible and she must have vowed, in her little doggie brain, to take action.

From that day on, at every opportunity, she would pad around the top of the hill looking for jumping cactus and, upon discovering a patch, would settle down and eat them.  I should stress that this ought to be utterly impossible.  The spines, as mentioned earlier, are at least an inch long.  There is no way that Doris could have eaten them without sticking herself in the mouth with an awful collection of fish-hooked spines.  But she did it.  Somehow, she did it, and she did it every time my mother went to work in the garden.  Which is a lot.  A lot.

She also believed firmly in attacking snakes, for exactly the same reason.  Doris was bitten by snakes on, I think, three occasions on The Hill.  She should have died from all three of them.  She certainly should have died from the one that caused the skin on her stomach to die and rot away, leaving her innards exposed to the air.  My parents are not heartless; they took her in to the vet, but the nice lady explained that full treatment would cost thousands of dollars and my parents are not made of money and, besides, they both grew up on and now, again, lived themselves on a farm.  Things sometimes die on a farm.  So they took Doris home with the hole in her stomach and were especially nice to her.  Doris survived.  Doris just kept the wound clean by licking it around the clock and it gradually grew over.  In the end, you couldn’t see any scars and her hair grew back over the whole area.  She got her own back, mind you.  Every summer when the snakes came out, she wouldn’t back away, but would attack them; and I do mean attack.  She’d grab and toss them, shaking her head to try to crack a spine or some such.  Mum and Dad used to discover dead snakes on the front lawn, left as presents.

The point, as you might imagine, is that Doris was an absurdly tough dog.  This is not particularly unusual for Australian Cattle Dogs.  You should hear some of the stories about my uncle’s dog, a red aussie, called — well, what did you expect? — “Red.”  But this isn’t a post about Red.  It’s about Doris.

Doris loved to please.  It was in her nature.  The instinct of both the Cattle Dog and the Border Collie is to run, to chase, to track and to herd.  For both, the link to their humans is near absolute.  Doris was never trained as a proper cattle dog (much to her frustration when my parents started breeding a few cattle), but she loved chasing balls.  She really loved chasing balls.  When she got tired from the chasing, she loved taking the ball into the shade and chewing it to pieces.  No doubt it was to keep her in shape for the next round of jumping cactus destruction.  Occasionally my mother would buy one of those expensive, “indestructible” balls for her.  I think the longest one of them lasted was 48 hours.  No, the only way to preserve a ball was to stick it in a bag out of her reach.

Doris wasn’t utterly indestructible, mind you.  Possibly because of some inherited condition, or possibly because of the string of snake bites, she suffered from a kind of arthritis.  She’d be stiff getting up in the morning and she might take a little while to warm up.  But once she was going, there was nothing stopping her.

Oh, the craziness.  I forgot the craziness.  Doris never quite understood storms.  I don’t just mean that she was scared of thunder.  Lots of dogs are scared of thunder.  Doris thought that the thunder and lightning were some enormous, angry animal.  Her fight-or-flight mode was often a random switch between the two.  Sometimes she would run around the yard trying to bite the lightning in the distance; sometimes she would rip open the screen door and slink inside to hide in the kitchen.  The first of these was just a source of laughter for Mum and Dad until Mum discovered that the same logic she’d applied to jumping cactus and snakes also applied to electricity.  For some reason a wire had become exposed close to Doris’ kennel and was crackling a little.  Doris tried to bite it.  Fortunately, that didn’t kill her either.  Tough.

Anyway, Daniela and I were back visiting over Christmas.  My mum’s brother and his family came in from Roma the day after Boxing Day and we all played some backyard cricket.  Doris, naturally, represented two-thirds of the fielding team.  I was on The Hill for a good two weeks out of my three in Australia and I threw the ball for Doris every day.  She’s a great dog.  She was a great dog.  This morning I woke up to this email from Mum:

A sad day. Doris died this morning. It is Australia Day so a holiday. I was mowing the lawn early and she was fine; chasing the mower trying to bite the wheel – she got it too! – I threw the ball for her a few times as I mowed. Your Dad and I were having coffee on the verandah at about 9am and she was lying on her mat under the family room window where she always lies, when I looked at her and she looked funny. Eyes open but not there. And that was it I guess the heart just stopped. No struggle, no noise, didn’t look distressed, just gone. We waited for an hour or so, I kept thinking she might not really have died but be having a fit as she sometimes does and then rang James. He was lovely and came out and helped bury her down under a big old ironbark tree overlooking the road.

