Relaunch, quietly ...
Finally come up with a new role for D2D! The Director's Cut thing was just too much work to be feasible. But I've now got an idea; while the majority of new stuff will be going up at CT, I'm going to use D2D in order to indulge my love of the art of summarising things (it also means that the title will for the first time make sense).
Basically, every post from here on in will be exactly 250 words (not counting this one). I'm also launching a colour coding idea:
Text in black will be summaries of official documents, academic papers, etc. Basically, long and difficult, but important, pieces of work, digested for the common man.
Text in blue will be short essays of mine on concepts or ideas that I find interest ing. Basically a bit like John Quiggin's Word for Wednesday series but with a bit of a wider remit
Text in green will be my trademark "aggressive precis" concept; summaries of positions I disagree with which the authors of the original documents would presumably regard as unfair
I will add a "DD sez" comment in red at the end of each post which doesn't count toward the 250 words
I'm branding the new content "D2Digests", in a fit of originality. The alternative "Shorter" branding is more a public domain thing these days
I'll be quietly building up some content this week and then relaunching properly by announcing it on CT. Keep it under yer hat ...
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Monday, March 22, 2004
The "Outsourcing1" Issue: Good or Bad for Workers? – D2 Digest
Effect on employment
In the short term, negative. When a company outsources, domestic workers lose their jobs. This may be "frictional" unemployment, but it's nasty if it happens to you. And in a recession "frictional" unemployment lasts longer, because employers take their sweet time to reinvest the money they save by outsourcing. It's not good enough to pretend that short-run costs don't exist.
In the long term, negligible. The domestic level of employment is a result of monetary policy, not trade policy. All previous scares about trade destroying jobs have proved to be bollocks, so these will too.
Effect on wages
There are two effects at work here:
If outsourcing improves the division of labour and increases national income (if the money saved by capitalists is reinvested at a profit), then it should be good for wages in the long term, as wages tend to rise in line with national income.
In the short term, outsourcing decreases the bargaining power of domestic workers, which is bad for wages. Particularly in an economic environment in which the labour market is slack and seemingly getting slacker.
More efficient technologies tend to increase wages. Union-busting decreases wages. Outsourcing has elements of both, so it is hard to say which effect will prevail. My guess is that in the long run, labour has always got its share of the returns to productivity improvements and so it will this time. But the short run (see above) could last a long while.
DD sez: It seems to me that, in principle, and in the long run, outsourcing is a form of trade and should be supported for all the reasons that trade should be supported. However, I certainly don't propose to make that argument in front of a gang of recently-outsourced workers and nor should anyone else. There are real social costs to any technological revolution which should not be ignored. In general, society doesn't internalise these costs to the companies in order to provide an implicit subsidy to innovation, but I am unsure that this subsidy is merited in this case. I haven't tackled questions of international equity here; they are obviously important.
1In reality, "offshoring". The jobs in question are not always being moved out of a company, and it is possible to outsource jobs without also offshoring them. But give up, this linguistic battle has been lost and "outsourcing" was a pretty nasty neologism anyway, so it's not ground worth fighting over.
You walked into the party Like you were walking onto a yacht Your hat strategically dipped below one eye Your scarf it was apricot You had one eye in the mirror As you watched yourself gavotte And all the girls dreamed that they'd be your partner They'd be your partner, and
You're so vain You probably think this song is about you You're so vain I'll bet you think this song is about you Don't you? Don't you?
You had me several years ago When I was still quite naive Well, you said that we made such a pretty pair And that you would never leave But you gave away the things you loved And one of them was me I had some dreams they were clouds in my coffee Clouds in my coffee, and
You're so vain You probably think this song is about you You're so vain I'll bet you think this song is about you Don't you? Don't you?
