Tot ziens Australie!

It’s been a great 15 years in Australia for me and the family, so we will be leaving lots of friends and colleagues behind as we seek new adventures in London, where from next week onwards  I will be part of a Wellbeing centre, pretty much the same topic as the Australian Research Council has been generously funding me to look at for the last 3 years.

The essential aim of the ‘Centre of Wellbeing’ at LSE will be to put utilitarianism into practice as much as possible. To this end, we hope to be part of wellbeing policy experiments, textbooks on how a decision maker can be a better wellbeing-bringer, longitudinal studies, large data-gathering exercises, policy briefs, Master’s courses, inter-active wellbeing systems, and all the rest of it. We have partners all over the world and an international panel for wellbeing is up and running at the end of next week. If you happen to have a few million lying around to help us get to our goals quicker, then please help!

Whilst the grass is greenest in Australia, variety is the spice of life so I am looking forward tremendously to the new adventure. Still, the family is not truly leaving Australia, as my 3 kids now carry Australian citizenship and one kid is still studying in Sydney. So it is ‘Tot ziens’ (‘See ya later!’) rather than farewell!

To all my friends and colleagues in the Australian economics community: do come and look me up in London; please join in with utilitarian-oriented research projects; and best of luck.

In Memoriam Reinhard Selten (1930 – 2016)

German economist extraordinaire Reinhard Selten has died. Born October 1930, he was 85.

In 1994 he was awarded the Nobel Memorial Prize in Economic Sciences which he shared with John Harsanyi and John Nash, three quarters of the NASH quartet of Nash, Aumann, Selten, Harsanyi that has been widely credited to have advanced decisively the theory of games in the fifties, sixties, seventies, and eighties. Aumann received his Nobel Prize, together with Thomas Schelling, in 2005.

Selten was awarded the Nobel Prize mainly on the strength of his game-theoretic contributions. Specifically, he was credited by the Nobel Prize Committee with the introduction of the concept of subgame perfection which defined conditions under which to exclude from a set of equilibria those which are unreasonable by some standard (non-credible threats). A decade later he provided as a further tool in the game theorist’s toolbox the concept of a trembling hand equilibrium which likewise helped to reduce the set of equilibria.

The Nobel Memorial Prize Committee in Economic Sciences credited Selten in addition explicitly with “powerful new insights regarding evolutionary games and experimental game theory”. Indeed, after he had finished his master’s thesis in 1957, Selten was hired by professor Heinz Sauermann who held a chair at the University of Frankfurt and for whom he worked in various roles as assistant for about a decade. Selten was given considerable leeway by Sauermann and, influenced by characteristic function experiments done by Kalisch et al. (1954) as well as Simon’s Models of Man (1957), embarked on the study of oligopoly experiments which ended a couple of years later in his first experimental paper (Sauermann & Selten 1959). It was through Simon’s influence as well as his own experimental work that Selten started thinking about the bounded rationality that defines much of the decision making of individuals and firms. In fact, from the very beginning of his academic career it has been this methodological dualism that has defined his work (and occasionally confounded his colleagues).

Selten – while being famously dismissive of some of the rites of the scientific community – has worked on too many topics to even start an enumeration here: “I do not want to convey the false impression that my research is single-mindedly organized around a grand question. I am easily attracted by the opportunity to shift my interests into unforeseen exciting new directions. The little coherence there is in my work is due to a desire to understand both fully and boundedly rational economic behaviour, especially in the context of game situations.” (Selten 1993, p. 113)

Selten (1993) remains a good primer of his research interests over the first three or so decades; it is also an enjoyable read. Ortmann (1999) is a succinct introduction to a set of articles selected in collaboration with Selten. Selten (1999) has a brief but very informative biographical sketch by himself. Easily accessible information about both his life and his work may be found on the website of the Nobel Prize Committee .

Acknowledgment: The above draws on a contribution I wrote for Real World Decision Making: An Encyclopedia of Behavioral Economics. (editor: Morris Altman, Praeger 2015)

References.

Kalisch, G., Milnor, J.W., Nash, J., and Nering, J.D..1954. “Some experimental n-person games.” Pp. 301-27 R.M. Thrall, C.H. Coombs, and R.L. Davis (eds). Decision processes.  New York and London.

Ortmann, Andreas. 1999. “Introduction (to Selten 1999).” Pp. xi – xxi in Selten (1999)

Sauermann, Heinz, and Selten, Reinhard. 1959. “Ein Oligopolexperiment.” Zeitschrift fuer die gesamte Staatswissenschaft 115, 437-71.

