Catallaxy Files

Possum has a very interesting argument and analysis that suggests ‘no’. Well, at least, ‘probably not’.

What he does is compare the rate at which houses with insulation burn down and tries to differentiate between the stock and flow effects that we might observe. He actually comes up with the counter-intuitive result that the Garrett program has reduced the risks of house fire.

Under Scenario 1 where 90% of fires are attributable to new installations, 1 in 909 installs lead to fire. Under Scenario 2 it’s 1 in 1636 installs lead to fire while under Scenario 3 it’s 1 in 8182 installs.

Under the Garrett insulation program, the rate is 1 in 11,828 – a much smaller rate of fires than what existed before the program.

The Insulation Program Safety Multiple is simply the Garrett program rate divided by the 2008 rate – it shows how many times safer the Garrett program is compared to each of the three scenarios for 2008.

While I’m not sure that his final analysis is correct, I do think he is on the right track and asking exactly the right question; what is the marginal increase in housefires due to the Garrett insulation program?

First we have to think about the ‘stock effect’. Each year there will x number of housefires due to existing insulation. Second there is a flow effect. Each year there will be y number of housefires due to newly installed insulation. We will probably only observe z housefires due to insulation in any one year, where z = x + y. Possum cites the federal government as saying that each year there are 80 – 85 housefires associated with insulation. So 82.5 = x + y (to take an average).

Possum tells us that in 2008 there were 3,183,265 houses with insulation and the rate of increase each year was 67,500. Okay. The Garrett program insulated 1,100,000 houses since July 2009. (That seems a bit high.) There are 93 housefires associated with that program – maybe more, but lets stick to Possum’s numbers. Remember also that this program only started eight months ago – so those 93 house fires are not an annual number. What we don’t know is whether that 93 includes the stock of house fires that we would normally experience or not. But going back to our equation we have x + 93 = z so far for the year. Adding to the complication is that some houses with insulation already were reinsulated. We don’t know whether that reinsulation has added to the risk of housefire or not.

Possum works out rates – what is the rate of increase in housefire risk due to insulation? The analysis here turns on how we allocate housefires to either the stock or the flow. The increase in housefires does look very large, but the flow in the past eight months has been massive relative to previous years (1,100,000 v 67,500). Possum is able to show, so far, that the increase in housefire risk is lower. But he is comparing the eight months of this year to the whole of 2008. Furthermore, I think, he has made the implicit assumption that shoddy workmanship will result in a housefire almost straight away and that the future stock of housefires will be unaffected by current shoddy workmanship. So we could be facing a housefire epidemic (not sure if that’s the correct term).

So where does this leave us? Possum could well be correct and people could well be over-reacting to a massive increase in the flow of insulation that would statistically give us an increase in housefires. Given their behaviour I don’t think the government believes this to be the case. They could have said this three weeks ago. I can’t believe that they couldn’t articulate this argument if they believed it to be true. Afterall they would have expected this to happen. Of course, that doesn’t change the fact that Possum could be right. On the other hand if, as I suspect, he has under-estimated the marginal effect of the new insulation on both the flow and the stock then we might have a massive increase in housefires due to this program over the next few years. Unless, of course, if an audit is undertaken of the work already undertaken and any problems fixed (at great expense).

Given the paucity of data I don’t know how Possum’s analysis could be improved upon to get a better feel for the numbers. But he is very handy at monte carlo analysis so it would be nice to see some scenario analysis using that technique.

Boskin’s article in the Wall Street Journal is worth reading and outlines how politicians have been seeking to change statistical collections to achieve better results. Fortunately most people can see through such charades.

I have a significant concern that the wellbeing framework (which comprises the triple bottom line of economic, environmental and social) promoted by the Sarkozy Commission including Stiglitz will result in meaningless, symbolic statistics.

It would be nice to directly measure utility, but the Sarkozy approach is in the wrong direction. The status quo – national accounts with GDP etc – remains the most useful such statistic until an alternative is proven to be superior.

Earth Hour is this year being held on Saturday 27 March at 8:30pm. That otherwise sensible people can think that turning off their lights for an hour demonstrates their commitment to the fight against climate change shows the morphing into a religion is this cause.

And as the Canberra Times on 23 February demonstrated, it is symbolic. The article says that the ACT’s environment minister Simon Corbell said that Earth House was

more than a symbolic gesture.

Later in the article Corbell was quoted as stating:

Turning off lights for one hour is an important symbolic gesture to help protect the world from the threats of climate change …

So there you have it: Earth House isn’t a symbolic gesture, it’s an important symbolic gesture.

And finally we have it confirmed that the ACT government is a local council. By no less an authority than the WWF.

When Earth Hour arrives, I won’t be doing anything differently. I won’t be specially switching lights off, nor on.

First some background from the WSJ.

IMF chief economist Olivier Blanchard, in a recent paper, said maybe the U.S. central bank’s future inflation goal should be 4% instead. John Williams, head of the San Francisco Fed’s research department, argued last year that higher targets might be needed to provide a cushion for future crises.

The proposals underscore a broader rethink that is rumbling through the economics profession in the wake of the financial crisis. Many of the things economists thought they knew turned out to be wrong.