On the upside, she didn’t appear to suffer at all. If I could eat chops the night before, chase a lawn mower an hour earlier and then lie down in the sun on the verandah surrounded by loved ones before I die – that would be about as good a way to go as any.

James stayed for the rest of the day and we’re all fine, just sad. She was 11 years old and such a good dog for out here. I keep thinking I can hear her outside. We’ll miss her for a long time.

Which is just about the most awful news I could possibly have received today.  Doris was never my dog.  I lived in the UK for seven of her eleven years and in Brisbane (two or three hours away) for the rest of them.  But I’m going to miss her enormously.  Rudyard Kipling wrote about this, many years ago.  He was one of my grandmother’s favourite authors, and my mother’s too.

The Power Of The Dog
Rudyard Kipling

There is sorrow enough in the natural way
From men and women to fill our day;
And when we are certain of sorrow in store,
Why do we always arrange for more?
Brothers and Sisters, I bid you beware
Of giving your heart to a dog to tear.

Buy a pup and your money will buy
Love unflinching that cannot lie–
Perfect passion and worship fed
By a kick in the ribs or a pat on the head.
Nevertheless it is hardly fair
To risk your heart for a dog to tear.

When the fourteen years which Nature permits
Are closing in asthma, or tumour, or fits,
And the vet’s unspoken prescription runs
To lethal chambers or loaded guns,
Then you will find–it’s your own affair–
But…you’ve given your heart for a dog to tear.

When the body that lived at your single will,
With its whimper of welcome, is stilled (how still!);
When the spirit that answered your every mood
Is gone–wherever it goes–for good,
You will discover how much you care,
And will give your heart for the dog to tear.

We’ve sorrow enough in the natural way,
When it comes to burying Christian clay.
Our loves are not given, but only lent,
At compound interest of cent per cent.
Though it is not always the case, I believe,
That the longer we’ve kept ’em, the more do we grieve:
For, when debts are payable, right or wrong,
A short-time loan is as bad as a long–
So why in Heaven (before we are there)
Should we give our hearts to a dog to tear?

So long, Doris.  It won’t be the same without you.

One in 20 Australians play the pokies WEEKLY

Stephen Lunn, writing at The Australian, channels the Productivity Commission’s recent report:

[The Productivity Commission] finds the legal ban in Australia on online gaming is a failure, with betting traffic heading to overseas sites that offer little in the way of consumer protection.

In its draft report on gambling, the first in-depth national look at Australia’s gambling industry in a decade, the commission finds that gamblers are losing $18 billion a year, of which $12 billion is lost on gaming machines.

It estimates that around 5 per cent of adults play weekly or more on gaming machines, and 15 per cent of those, or around 125,000 people, are problem gamblers.

Productivity commissioner Gary Banks says “a large number of people have problems with their gambling (and) it is vital that they are given a tool to achieve greater control”.

The commission recommends the reduction in the amount that can be lost on a gaming machine from its current upper limit of $1200 an hour to $120 per hour, and giving people a choice when they sit down on how much they spend, using the latest technologies.

[Emphasis added by John Barrdear]

If we assume that state governments and pubs don’t want to get rid of pokies because they’re so dependent on the revenues, then surely the only serious hope for enacting this would be for it to be a federal law.

Lifting the ban on online gambling and permitting pokies but limiting the loss rate seem sensible ideas to me – they leave people with the freedom to gamble if they wish, but limit the loss to largely one of time rather than having the option of putting the house down.

Of course, the softest still-ultimately-effective policy would be to simply hold the upper limit on loss rates constant while letting the minimum wage and welfare benefits rise with inflation so that the limit falls both in real terms (relative to the cost of living) and relative to household income.