Well, I hear you went up to Saratoga And your horse naturally won Then you flew your Lear jet up to Nova Scotia To see the total eclipse of the sun Well, you're where you should be all the time And when you're not, you're with Some underworld spy or the wife of a close friend Wife of a close friend, and
You're so vain You probably think this song is about you You're so vain I'll bet you think this song is about you Don't you? Don't you? Don't you? (Repeat until fade)
DD sez: Well really.
posted by the management 5:06 AM
Wednesday, March 10, 2004
"Grounds for Complaint", by Brink Lindsey, published in the UK by the Adam Smith Institute - D2Digest
Fair trade coffee is a "politically motivated" niche, while "the fast-growing specialty coffee industry is developing and serving vibrant consumer demand". Figure out the difference between these two products for yourselves.
Despite the fact that Fairtrade occupies only 1% of the US coffee market (it did in 2001, anyway; see below), its very existence will distort production forever.
Antiglobalisation activists are demonising the coffee producers and retailers, and this accounts for the recent decline in coffee drinking in the USA.
Works cited:
Oxfam (Sept 2002) <---; most recent Seattle Times (Nov 2001) Federal Reserve Boston (Q2 2002) Hillside Agricultural (2001-2002) Proctor & Gamble (2002 annual report) Coffee Assoc. of Canada (2002) World Bank Agriculture Technology Note (June 2002) (relevant detail cited to an earlier 2001 report. More up to date numbers here Economic Development & Cultural Change (Jan 1996) House Committee on International Relations (July 2002) World Bank Comodity Market Reform (2001) Bohman & Jarvis, 1999 The Economist (Sept 2001) World Bank PREM Note (Jan 1999)
I haven’t noticed the "coffee crisis" is the year before last’s story because I’m using a chart of coffee prices in which the scale is dominated by the 1994 and 1998 spikes to $2/pound, and didn’t use a log scale. Look out next week for my working paper on why "Dot Com Stocks Are Go! Go!", citing only sources from 1999.
DD sez: But really, does anyone believe that paying farmers more is bad for farmers? Or that coffee producers are hanging on in a dead industry simply out of the hope of getting their hands on some of that sweeeeet Fairtrade moolah? Of course not. Lindsey is just engaging in pretty mindless epater les gauchistes. This is a real clunker from the author of "Against the Dead Hand", which was apparently a pretty good book.
The important finding is that Equitable went bust because, fundamentally, it had always distributed more in bonuses than was prudent. This was actually always a selling point for Equitable’s sales force; that they paid policyholders more and held less ‘surplus’ capital. Helas. Life assurance is actually a very simple business (nothing beyond high school maths) What makes it complicated is trying to do it with too little capital, as you have to decide two imponderables:
a) what is an acceptable risk of ruin b) what risk of ruin you are actually running
Estimating the first is merely intractable; estimating the second is a metaphysical impossibility, unless you are prepared to extend frequentist statistics into the realm of human actions. US life assurers don’t run these risks; they are generally fully funded, which is why US actuaries have two years’ less training than UK – we demand higher returns from our life assurance and so we occasionally get these blow-ups. Lesson learned for investors; don’t invest your money with people who boast about their low solvency margin. Lesson not learned for economists; “acceptable risks”, are defined as those risks acceptable to people who have not lost money.
The genuine culpability, though, was the regulators and company a) assuming without advice that Equitable would win its case in the House of Lords and b) remaining open to new business after it had lost. Taking new investors’ money to pay off old and hoping that investment returns improve, is exactly what Charles Ponzi did.
DD sez: It isn’t the government’s fault that Equitable collapsed. The people who invested post 1998 should get compensated the full amount by the FSA; for the rest, it’s a hell of a shame but if caveat emptor is to mean anything it has to mean this. This will presumably dent confidence in long term savings for private pension provision, but that’s all to the good; it can’t be a good idea for people to have “confidence” in a fundamentally unstable product
posted by the management 4:39 AM
Wednesday, December 10, 2003
The Anti This War Now Left
I can't remember which particular newspaper column or weblog post motivated me to write this out longhand, but it's a version of an argument I've been repeatedly making in response to various flavours of the "pro-war left" argument that opponents of the war are somehow deficient in their loathing for Saddam Hussein (by the way, another entry for the Catechism: "What kind of a dictator was Saddam? A brutal dictator"). My defence against this charge is that I was, provably and repeatedly, in writing, in favour of war against Saddam Hussein. I just simply didn't want it to be this bunch of pillocks in charge of it.
