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10:51:04 PM    

The Australian Government intends to head into the G20 meeting in April with strong warnings against the dangers of growing economic nationalism around the globe, so we should not expect the Government to exhibit any such traits in the lead up to the London meeting.¬[sgl dagger]

On Sunday morning Wayne Swan was offered the chance to pillory ANZ for out-sourcing 500 back office jobs to India.¬[sgl dagger] He was asked on the ABC Insiders program¬[sgl dagger]whether the Government was getting enough in return for the financial guarantees provided to the banks, given that jobs are being sent off-shore.¬[sgl dagger] Swan’s reply was reassuring in its economic liberalism.¬[sgl dagger]¬[sgl dagger]Swan said that the guarantees and off-shoring of jobs were unrelated issues, and he only urged banks to look after their employees.¬[sgl dagger]

So far so good.¬[sgl dagger] But then on Monday we hear that the Government is to slash Australia’s skilled migrant intake.¬[sgl dagger]

¬[sgl dagger]This is a bad¬[sgl dagger]decision on every level.¬[sgl dagger] It trashes the Government’s credibility in arguing against economic nationalism; it restricts the flow of valuable human capital into Australia; and it pulls up the ladder people who are in the pipeline and could reasonably have expected to come to Australia this year.¬[sgl dagger]¬[sgl dagger] Josh Gans explains below that there is little or no evidence that immigration increases either unemployment or rents in a¬[sgl dagger]recession.¬[sgl dagger] ¬[sgl dagger]

We are a nation of immigrants.¬[sgl dagger] Apart from our¬[sgl dagger]indigenous¬[sgl dagger]population, everybody who lives in Australia is descended from immigrants (and/or convicts).¬[sgl dagger] Our immigration policy has served the nation fantastically well and should¬[sgl dagger]not be¬[sgl dagger]used as a semi-annual labour market policy instrument (the skilled immigration quota increased substantially only 9 months ago).

The Government might just as easily have announced that in the global war for talent the GFC¬[sgl dagger]presents a unique opportunity for Australia to bring in a wave of talented and energetic immigrants that will carry us forward for decades.¬[sgl dagger] It might have announced that in the interests of up-skilling the economy and solving the demographic problems of a greying population, skilled migration will be increased by 100% for the next three years.¬[sgl dagger] Skilled immigration is like adrenaline to any society and an opportunity to attract this much talent is unlikely to present itself again, so lets go for it.¬[sgl dagger]

But, alas no.¬[sgl dagger] Instead we have a sop to ACTU lobbying that does a lot of harm and and very little good.

2:13:16 PM    

In early-1993, Australian unemployment peaked at nearly 12%. In 1992-1995, six of Australia’s eight states and territories ousted their government. By contrast, unemployment averaged 5% in 2003-2006. In these years, no state or territory government was ousted from power.

In Australian politics, conventional wisdom has it that the state government oustings of the early-1990s were due to bad leadership, while the victories of the early-2000s were due to skill. But could it be that Carr wasn’t more skillful than Cain & Kirner, just luckier? In a paper that we released last year, Mark McLeish and I showed that Australian state governments were more likely to lose office when the national economy turned sour.*

To check that our results weren’t being driven merely by the modest contribution that state leaders make to economic performance, we were able to show that our results held up even if we only used a purely unrelated source of growth - the US economy. Here’s a chart that shows our central result: the bars indicate the share of state governments losing office in each 5-year period, while the line is the US unemployment rate.

Why do Australian voters turf out their state governments when the US economy tanks? The answer seems to lie in something psychologists call ‘the fundamental attribution error’, which is the fact that humans aren’t very good at separating situational factors from ability when making assessments. So for example managers tend to be bad at taking task difficulty into account when assessing their workers, sports fans don’t appropriately adjust for field conditions when judging ability, and shareholders tend to overpay CEOs when the market booms. Consequently, it isn’t all that surprising that voters aren’t very good at separating out the component of economic growth that lies within the control of state politicians from factors outside their control.

Our results suggest that a 1 percentage point rise in the unemployment rate lowers a Premier’s chances of re-election by 3-5 percentage points. So the 1 1/2 percentage point increase in the Queensland unemployment rate over the past year has lowered Premier Bligh’s chances of re-election on the weekend by 5-8 percentage points (the average Premier in our sample had a 66% chance of re-election).

But the fundamental attribution error doesn’t just affect Australian state elections. In earlier work, Justin Wolfers showed that luck affected US state elections in a similar way (though Australian voters seem a little more gullible than their US counterparts). And in work on national elections, I’ve recently shown that when the world economy slumps, national leaders tend to get voted out of power.

Here’s a chart plotting world growth against re-election rates over recent decades (I exclude the US and Japan, since they make up a large share of world GDP).

We don’t know the optimal turnover rate of governments, so it could be that voters in national elections get rid of too many governments when the world economy slumps. Or perhaps they axe too few when the world economy booms. But either way, some more national leaders are likely to join the ranks of the unlucky unemployed.

One last prediction. I’m guessing that the prognostications of the pundits will over-emphasise competence and under-emphasise luck. After all, it’s not just voters who commit the fundamental attribution error.

* As part of the Australian state elections paper, we also produced estimates of Australian state unemployment rates from 1913-2006, which are available here.

1:25:56 PM    

Google made a practical move with some of the 7 million books it's scanned from academic collections by making 500,000 titles with no remaining copyright protection available to Sony for its electronic book device, the Reader. Reports indicate only books from 1922 or earlier were included, as 1922 is the latest date for which public domain status is entirely clear. (Many works published after 1922 are also in the public domain, but each work has to be researched individually to determine its status.)

Earlier this year, Google added an option to view but not download 2 million public domain books on the iPhone; see "More Ebooks Available for the iPhone/iPod touch," 2009-02-09. Think of it like iTunes song purchases versus a Pandora stream.

Google's program to scan books ran afoul of publishers and authors' concerns about the right to scan and archive titles, and the legality of snippets being displayed from these scanned works. A preliminary settlement between Google and various interested parties should make millions of books available for viewing, printing, download, and purchase in the coming months; these titles could also wind up being previewable and for sale on the Reader. (See "Authors and Publishers Settle with Google Book Search," 2008-10-29.)

It's clear that Google has chosen a side (for now) between the two giants of electronic book readers, Sony and Amazon. The Wall Street Journal notes Sony said its Reader sales are at 400,000 and reported that Citigroup estimated Amazon Kindle sales at 500,000.

The Kindle 2, introduced in February, improves on the design of the original device and has a faster screen refresh. Amazon released Kindle for iPhone shortly after the Kindle 2 hardware. Amazon offers 245,000 books for sale along with subscriptions to dozens of magazines and newspapers, and hundreds of blogs. The iPhone software can download only books, not subscriptions. That may change with Apple's iPhone 3.0 software, which now enables in-application subscriptions and purchases.

Lest we forget, Project Gutenberg's volunteers have been assiduously typing, scanning, and correcting out-of-copyright works for many years. Its catalog, now at 27,000 books, includes downloads in text and other formats, including a DRM-free ePub format that both the Reader and Kindle 2 can handle. Affiliated and partner projects bring a grand total to 100,000 titles.

While Project Gutenberg has a fraction of what Google has made available, the quality should be higher, as works have been prepared for accuracy instead of volume, and represent works of a great likelihood to be interesting to a modern audience instead of historians and researchers.

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12:29:13 PM