A description of Australia’s healthcare system

John Hempton has gotten to it before I did and written it far better than I would have anyway.  Have a read.  Although I agree that Australia’s system is much, much better than America’s current system or any of their proposed frameworks, I would add three negative comments about Australia’s system:

  • Medicare payments to GPs for a consultation by a patient are determined centrally (at the federal level) and have not increased with inflation.  At first that meant that GPs shortened each consultation to fit more people in per day, but in the long run served, I believe, to reduce the supply of GPs and as a result pushed people with minor ailments to hospital emergency rooms.
  • I don’t know if it is better or worse than other countries, but the administrative overhead in the state government health departments is surprisingly large, even to me.  I am led to believe that adminstrators and middle-managers exceed more than 50% of the staff of Queensland Health (and that does not include admin staff on the wards).
  • The federal-state funding arrangement in Australia is a real problem.  I don’t know whether the best policy is to put all health care in federal hands or to grant the states more revenue-raising posibilities, but something does need to happen.

Whither baseload demand?

John Quiggin has a post in which he argues that, if baseload demand exists in any meaningful sense, it is much lower than current offpeak demand.  I want to paraphrase and expand on what he said.

There is no such thing as a “natural” or baseload level of demand.  There is a demand curve that plots quantity demanded as a function of price (or if you’re trained as an economist, the other way around).  There is a 3rd dimension of “time of day” (or more strictly, time of week, if I can say that): the curve of quantity-versus-price shifts in and out over the day.  The entire thing then shifts out slowly over time as population and the economy increase.

At most, we might say that there is a region of the demand curve for the offpeak period that is highly inelastic with respect to price.  Quiggin is arguing that that region would only be for quite small amounts of power, distinctly less than we currently see in offpeak load figures.

The reason lies in the economics of our current electricity supply through coal-fired power stations. (Side note:  I’m not 100% certain of these points – if anyone can confirm or deny them, I’d be glad to hear from you):

  • There is some range in the thermal output of a single furnace (it’s not simply all or nothing), but real variation comes from switching entire furnaces off and on.
  • The cost of moving within the output range of a given furnace is essentially just the fuel cost; the concurrent manpower required and the maintenance needs accrued are unchanged.
  • There are economies of scale in concurrent manpower when increasing the number of furnaces.  Moving from one furnace to two does increase the staff requirement, but it does not double it.
  • There are significant one-time costs associated with starting (and possibly also with shutting down) a furnace, largely due to accruing future maintenance costs.  This means that once you start a furnace, you want to keep it running as long as possible so as to amortise that cost over the greatest amount of output.

The upshot of these points (and all of them point in the same direction) is that a cost-minimising coal-fired power station is one with many furnaces that are shut down as rarely as possible.  In other words, they ideally want to supply a large and constant amount of power to the grid.

But the demand curve at 3pm is a lot further out than at 3am.  The coal powered stations can handle this a little bit by scheduling all non-emergency maintenance overnight, but ultimately, they face a conundrum:  the demand simply doesn’t exist — at any price — to meet their cost-minimising supply in the dead of night.  So they compromise by shutting down some furnaces (which raises the average cost of the remaining power generated) and lowering the offpeak price by half (which lowers the average revenue they receive for that power) in order to raise the quantity demanded.

Quiggin is contesting that the increase in quantity demanded during offpeak is significant compared to the “true baseload” demand, the quantity that would be demanded at 3am at just about any price.

In contrast, solar power, in particular, would have supply shifting in and out over the day along with demand.

Howard and Costello

With the news that Peter Costello will not be seeking reelection, Peter Martin gives us two stories of Costello’s way of dealing with people.  The first, with Saul Eslake, the chief economist of ANZ, is interesting enough, I guess.  The second one really caught my eye:

Richard Denniss is these days the chief of staff for the Greens’ leader Bob Brown. In 2002 he was the chief of staff to the then Democrats’ leader Natasha Stott Despoja. In Mr Costello’s budget speech that year he had announced that pensioners and other concession card holders would have to pay more for their medicines. Their co-payment would climb from $3.60 to $4.60 per prescription.