This is an important point, and one of the few things they teach you at business school which is worth the price of entry; very few decisions in business or elsewhere are "now or never". It is massively more common for a decision to be "now or later". Furthermore, corporate finance theory teaches us that the option to wait is usually really quite valuable. So when we were faced, pre-war, with the following dichotomy:
Option A: Have a war which will kill people and have many undesirable geopolitical consequences (the Ken MacLeod point). Option B: Leave Saddam in power
it was necessary to consider not just the pros and cons of A and B, but also the unstated third option which is almost always present whenever you are considering an expensive and time-consuming project.
Option C: Wait awhile to see if a better tradeoff or more information becomes available.
Specifically, my taste was to wait until 2004, when we might have a different American government which wasn't quite so zealously devoted to the project of cocking things up. This is why I never qutie understand why the pro-war crowd, left and right, seem to think that injecting the phrase "Bush is a moron" into the debate is in some way unsportsmanlike, unmannerly or evidence that one's opposition is partisan or not serious. It's an entirely germane point in considering the costs and benefits of a war whether or not it's being run by a moron, and it is by no means established that the option of a war not run by a moron was completely out of the question. The benefits of waiting could have been considerable; we might have had a significantly better-planned war and post-war. And I'd argue that the costs were not so great; although Saddam was indeed a dictator or the variety "brutal", the fact is that those mass graves were filled in the early 1990s. At the particular time when we were discussing this question, the actual Saddam-caused mayhem was at a much lower level (although, obviously, I would certainly not have chosen to live there). In any case, any argument based on the assumption that Saddam's domestic brutality was so horrible in 2003 that it could not be suffered to carry on for a single second longer runs into a particularly nasty tu quoque objection; like the rest of us, the humanitarian-bomber crowd were, observably, not out in the streets demanding intervention in Iraq during the first half of 2001, so how serious could this argument actually be?
I'm pretty sure that a lot of us who marched to Hyde Park were in the same camp as me; opposed to "this war now", rather than opposed to "any war against Saddam ever". A very significant proportion of UK and world opinion was entirely prepared to give them their damn war, if they could only get a UN resolution in favour of it, but they couldn't. It's simply an error of reasoning to assume, without specific proof to the contrary, that the anti-this-war-now left could be described as "objectively pro-Saddam". Much fairer to say "objectively pro-Saddam until a sensible plan can be formed to get rid of him, which they judge the current proposal not to be". I'm pretty sure that this was a common point of view, which is why I'm disappointed to see that it wasn't articulated better at the time (I only said anything about it myself in a pretty frivolous way).
Of course, the point would have been moot if there really were weapons of mass destruction in Iraq; that of course would have been a decent reason why the "war/not war" decision was "now or never" rather than "now or later". But I don't think anyone's pushing that line any more.
A few posts ago, I referred to the communitarian thinker as having "a name which looks like the Scrabble hand from hell". This provoked a certain amount of discussion at the time; I think that everyone took it in the spirit of fun in which I intended it, but have been left ever since with the uneasy suspicion that some people might have thought that I was mocking Etzioni for having specifically a Jewish name, rather than just generally for having a funny foreign non-English one. It's always as well to be careful on these things.
All of which is by way of prelude to my having just realised that if there is an "S" already on the board, then if you had the tiles "AMITAIETZIONI" on your rack, you could put down the word "ZIONIST". Which if it landed on a triple or double word score, would pretty much be game over, obviously.
Therefore, while I still think that "Amitai Etzioni" is a pretty poor Scrabble hand (apart from the Z, it's all vowels and low scoring consonants), it can't be described as "from hell", because it does hold out the prospect of that fantastic move. Therefore, sorry.
