The Filter^

On the Road

The Motorcycle Diaries is the story of "Che" Guevara and his companion Alberto Granado's epic journey from Argentina to Venezuela. An adaptation of Guevara's own diaries (see here), the beautiful scenery of South America is carefully captured, paying homage to the great photographer, Rene Burri, who once witnessed:

One of Castro's aides asked, "Is there an economist in the room?", and, to everyone's surprise, Che stuck up his hand. Because they were all in awe of him, they voted him governor of the bank. It turns out Che had misheard the question. He thought the guy had asked, "Is there a Communist in the room?"

Youthful, idealistic and uplifting, the Motorcycle Diaries will warm the hearts of even the most "rational" economists.

PS: Speaking of motorcycles, one of Rachel's favourite books is Zen and the Art of Motorcycle Maintenance. I haven't personally read it, but once in a while, I am allowed to judge a book by its reader!

Homelessness

Thanks to all who came to the leaving do, there's a few photos so email me for the link. As I spent the night sleeping upon the lawns rolling up to St Georges Hall I noticed a distinct loneliness: I was the only bedless sole in that area, that night. Although warm, it was an uncomfortable night's sleep, and once again prompted an empathic surge for the plight of many drifters and deprived.

Since I was moving house, Faith and I put some out of date Guiness, Tonic Water, and a can of "Tusk" deodorant into the Van and delivered the goods to a known retreat. I hope they get found, and add a spot of cheer to an otherwise cold night. Apparently though, homelessness is on the decline. CommonKnowledge:

A recent tally suggests that the number of people sleeping on the streets has dropped by more than 70% between 1998 and 2003.
Why the tremendous decrease? British police are increasingly tough on the panhandlers--either slapping them with fines or simply arresting them. In addition to this, the British government has undertaken new campaigns to deter income-earners from giving to beggars. These campaigns point out compassionate would-be givers that beggars are more likely to spend the money their are given on drugs than food and shelter-

And there's me respecting consumption desires, and acknowledging homeless people as intelligent humans (which is not the same as cost-benefit optimizers). I remember a feeling of hollow bemusement when an Arriva bus first told me not to give money to the homeless: one can never ignore the frontline of an issue. Indeed a statistic once shocked me: something like 50% of "beggers" are undercover police officers. How's that for eroding civic trust?

As friends would testify, I am not traditionally charitable but the war shouldn't be on the homeless, rather the system that prevents them from unlocking their desire for a better life. We shouldn't shoot the symptoms: shoot the cause.

Demolition

The ugliest building in Liverpool, the Concourse Tower, has been bought by English Partnerships and looks set to be demolished. At last.

More sadly, as part of the World Heritage "clean up" Coopers Emporium will be just one building targeted for destruction. It's a shame: many a fond pint has been supped within those concrete walls. I was in there Christmas Eve 2002 with a large ornamental owl. Rest in Peace.

Irrational Expectations

There's nothing like the first game of the season: optimism everywhere. Even at Everton, after a pre-season to forget and serious concerns for the standard of the squad, you couldn't help but wonder if we could pull off a shock against the Champions. 90 minutes later, and an embarrasing lesson in fluid, pressing and inventive football we're back down to earth wondering how we could have even dreamt of a realistic chance. But that's what the first game of the season is all about: belief, fantasy, and "just maybe".

And it holds across the country - in each and every league, expectations are high.

Rational Expectations, a cornerstone of post 60s economics assumes that people, on average, are correct. Any discrepency between the expected, and actual, is therefore random. For every fan expecting to improve this season, there's a fan expecting to do worse. And yet even Evertonians were smiling on Sunday morning.

Just one of the things about Rational Expectations I struggle with is the impossibility of individuals to have RE if they belong to a group that does. The problem of aggregation has not been resolved: the assumption that individual agents hold RE therefore the group does, is false. The whole point is that because individuals are irrational, their irrationality cancels out. To then model based on invidual RE is nonsense.

Tom Watson MP: no shame

It's starting to get messy in the Hartlepool by-election. According to The Times Sir Menzies Campbell has complained to the Chairman of the Labour Party regarding "personal and misguided" attacks.

The reason? Tom Watson MP accuses Lib Dem candidate Jody Dunn of "making excuses for junkies" on the grounds that she's a barrister, and has (quite rightly) represented whichever clients the Bar Council has allocated to her.

Mr Watson has dropped in to The Filter^ during the neoclassical endogenous groeth theory affair giving us all a glimpse of his flippant pomposity. Let's hope the shit sticks.

Dead Men Left covers the story well.

Free Journals?

In the past I have argued that academia is a creative commons, however an article in this weeks Economist, titled 'Access All Areas' disagrees.

Either I've failed to privide enough concern for the subtle matter of who funds scientific journals, or The Economist can't see the wood for the trees. They explain how...

Some titles have acquired exceptional cachet over the years. Such is their prestige that a researcher can win tenure, promotion or a research grant on the basis of a single article in the right publication. That means the publishers of those journals have the pick of the best papers, reinforcing their reputations in a positive feedback loop. They also claim copyright over what they publish, reinforcing their monopoly. So if you want to read an important paper (or an unimportant one for that matter) you have no legal choice but to pay the publisher for it.

The upshot is that university libraries must purchase the leading titles, almost whatever their price, and often at the expense of carrying less-exalted works.

After giving some figures to demonstrate the excessive price rises of leading journals, they highlight the campaign for free access for all.