The Democrats said they would oppose the measure in the Senate. Some weeks later Senator Stott Despoja and Dr Denniss were summoned to the Peter Costello’s office.

Denniss says Costello took them through page after page of laminated graphs, talking at them for the best part of an hour. The Treasurer seemed surprised to discover that they hadn’t been won over.

“At one point Costello said: Natasha, you don’t appear to understand the numbers. To which she replied: I do understand the numbers Peter, you don’t have them in the Senate and you won’t be passing this bill”.

A few days later the two were summoned to the Prime Minister’s office. Denniss says he had expected Mr Howard to be even worse.

Instead they found Howard “effusive in apologising for being late, come in sit down, can I get you a cup of tea – lots of chit chat, lots of actual conversation”.

The Prime Minister said “I know you spoke to the Treasurer last week and I’m sure he showed you all his graphs” and I understand your position: “we are trying to drive up the price of medicine for sick people, of course the Democrats are going to oppose it”.

And then he said: “How about ten cents? That wouldn’t hurt anyone.” “It absolutely floored us.”

Howard said: “Natasha, you’re the leader, I’m the leader, can’t we just settle this right now?”

Denniss says he found the Prime Minister almost impossible to resist. “His genius was to make us feel powerful.”

Costello by contrast “wanted to wield the power that had been bestowed upon him.”

I find this entirely compelling.  Costello always struck me as a technocrat.  I may not have liked Howard much (and not at all for the latter half of his time as PM), but he knew better than most what any specific audience wanted to hear.

On China

Menzie Chinn emphasises that for the purposes of estimating country shares in global GDP, it is necessary to think of them in nominal terms.  On that basis, China is large, but only half the size of the Euro zone and well under half the size of America.  Therefore, he implies, an increase in demand from China won’t really contribute as much to global growth as people might be hoping.

Nevertheless, people do seem to be wondering about China as an engine of global growth in demand.  The reason is simple:  Despite a near catastrophic collapse in world trade, China’s economy is still growing while those of  other export-oriented countries like Japan or Germany are falling precipitously.

Clearly part of the reason for the continued Chinese growth, like in Australia, is the successful use of a fiscal stimulus to boost local demand (the Australian rebound was also helped by the fact that, by not manufacturing much, their decline in investment was offset by a fall in imports and (price) changes in natural resource exports occur with a significant lag).

Brad Setser has explored the Chinese stimulus a little.  He writes:

I initially underestimated the magnitude of China’s stimulus by focusing on the (fairly modest) change in the government’s fiscal balance. It is now clear that the majority of China’s stimulus has been off-budget: the huge increase in lending by state owned banks mattered far more than the change in the budget of the central government. The expected loss on these loans can be considered a form of fiscal stimulus.

Which is a fascinating way to conduct government business.

A hint on the nature of the current global recession

It’s only for a six-month time period and (importantly) doesn’t attempt to correct for the varying policy responses across countries, but this graph highlighted by the Australian Reserve Bank’s governor, Glenn Stevens, is interesting:

gdp-manufacutring

 

Australia generally imports intermediate capital goods so in the latest numbers the fall in investment was largely balanced out by a fall in imports, while the government’s stimulus handouts probably served to keep consumption up.

As a first guess and without hunting around to see if there are numbers, I suspect that households’ spending of the handouts was also skewed more towards domestically produced goods/services over imports than has been typical for the last few years.

It would be interesting to see trade figures broken down into intermediate and final goods flows more generally.

Hat tip: Peter Martin.

Westminster democracy and illiberalism

Cam Riley doesn’t like the new “Bikie Laws” in South Australia.  He quotes Gary Sauer-Thompson, who says:

My understanding is that under the legislation … the Attorney-General has right to call an organisation, which could be anything from an informal group of people who meet at the local pub for a weekly drink through to a football club or a business, a Declared Organisation. The Attorney-General can use secret and untested evidence in making that declaration, and his decision can’t be challenged in the courts.

… Severe penalties are then visited upon controlled members who continue some form of contact, even remote contact by post, fax, phone or e-mail – two years imprisonment for a first offence, five years for a second or subsequent offence.

