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Recently, I recorded a lecture in which I tries to illustrate the 10 Lessons of Economics (from the Australian version of Mankiw’s textbook) with parenting examples. Watch it on YouTube (below) or click here for a downloadable full version.

So there has been much talk about iPhone 3G reception problems. The problems were widespread (around the world), random (not everyone got them) and the hardware tested just fine. It looks like the problem was congestion at mobile phone towers. Read more

So I have tried various travel organisers over the years but none have come up to scratch. A new one, Tripit, seems to have got it right. The key is how is easy it is to use. Get an email with a flight, car or hotel booking and you email it to Tripit and by magic it adds it to your itinerary. All the information you need is there plus more, including links to maps, weather, time correction and city information. You can then share it with whomever. And, of course, it has an iPhone modified webpage and I’ll bet an application soon to follow. This is one worth trying.

I have just come across a fantastic blog and a particularly insightful post by Michael Nielsen, an Australian physicist living in Canada who seems to have turned his mind to writing about science. The post is about how academic science needs to catch-up in disseminating information with new technologies. Read more

Let’s see. The iPhone is incredibly popular (with sales this month exceeding 6 million worldwide). Devices such as the Wii have WiFi as the default way of connecting to the Internet. Most home networks are WiFi. Computer and device designers are doing everything in their power to free us of wires and allow mobility. Read more

Well I am pretty happy with my iPhone but according to Wired:

• European T-Mobile users reported the fastest 3G Download Speeds: 1,822 Kbps on average.
  • Factoid: Europe has some of the most mature 3G networks, which have been in development since 2001. (AT&T introduced its 3G network in the United States in 2004.)
• Canadian carriers Rogers and Fido tied for second fastest with an average download speed of about 1,330 Kbps on average.
• U.S. carrier AT&T tied for third with Telstra, Telia and Softbank, where users reported average download speeds of roughly 990 Kbps.
• Australian carriers Optus and Virgin users reported the slowest speeds of about 390 Kbps on average.

From the big guy, just for me but I’ll share it [over the fold].
Read more

So I got the August 7-13 copy of Business Review Weekly. I hadn’t read it for a while but it seems to have vastly improved. It has a fascinating article on intellectual property issues and Macquarie University.

But the reason I had the issue was that it reported on CEDA Roundtable I participated in. It covered various challenges facing the Australian economy. Anyhow, here are some choice quotes from yours truly. On getting prices right …

Speakers were less sure on turning this prescription into policy that politicians and voters could stomach. As Professor Joshua Gans … put it: “The mystery is we have these preferred outcomes, and yet they get no traction despite seemingly enormous gains. The principal issue is being able to ‘sell sense’ in the political marketplace.”

… Down a road less travelled was Gans’ suggestion to look for single policies that treat more than one issue. Politicians could sell the policy on the back of voters’ biggest issue while still tackling the less popular ones. A “two for one” appraoch to climate change, Gans said, would also deal with sceptics’ main two concerns: uncertainty over the extent and causes of global warming; and the folly of a smaller emitter such as Australia slashing its carbon emissions before the US and China.

“If you are worried about pollution, which is mainly coming from the burning of fossil fuels, targeting industries that are just pollution could be sold on pollution grounds,” Gans said. “So if it turns out that climate change isn’t an issue at all, we’ve still done the right thing in terms of the economy on picking those sectors.”

Basically, I was pushing these business-oriented types towards seeing pollution abatement as a good thing and not worrying about their own biases on climate change per se. That said, it doesn’t look like the BCA has taken heed and is still pushing the corporate welfare line.

Justin Wolfers discusses unlikely sporting achievements today. Most notable, is the one where Bradman plays the piano at his grandmother’s wedding.

A grab-bag of stuff today on financial stability and interest rates:

• Following up on nab’s announcement yesterday, an interesting article in Business Spectator about that bank’s political game — you know, arguing against intervention except where it might help the banks.
• Chris Joye and I appeared before the House of Representatives yesterday. This was a much more informed and reasonable discussion than my FuelWatch time at the Senate the other week. Malcolm Turnbull pushed us hard on what the costs to the government might be (for which we gave our response that in the scenarios that would cause that cost, the government already bears the implicit risk). I was also pushed on bank switching costs. I expressed my skepticism that it would cost $500 million to put in bank account number portability and that, in any case, this is a good task to hand the ACCC for a complete review. They are used to dealing with situations like this.
• At the House, I favourably talked about Sam Wylie’s AFR piece yesterday which he has kindly given to me to reproduce (over the fold). Contrast that thoughtful piece with some typical lunancy we get in the press.

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I did an interview on parental leave on ABC News Radio this morning. You can listen to it here.