Selten, Reinhard. 1993. “In Search of a Better Understanding of  Economic Behaviour.” Pp. 115-39 Arnold Heertje (ed). The Makers of Modern Economics, Vol. 1. Harvester Wheatsheaf.

Selten, Reinhard. 1999. Game Theory and Economic Behaviour. Selected Essays Volumes One, Two. Cheltenham, UK and Northhampton, MA, USA: Edward Elgar.

Simon, Herbert A. 1978. “Rationality as a Process and as a Product of Thought.” American Economic Review 70: 1–16.

What she sees at the revolution

Peggy Noonan is a writer and columnist for the WSJ.  Part of her reputation stems from her writing speeches for Reagan and the elder Bush, and for coming up with memorable phrases. Some of these phrases apparently did not work out well for whom she coined them. Read my lips.

In a recent WSJ opinion piece titled How Global Elites Forsake Their Countrymen – a piece much shared on social media — Noonan enlightens us about the failure of global elites to empathize:

“The larger point is that this is something we are seeing all over, the top detaching itself from the bottom, feeling little loyalty to it or affiliation with it. It is a theme I see working its way throughout the West’s power centers. At its heart it is not only a detachment from, but a lack of interest in, the lives of your countrymen, of those who are not at the table, and who understand that they’ve been abandoned by their leaders’ selfishness and mad virtue-signalling.”

Noonan, presumably to impress on us her status among the well-connected, opens her piece recounting a meeting with “an acquaintance of Angela Merkel, the German chancellor and the conversation quickly turned, as conversations about Ms. Merkel now always do, to her decisions on immigration.” Noonan then recounts Merkel’s announcement in late 2014 that refugees from Syria, Iraq and elsewhere were welcome in Germany, the following influx (net) of more than a million in 2015, the resultant public discussions in Germany about this fact, and the claim that, coming “from such a sturdy, grounded character as  Ms. Merkel the decision was puzzling – uncharacteristically romantic about people, how they live their lives, and history itself …”. We learn that the acquaintance of Merkel attributes her puzzling decision to her upbringing as the daughter of a Lutheran minister in East Germany, and as yet another attempt of providing “a kind of counter-statement, in the 21st century, to Germany’s great sin of the 20th.”

We learn that, while this was as good an explanation as Noonan heard, there was a fundamental problem with the decision:

“Ms. Merkel had put the entire burden of a huge cultural change not on herself and those like her but on regular people who live closer to the edge, who do not have the resources to meet the burden, who have no particular protection or money or connections. Ms. Merkel, her cabinet and government, the media and cultural apparatus that lauded her decision were not in the least affected by it and likely never would be.”

“Nothing in their lives will get worse. The challenge of integrating different cultures, negotiating daily tensions, dealing with crime and extremism and fearfulness on the street—that was put on those with comparatively little, whom I’ve called the unprotected. They were left to struggle, not gradually and over the years but suddenly and in an air of ongoing crisis that shows no signs of ending—because nobody cares about them enough to stop it.”

Noonan goes on to invoke the Cologne transgressions at last new year’s eve celebrations and Merkel’s adjustment to the considerable political backlash that her policies have brought about (the strong emergence of the AfD and the growing support of other populists such as Seehofer, the head of her own party’s Bavarian branch) and her pleading with her own populace to  deal with both the positive and the negative aspects of globalization. Quoting a fellow journalist, Noonan argues: “’This was the chancellor’s … way of acknowledging that various newcomers to the national household had begun to attack her voters at an alarming rate.’ Soon after her remarks, more horrific crimes followed, including in Munich (nine killed in a McDonald’s) Reutlingen (a knife attack) and Ansbach (a suicide bomber).”

Now, it is rather rich that as prominent a megaphone for the global elites as Noonan virtue-signals her compassion for the disenfranchised masses that allegedly have fallen victim to the NIMBY syndrome. For all we know, Noonan got paid royally for her piece and was writing it in a brownstone home in an affluent residential New York City neighborhood.

All that hypocrisy aside, while we have come to expect false and silly claims from presidential candidates in the USA, it is noteworthy that Noonan seems not to check the facts that she parades to make her case. Of the three horrific crimes that she mentions, at best two can be clearly linked to Merkel’s open-door immigration policy (the suicide bomber in Ansbach, and maybe the Reutlingen knife attack, which — while committed by an immigrant asylum seeker from Syria — seems to have been a crime of passion). Importantly, the McDonald’s killings were committed by some kid born in Germany that was as confused and unhinged as some of the school shooters in the USA from which he seems to have taken his cues. Apparently, fact-checking is not Noonan’s thing. Never let the facts get in the way of a story that sells. True journalism, that.