I agree with Cam and Gary.  This is illiberal and unnecessary.  The law is ostensibly to combat criminality in gangs of bikies, but every element of that criminality is already illegal.  It’s already illegal to conspire to commit violence, or to trade drugs.  So the net effect of this legislation is simply to grant the Attorney-General the power to disallow any organisation that (s)he doesn’t like.  Cam points out that the “emergency” laws enacted in NSW following the Cronulla riots are still on the books.

My question is this:

Why do these laws get passed now when they (probably) wouldn’t have been passed following equivalent crises 100 years ago?

It seems obvious that the legislature has a political incentive to be seen doing something, as time in the media’s spotlight is currency to a politician.  It’s common to suggest, although not universally accepted, that the sharp end of the executive (i.e. those charged with enforcing the law) generally wish for more options in carrying out that enforcement.  In a Westminster system of the executive having a controlling influence in the legislature, that would imply inexorable movement towards illiberalism over time as exogenously-sourced crises occur.

So how has liberalism survived for so long in the Westminster tradition?  What, if you’ll excuse the pun, arrests the movement to a sort of democratic dictatorship?

More people have jobs AND the unemployment rate is higher

This is another one for my students in EC102.

Via the always-worth-reading Peter Martin, I notice that the Australian Bureau of Statistics February release of Labour Force figures contains something interesting:  The number of people with jobs increased, but the unemployment rate still went up.  Here’s the release from the ABS:

Employed Persons Unemployment Rate
Australia Feb 2009 Employment Australia Feb 2009 Unemployment Rate

FEBRUARY KEY POINTS

TREND ESTIMATES (MONTHLY CHANGE)

  • EMPLOYMENT increased to 10,811,700
  • UNEMPLOYMENT increased to 561,100
  • UNEMPLOYMENT RATE increased to 4.9%
  • PARTICIPATION RATE increased to 65.4%

SEASONALLY ADJUSTED ESTIMATES (MONTHLY CHANGE)

EMPLOYMENT

  • increased by 1,800 to 10,810,400. Full-time employment decreased by 53,800 to 7,664,200 and part-time employment increased by 55,600 to 3,146,200.

UNEMPLOYMENT

  • increased by 47,100 to 590,500. The number of persons looking for full-time work increased by 44,400 to 426,000 and the number of persons looking for part-time work increased by 2,600 to 164,500.

UNEMPLOYMENT RATE

  • increased by 0.4 percentage points to 5.2%. The male unemployment rate increased by 0.3 percentage points to 5.1%, and the female unemployment rate increased by 0.5 percentage points to 5.3%.

PARTICIPATION RATE

  • increased by 0.2 percentage points to 65.5%.

The proximate reason is that more people want a job now than did in January.  The unemployment rate isn’t calculated using the total population, but instead uses the Labour Force, which is everybody who has a job (Employed) plus everybody who wants a job and is looking for one (Unemployed).

$$!u=\frac{U}{E+U}$$

Employment increased by 1,800, but unemployment increased by 47,100, so the unemployment rate ($$u$$) still went up.

Peter Martin also offered a suggestion on why this happened:

We’ve lost a lot of wealth and we’re worried. So those of us who weren’t looking for work are piling in.

I generally agree, but my guess would go further. Notice two things:

  • Part-time jobs went up by 55,600 and full-time jobs fell by 53,800 (the difference is the 1,800 increase in total employment).
  • The number of people looking for part-time jobs went up by only 2,600 and the number of people looking for full-time jobs rose by 44,400 (yes, I realise that there’s 100 missing – I guess the ABS has a typo somewhere).

There are plenty of other explanations, but I think that by and large, the new entrants to the Labour Force only wanted part-time work and found it pretty-much straight away – these are households that were single-income, but have moved to two-incomes out of the concern that Peter highlights.  On the other hand, I suspect that the people that lost full-time jobs have generally remained in the unemployment pool (some will have given up entirely, perhaps calling it retirement).

The aggregate result is that the economy had a shift away from full-time and towards part-time work, although the people losing the full-time jobs are not the ones getting the new part-time work.