Yes, but: The leading journals enjoy monopoly status for reasons of signalling. But whilst there may be no pecuniary exchange, signalling can be an efficient means to transmit information. Without physical coercion there can be no monopoly unless it's superior than any rival. There is competition in scientific publishing, for example the emergence of Econ Journal watch, an electronic triannual. If it's good enough, it'll catch on.

Also, the costs are only indirectly paid for by researchers, and to suggest that we're shackled by monopoly journals is a myth. The article fails to mention Jstor, which provides free at the point of entry access to almost all scientific journals.
But more importantly journals merely carry ideas. These can't be encripted within text, restricting non-payers from their insight. Once published, research is publicly available, and publicly owned.

The shoulders of Giants are still reachable.

Privatising Keynesianism

Dr Madsen Pirie, at the Adam Smith Institute, has written an article exploring the automatic stabilizers within an economy, and government policy to manipulate them. Called ''How the Politicians have Priivatized Keynesianism", he starts with a very Austrian view of the business cycle.

"Keynesian policies sought to smooth the economic cycle by increased government spending into the downturn. The extra public spending would boost demand, stimulate investment and create jobs at a time when private demand was falling, thus making the trough of the economic cycle less severe.

Such policies worked initially, but the government demand was not a real one, It sent false signals and caused industry to over-invest, especially in producer goods. When the government coffers closed, industry found itself with surplus capacity, and headed for painful contraction and attendant job losses."

From Wikipedia:

The Austrian School rejects the suggestion that the business cycle is an inevitable fact of capitalist economies. Instead, they blame the government and/or the central bank for interfering with free markets, which causes recessions as an unintended consequence. They point to the role of interest rates in setting investment decisions (as a price on investment capital). Governmental control of money supply through central banks means that interest rates are artificially set, and so the price of investment capital does not reflect the real demand for it. This means that capital is misallocated and the business cycle is a periodic correction of this misallocation.

Pirie continues...

Governments seem to have stumbled upon a modern version which seeks similar results to those planned by Keynes, but in which private spending rather than just government spending is encouraged to smooth the economic cycle. Prompted largely by government policies in both the UK and USA, private consumption did not dry up as the most recent cycle turned down. Instead it increased, largely at the expense of saving and by increasing levels of indebtedness. It remains to be seen if the new model Keynesianism can escape the consequences of the old.

Krupnik's Critique I'm not sure this a post-Keynesian phenomena, rather than an example of old Austrian theory. It's commonly felt interest rates have been set too low, and we'd expect this to distort the market signals. Much focus is on central bank policies at changing the rate, and this should be a worry. As we face an explosion of debt, this could readily turn into a prime case of how the unintended consequences of macro-planners zeal to control the economy can cause misallocations. Dr Pirie alludes to Austrian theory, without acknowledging it. I believe it permeates his article deeply, and must be resuscitated during these worrying times.

Correction (10th August) In the original article I referred to Dr Pirie as 'Dr Price'. Sorry.

Orange Alert: Someone change the bulb

Is our faith in the intelligence services restored because the US government think the World Bank, IMF, Citigroup and US stock exchange are targets for terrorists? Cheers! Who didn't know that?
Lew Rockwell continues the scorn:

"We found some scraps of paper in Pakistan written perhaps years ago that seem to have drawings of the stock exchange. Full scale alert! Next we'll get the warning that the Japanese are going to attack Pearl Harbor

Back in May I visited the Spy Museum, and noticed a clapped out car parked in the middle of the road, in front of the FBI headquarters. No license plates, blacked out windows... in front of the bloody FBI.
I'm looking forward to returning to DC, where I'm sure hardly anyone takes seriously the terror alert; i'm more worried by the political filters than terrorists. Although getting caught up in America's folly is ironic.

For some excellent advice, check out Preparing for Emergencies, a resource compiled by 'HM Department of Vague Paranoia'.

Hartlepool Resources

It's all going off in Hartlepool. As the Californian recall showed, politics isn't necessarily apathetic and the candidates for Hartlepool MP are an eclectic mix. A Monkey, Robocop, and Orange racists are all in the frame. Labour MP for West Bromwich, and complete arsehole Tom Watson is in Hartlepool canvassing, having declared a truce with LibDem campaigners on his blog.

There's a blog for the election, called Guacamoleville, after a legendry incident involving departing MP Peter Mandelson. From Dead Men Left:

The infamous story - from which Guacamoleville takes its name - about Mandelson's confusion between mushy peas and guacamole on a visit to a chip shop supposedly sums him up: clever and cynical he may be, but utterly distant from ordinary people - whose native wit may, every so often, let them get one over the New Labour men in suits.

("Mushy peas" - an explanation: this traditional accompaniment to fish and chips is consumed in alarming quantities in the north of England. Virulently green, lumpy, and generally served in a small polystyrene cup, mushy peas - like cloth caps, Vimto and rugby league - are an emblem of the northern proletariat. Guacamole, on the other hand, is what soft southerners consume at their poncy dinner parties, probably in Islington. The cultural resonances of all this are very important indeed.)

But actually, this is false. Read the full post atDead Men Left for the real story.

Everton's Kenwright finds the cash?

After failing to buy Marks and Spencers, Philip Green might be after another faded jewel. Almost definately not, although it seems that Kenwright's not merely being difficult; he's certainly got inside information, and perhaps he's got a plan.
Competition is good?