Yes, there is no doubt that the open-door policy was ill-advised, lacked appropriate consultation, and was poorly implemented in particular on the federal level, but the fact is that murders in Germany — currently about 250 annually — have been cut by 40 percent since 2000 and – at least for 2015 — this number has not increased, notwithstanding the influx of the various newcomers to the national household. For all I can tell, Germany is far from falling apart at the seams as some of the hysteric press and social-media responses have tried to suggest.

The Independent — a British newspaper, no less — has argued that Angela Merkel’s open-door immigration policy will protect Germany from terrorism in the long run. It seems that for now things have worked out remarkably well even in the short run, notwithstanding the fact that this policy has been implemented poorly.

While it is way too early to assess all the benefits and costs of the developments in Germany since late 2014, it seems self-evident that Noonan is mostly uninformed about the current state of affairs there. That, unfortunately, seems to be the modus operandi of post-truth journalists like her who are no better than the illiterati and inumerati populating social media.

Australian Banks ask for permission to collude against Apple

This news caused me to make a spit-take on my morning coffee.

Several of the country’s big banks are seeking to join forces and negotiate as a bloc with technology giant Apple, which could lead to a collective boycott of Apple Pay, in a bid to offer “digital wallets” on the iPhone.

Commonwealth Bank, National Australia Bank, Westpac and Bendigo Bank have this week applied to the Australian Competition and Consumer Commission, asking permission to negotiate as one with Apple.

Their application also seeks permission to undertake a “limited form of collective boycott,” in which the banks will agree not to negotiate with Apple individually while the collective talks are occurring.

Let’s unpack this. Apple has an NFC solution on its iPhone (just as Google does) but in order for Australian consumers to use it, they need permission of their banks. The banks claim that because Apple controls the phones of some of its customers, they need to negotiate as a block on access to the NFC component on the iPhone.  Of course, not all banks. ANZ has already signed up to Apple Pay.

But here is what I don’t get. First, what does negotiating for access to the NFC component mean? Do the banks think that Apple will open it up to them when they haven’t opened it up to anyone else in the world? The reason Apple keep that close knit is because of security. It is unlikely there is anything else going on.

Second, the idea apparently is for the banks to agree not to sign up to Apple Pay until this is done. Then they will negotiate terms of access individually. In other words, a collective boycott.

The Australian law has provisions to allow this sort of thing if there are public benefits. But in this case, the public benefits only arise (potentially) if it is in the public interest for Apple to open up access to NFC. However, that decision would lie elsewhere with a much more detailed process. Also, because Apple is not a dominant handset maker — it has much less than 50% market share in Australia and elsewhere — opening up access through the usual route won’t happen. Put simply, Google have already developed this and so access to NFC is possible.

Instead, the idea here is to allow for something blantantly anti-competitive. One of the forces the drives banks to adopt new technologies that are provided by others is competitive pressure between them — that is, their customers want it. That is why AmEx and ANZ are already on board with Apple Pay. What the remaining banks want to do is ensure any one of them doesn’t break ranks and adopt Apple Pay and activate a competitive response.

In summary, the banks are using the wrong part of the law to deal with a public interest question precisely because Apple is not dominant in the Australian market. And they are doing it to protect what is likely a poor set of investments on their part and because they are unwilling to throw their weight behind Google alone. In other words, it is classic undermining of competition to benefit the interests of competitors and not the interests of consumers. Hopefully the ACCC will deal with it quickly because it is pretty clear that while the regulators deliberate, the same effect as a collective boycott is actually occuring.

The NBN needs emergency triage

Now that the election is done and sorted and there isn’t a hung parliament, it is time for Australia to get on to the job of urgent policy-making. There are lots of areas in need of help but I am going to focus here on one close to my heart: broadband.

By any measure, broadband policy in Australia has been an abject failure. Despite brief moments of hope, we moved from a regulatory morass dominated by a private monopoly to a set of deals and politics dominated by a government monopoly. No one advocated for this but in the reality of political mess that is what happened. As a result, broadband has not improved in almost a decade. Indeed, much of regular internet use by ordinary Australians has moved to wireless.

I know the Prime Minister agrees with me about this because he and I had a public conversation on it in 2011 before the Coalition was in government. You can read the transcript here. But I suspect that political truths have prevented progress. Thus, the first course of action is to cut out those political truths.

The first one is that one size cannot fit all in broadband. There is variation in demand. There is variation in the costs of supply. That means setting equal terms in urban and rural areas won’t cut it. It is far better to explicitly subsidise than cross-subsidise. Full stop. But because it takes time, a period of unequal pricing and quality is necessary. Any solution that tries to do otherwise will only continue the morass.