Also, here is a video of the entire Policy Brief launch at ANU.

The RBA and Government are trying to talk down interest rates. Turns out the nab can talk too:

NAB said on Thursday it would lower its standard variable interest rate by 0.25 per cent to 9.36 per cent per annum, if the RBA cuts the official cash rate by 0.25 per cent at is board meeting in September.

“The Reserve Bank is sending out a signal and nothing gives me more pleasure than to follow suit,” the bank’s Australian chief executive Ahmed Fahour said.

Sounds good but then they got inconsistent …

“The RBA rate is no longer an indicator of the bank’s costs of funds… and it’s the banks that set the mortgage rate,” he said.

And then …

Asked if the central bank cut 50 basis points next month, Mr Fahour said the bank would consider the market reaction, but would not commit to a higher cut of 0.25 per cent.

Oh dear. Not surprising that nab’s share price fell 1 percent on the news. They are cutting rates but without the certain competitive or political payoff.

That said, why wait? If it is all about competition, I have news for you, the market has already built in the 0.25% cut into the cash rate. If you really care about the market forces and not what the RBA happens to be doing and there is competitive pressure, why not cut now?

Anyhow, as I have said before, please cut my mortgage rate. I am happy to lay off the competitive concerns while banking is actually looking competitive.

So I was early to get in on the quality of Obamanomics. As this Daniel Leonhardt piece in the New York Times Magazine shows, it is even better than we thought. Obama listens to economists, cares about actual evidence and in many ways is a Chicago-School Democrat. I like that characterisation. It means that you get the economics right and worry about distributional issues through the tax system. It also leads to sense on things like carbon trading and free permits; there should be no free permits and they should be auctioned off. If our own government is really going to be considered progressive, it should take note.

Justin Wolfers channels George Stigler on the list of comments contributed by economists in many situations. It would apply to many blog comments too.

One missing from the list and a favourite (for a now famous US blogger) from my days at graduate school was:

But will that hold when you have three agents/firms/countries?

My colleague, Sam Wylie, has written an excellent opinion piece in today’s AFR on Fannie Mae and Freddie Mac. I wish it was available online so I could share it in its entirely. In the article, he makes several points. First, even today, loans through the GSEs are 1.25% lower than loans elsewhere with the main beneficiaries being low and middle income households. Second, the bailout, if it occurs, will cost $25 billion which is a drop in the ocean given the savings each for households in terms of lower interest rates. Third, in any case, all of the issues with the GSEs have fallen on shareholders. Finally, that charging the GSEs an explicit premium of 0.2% would more than cover any future (or current) bailout costs and so, if there is a problem, it is with implicit rather than explicit guarantees (here that banks in Australia). He concludes:

Australians who believe that the Fannie and Freddie model is a failure should ask themselves two questions. First, why are prime mortgage rates consistently 1 percent or more lower in the US thaan in Australia, even after adjusting for the lower Treasury yields in the US? Second, why do US households have access to 30 year fixed-rate mortgages, which can be refinanced without penalty, when Australian households do not? The answer is that the US has effective government-sponsored agencies and Australia does not.

Treasurer Wayne Swan has stated that he has reviewed the mortgage agency models of other countries and does not wish to introduce the “failed” model of the US GSEs into Australia. It will be interesting to hear the Treasurer’s views on the utility of a mortgage agency if the banks do not decrease interest rates after the next RBA cut.

That is as clear as you get. See also Ross Gittins:

But competition may yet come to the rescue. The first bank to pass on the rate cut in full would get favourable publicity and the others would have to match it.

Failing that, the Rudd Government could discipline the banks by authorising the Office of Financial Management to start buying mortgage-backed securities in the market. This would reduce the borrowing costs of the non-bank mortgage originators and allow them to resume their competition with the banks.

Which is yet another version of a GSE. All paths lead in a single direction here.

[Update: Westpac is calling for a 0.5% cut in the RBA rate. If it isn't passed on in full, this is just a call for a subsidy to bank profits. Then again unlike the other banks, the government carries an actual stick when it comes to Westpac -- you know, that merger approval -- so maybe we will see it used or, I guess, not used; sticks are better if they can continue to be kept behind your back.]

So after I put in my submission to the Productivity Commission on parental leave, they called me to see if I could appear before them for questioning about it. The only time that was open was 3:30pm the next day — a day I had to pick up the kids from school. So I couldn’t do it and that was that. Today I have had several requests for radio interviews about my parental leave proposal – you know the one premised on the notion that workplaces aren’t very accommodating towards workers with family obligations. And in three cases they have needed a live interview at, you guessed it, 3:30pm; school pick up time. One opted for a pre-record. The others basically said, that if I want to promote the idea it is then or not at all. I chose not at all. My silence will have to make my point.

