Sunday Snippets - fires, global warming, problems with benefits & with multipliers

It's been a slow blogging start for me this year. There has been plenty to write about, so much in fact  that I have found it difficult to select. So this morning just some snippets.

This has been a bit of a funny week, dominated by heat and fires. The three posts I wrote on the fires (Saturday Morning Musings - fires, land management & risk, Hysteria over fire risk, A view from the ground in a "catastrophic" fire risk area) drew some interesting comments. The comments provide a base for a new post, for they highlight some of the practical issues involved in responding to bush fires. I also finished the first post in the series noting that I had been going to finish the post by looking at new land management techniques, but that would have to wait until later. So I have two potential posts linked in some way to the fires.

One feature of the discussion flowing from the heat and the fires was a resurgence of the habit of linking current events to climate change. We saw this during the last drought, too. Then came flooding rains, and all the previous prognostications and the more extreme policy responses based on them suddenly looked rather silly. Something of the same thing has been happening this time.

I have made my own position on climate change clear before. On the balance of probabilities, I think it likely that the globe is warming and that that warming is linked at least in part to human activity. However, not all climate change skeptics or at least agnostics are either irrational or ideological.

Professor Don Aitkin is a case in point. He argues that the the current IPCC analysis is inherently biased because its mandate is to measure the impact of human induced climate change. As a consequence, less attention is paid to alternative views and, more importantly, to the broader pattern of, and general causes of, climate change. I have put forward somewhat similar arguments, although my focus has been more on the sometimes silly policy responses to climate change arguments.

In all this, I am left with an uncomfortable feeling that if the climate is changing and for whatever reason, then we had better get ready for bigger and faster changes than presently projected. When the old continent of Sahul was split by rising sea levels, the sea advance across the low lying areas of what is now the Gulf of Carpentaria was a metre a year. That is why I would like more research focused not on human induced causes, but on climate change in general.

In The error fallacy, I referred in passing to the in passing claim made by Commonwealth Families Minister Minister Macklin that she could live on the Newstart Allowance or dole.  She made the comments on the day that more than 80,000 single parents were shifted from the parenting payment to the lower Newstart allowance, leaving some up to $110 a week worse off. Since then, Labor ministers have been backtracking all over the place,

One of the difficulties in a complex integrated welfare system is that one change can have consequential effects. Now it appears that Centrelink, the Commonwealth agency that administers the welfare system, has issued letters to 60,000 single parents telling them to cut up their pension card since they are no longer eligible to use it. If you read the story, you can see that confusion apparently abounds. The issue is significant since the pension card gives you discounts on things like travel and electricity bills, making for a double whammy in reduced benefit payments and reduced discounts. If the newspaper report is in any way correct, we appear to have another example of bungled public policy.

The release of an IMF discussion paper suggesting that they had got the multipliers wrong in their earlier analysis of the impact of austerity measures in Europe has been widely reported. This is an Australian example. In simple terms, every dollar reduction in Government spending reduced national income by $1.50 instead of an expected 50 cents. This wasn't totally new news, for International Monetary Fund chief economist Olivier Blanchard had indicated just this back in October.

I must say that I was a little staggered, though. Economic models are just that, models. Their results always have to be checked by alternative analysis. In a growing world economy, actions by one country to restructure don't affect the whole. In a stagnant global economy, the application of simultaneous austerity measures by interconnected economies must have obvious flow on effects.

You can see this in Australia in the latest job vacancy figures. All Governments have been cutting spend and jobs. Public sector job vacancies in November 2012 were down a whopping 29.5% from the year before. Now in a rapidly expanding economy, reductions in Government spend free up resources for use by the private sector. But in the Australian case, the economy is slowing. Private sector job vacancies were down too, if by a smaller amount. 

The graph shows the trend. The downward trend in vacancies has been running for two years. That's a problem.

One of the issues drawn out in the discussion surrounding the IMF discussion paper is the way in which macroeconomic policy has become dependent on monetary policy and that's not working. In a world awash with money, the old Keynesian idea of the liquidity trap has come back into vogue. Quantitative easing doesn't work if people don't want to use the extra cash. It's as simple as that.