The second one is that the NBN’s active role needs to be diminished. It needs to retreat to the backbone. I am not sure what architectural requirements would be needed but taking any customer facing role of the NBN (they may not be any but it is hard to tell from the media reporting) and divesting it — and yes privatising it — is probably the right way to go. If you don’t want privatisation, then split it up into local areas and hand it over to local government. Broadband is not a national public good it is a local one. It shares more in common with garbage collection than defense. Treat it that way.

The third is that it then needs a clear open access regime. We need to encourage retail competition at the local level. Full stop.

The fourth thing is that we need to diminish any sort of exclusivity the NBN has. Any sort. Mobile should be able to compete with it fully. Other wired providers should be able to build over the top of it.

The fifth thing is that a temporary sacrifice in local environmental regulations on wires not in the ground needs to be nationally suspended. The idea is to allow these unsightly things for 5 years on the condition that they be then grounded. Sorry. That is what the rest of the world has done. If local governments want to pay to speed up grounding them then fine. It should not slow down any rollouts.

The final thing is a big one. After all these years we have learned that the biggest broadband use is video consumption mostly for private purposes. The wholesale pricing model and also retail ones will need to switch to something that ensures that those consumers using the most video have to pay more. That means no ‘under the count’ options. You will find them willing. The only thing is that means broadband caps as a default. That sucks — I know — I pay to have mine removed but the economics require it.

If it is wanted to make this more politically compatible then the basic free account is something that can be offered. That will open up the notion of broadband as a citizen right.

[Updated to reflect user comments and clarifications]

Adverse Action Lawyer wanted in Frijters versus UQ case

I am seeking a lawyer to run an Adverse Action case connected to the recent Fair Work Commission verdict that found systematic breaches of procedures and procedural fairness in the University of Queensland’s actions against me following my research on racial attitudes in Brisbane. I first raised these breaches late 2013, but they were never addressed, with lots of new ones added to them as the case dragged on. The VC of the university was also personally informed of these breaches in April 2014, publicly denying there was anything wrong about UQ’s action in February 2015. He was again informed in March 2015, consistently failing to rectify breaches of procedure brought to his attention. I wish to bring an Adverse Action case to claim back my considerable costs.

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I expect the case to be worth at least a few hundred thousand dollars in terms of damages (legal cost, value of my time, etc.), and for it to be potentially one of many others because the FW case uncovered widespread breaches of procedures in UQ’s handling of misconduct cases. So there might well be many others who are now looking to bring Adverse Action cases against UQ.

I offer a pay-for-success contract wherein the first part of any awarded damages would go to the lawyer, but after a threshold payment I want 50% to go to the successful lawyer and 50% towards Vanavil, which is a school for orphaned victims of the 2004 Tsunami flood in India. I feel that helping the poorest Indians will go some way to nullify the damage that the managers of UQ did when they suppressed evidence of adverse treatments of Indians (and Indigenous peoples) in Brisbane and made it harder to research these things in general. And I want to feel that I haven’t wasted my time these last three years on fighting mindless bureaucracies, but that my efforts ended up helping people in need.

Negotiations on the offered contract are possible. Please contact me on email if you are interested or have a good suggestion for a good adverse action lawyer ( p dot frijters AT uq dot edu dot au).

[Ps. The VC of UQ was still making inappropriate claims last week on the UQ media about his lack of involvement and has refused to retract his claims this last week when I pointed his errors out to him.]

Finally, return to work tax rebates

I have been following the Australian election at a distance and it is amazing how much more policy-centered it is than elections taking place here in North America. There are so many policies it is easy to miss some. Thankfully an alert Twitter follower noticed something familiar about the ALP’s new policy with regard to employment by small businesses.

Top of the list was a new promise to give small businesses an additional $20,000 a year tax deduction for taking on a new employee who is under 25, over 55 or a parent returning to employment and parental leave.

There is alot here but the one that got my attention was the notion of giving small businesses a tax rebate for employing someone return from parental leave. I searched for details and couldn’t find any but I did want to say that this has the makings of the best parental leave policy ever, anywhere. Of course, I would say that as it is the same as the policy I have been advocating for almost a decade.

Anyhow, for those interested, here are some links to accessible articles about this:

And here is a set of videos I recorded explaining the scheme.

The bottom line is that rather than simply handing out dollars to parents on leave, this policy targets the real issue — discrimination in the workplace — and makes it easier for businesses to encourage parental leave and ensure parents return to work successfully. In other words, target the problem rather than the symptoms. While the policy announced is small scale relative to what I was proposing, I should note that is the sensible place to start so we can learn whether what is proposed in theory actually works in practice.