Tomorrow, Christopher Joye and I are appearing before the House of Representatives Standing Committee on Economics to discuss competition in banking. The answer to one question separates those who believe that the market can be left to itself or whether stronger government intervention is warranted: when the RBA lowers interest rates, what will happen to mortgage variable rates? We are not the only ones asking this question.

Let’s look at history. The graph below plots the RBA rate and the average variable home mortgage rate.

A look at this graph might indicate that the RBA has a high degree of control over interest rates. However, delving into it suggests that that control has been something of recent history.

Let’s compare two episodes where the RBA dropped interest rates. From February to April, 2001, the RBA dropped rates 1.25%. The mortgage rate also dropped 1.25%. In contrast, from May to July 1992, the RBA dropped rates 1.75% but by February 1993, mortgage rates had only dropped by 1% before the RBA tried again. The difference between the two time periods: the majors had a share of less than 70 percent in the first but 90 percent in the second, earlier time period.

Today, the majors have a 90 percent share. This year mortgage rate rises have outstripped RBA rate rises. You do the maths on what is likely to happen when the RBA lowers its rate.

Following the Policy Brief release yesterday, there was a ton of press coverage on my parental leave/return to work tax credits proposal. Here are a few from the Sydney Morning Herald, The Daily Telegraph,and news.com.au.

This other longer one from The Daily Telegraph also refers to new findings from a study of the Australian public service regarding the difficulties mothers have in getting promotions after taking maternity leave. Of course, tax credits are designed to boost private sector incentives. The public sector would have to use budgets and the like to stimulate the same sort of incentives there.

I am a contributor to a Crawford School of Economics and Government’s Policy Brief on Parental Leave. Other contributors are Bruce Chapman, Tim Higgins and Ralph Lattimore. You can download the brief here. A press release is over the fold.

The Brief was launched today and a videoed in my own 5 minutes worth. If you would like to watch it, you can do so here.

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Well I am over a month out in using my iPhone 3G. What sort of data usage was I doing? Basically, about 120MB in the first month. That surprised me in terms of how low it was. My email checks every 5 minutes, I mailed several photos and installed a bunch of applications that utilise the internet. On that score, it was a pretty intensive month. That said, at work and at home, it is on WiFi which limits the 3G data count.

I think we may have dramatically over-estimated the data intensity of mobile devices. Except for video (and maybe audio) streaming, the applications are designed for minimal data flow; especially, the Google stuff. And they are becoming more and more like that. Indeed, the beauty of the iPhone is that it is such a powerful computer that compared to other mobile devices, it can afford to process data on the phone itself rather than on a server and rely on good bandwidth to take care of the rest.

This suggests to me that the Telstra strategy of pushing video over 3G is fundamentally flawed. The real opportunity for high value consumer usage comes from applications that use data moderately. In doing that, Telstra’s competitors will likely find their data costs much lower than expected and can afford to drop data charges — especially for the iPhone — considerably. For Telstra, shackling themselves to Foxtel content — even if they put the data usage out of download limits (although not the pay per view pricing) — means that they will always have higher expected data usage from customers who select to be with them. That will limit them to the mobile TV streaming end of the market. My guess is that will not be very lucrative.

Over at GameTheorist, I explore the benefits of winning and review the new Star Wars movie.

… if the Government is able to talk down interest rates despite the major banks saying that they won’t fall. Although even if that occurs will it be sustained. That said, I wonder if they will take credit for the fall in interest rates for depositors? The question is: what will they do if interest rates do not fall? They have crimped the switching cost policy although that was not likely to be a big factor. And they appear to have ruled out intervention to restore the competition that was lost. Could we be back to direct regulation of interest rates? It is hard to imagine but then again will the government really want to look ineffectual on this.

On the Freakonomics blog, a call to arms in solving for the Nash equilibrium of the Beauty and the Geek game. Basically, there is a bit of game theory all over it because you have the ability to pit two of your competing teams against each other for elimination. The question is: who should you send? The answer is, of course, simple: the two teams who are most likely to score well. You might be worried about retribution but in that case it will be a strong team doing the retribution and you won’t be competing against them in future elimination rounds. The hard part is predicting whether this will be a balanced team or one where one of the members is particularly strong.

I just got the Hansard transcripts from my Senate testimony on FuelWatch. My favourite bit over the fold:

Read more

So following on from the RBA’s aggressive stance of noodging the banks into lower interest rates, Jim Murphy, a senior official in the Treasury, joined in to rule out intervention in mortgage markets: Read more

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