Ludwig von Mises addresses these points in his Economic Freedom and Intervention. Mises on what economists know (pg. 127)

The fanatical supporters of inflationism, unbalanced budgets, and reckless government spending have, it is true, succeeded in banning sound theory from universities and textbooks. And they have founded special research institutions whose main purpose it is to put the monetary theory into oblivion. But their triumph is always shortlived.

Then Mises on inflation as a solution to economic problems (pg. 274).

The interventionists, however, ascribe to the government the power to prevent or, at least, to mitigate considerably the harshness and duration of the slump by measures which they call “anti-cyclical.” Under this high-sounding name they recommend, for the emergency in which government revenue is shrinking on account of the depression, tax abatement, on the one hand, and, on the other hand, a huge increase in government spending through gigantic public works and an increase in unemployment compensation. Though the crisis is the inevitable outcome of the creation of additional quantities of money and money substitutes, the interventionists want to cure it by still further inflation. They blithely neglect to take cognizance of the teachings of both theory and history concerning the final outcome of a protracted inflationary policy.

Speaking of what economists know and Mises my RMIT colleague and Catallaxy blogger (soon to return now that he’s back from his summer travels) Steve Kates will be seminaring this Friday on the topic ‘Why Your Grandfather’s Economics was Better than Yours’. This is a dummy run for when he presents the Ludwig von Mises Lecture at the Austrian Scholar’s Conference to be held at the Mises Institute in Auburn Alabama March 11-13, 2010.

Rafe made this comment in the Peer Review thread.

The laws on libel or slander are scandalous in Britain, a whole book had to be pulped after threat of legal action by an Oxbridge academic who was described as “incompetent” for grossly misrepresenting the ideas of a group of scholars. He tried to do the same with the US edition of the book but the publisher was not intimidated.

This reminded me of a great op-ed in the WSJ. I can’t remember if I’ve linked to it before but, if I have, it’s worth reading again and again.

In 2005, Mr. Mahfouz sued me for libel in London, where my book had never been published or marketed. He chose London due to its antiquated libel laws, which are plaintiff-friendly. … These cases were never tried on the merits. Mr. Mahfouz’s litigiousness and deep pockets helped to silence and intimidate Americans and others who tried to expose his terrorist connections.

Except for me.

I refused to acknowledge the jurisdiction of the British courts, asserting my rights as a U.S. citizen. Unimpressed, the British judge rendered a default judgment in favor of Mr. Mahfouz. I was ordered to pay the Saudi more than $225,000, publish apologies in major international newspapers, and destroy all copies of my book internationally.

I sued in New York to prevent enforcement of the British judgment in the United States, petitioning the court to declare that the foreign judgment violated my First Amendment rights and was therefore unenforceable.

When the New York courts ruled that they could not assert jurisdiction over Mr. Mahfouz, New York legislators, led by Assemblyman Rory Lancman (a Democrat) and Dean Skelos (a Republican), introduced the Libel Terrorism Protection Act (aka “Rachel’s Law”). The law, passed in April 2008, protects New York-based publishers and writers from the enforcement of foreign libel judgments obtained in jurisdictions lacking First Amendment-level protections for freedom of expression. Since then, California, Florida and Illinois have passed similar laws.

Good for her.

The Calvary Hospital saga seems to be ongoing. You may recall that the ACT government planned to acquire the Hospital using some very dodgy analysis. Well the deal has fallen through.

Ms Gallagher says LCMHC also made it clear the Catholic Church would fight any plans for the Government to use compulsory acquisition to takeover the hospital.

The politics continue.

MR HANSON: My question is to the Treasurer. Treasurer, on 17 December 2009, you issued a press release which stated:

But no one has been able to dispute the Treasury Analysis.

This is in reference to the Cavalry hospital purchase. Treasurer, Professor Sinclair Davidson was able to dispute your analysis on 28 October 2009—prior to your making that statement—when he said:

The argument that the ACT Government should maximise the value of assets on its own balance sheet is quite simply nonsense. It is the function of Government to provide services to its citizens and to do so in the most cost-effective manner.

This analysis was backed up by Dr Terry Dwyer, who has a PhD in economics, on 15 November 2009. Mr Tony Harris, a former auditor-general of New South Wales, has also described the fundamental premise of the analysis as a contrivance. Treasurer, do you now accept that your government’s analysis of the purchase has been disputed by experts? If not, why not?

This is followed by a long and nasty exchange before we get back to the substance.

MR SMYTH: Treasurer, can you point the Assembly to any experts who agree with the Treasury analysis who are not paid by the ACT government, and will you table this advice?
MS GALLAGHER: The government support the Treasury advice. We have no reason to believe that the experts at Treasury have not provided us with the best advice.
Mr Seselja: I think the answer is no.
MS GALLAGHER: No. The answer is no. I have not commissioned any other work, other than an independent peer analysis of the Treasury work. The Treasury work holds up. I could ask the same question: can you point to anyone who disputes the Treasury analysis? The answer to that is no.
Mr Smyth: Davidson does.
MS GALLAGHER: No. You are wrong, Mr Smyth. He has not disputed the analysis. He has disputed the government’s policy decision about the way forward. And that is incorrect. He has not disputed the financial analysis of this arrangement. Nobody has been able to dispute these figures. These figures hold up. In relation to Mr Harris, he was commissioned—
Mr Smyth: Have you read his advice?
MS GALLAGHER: Yes, I have. Mr Harris has been commissioned by the archbishop to come up with other options because the archbishop did not like the one the government had. What a surprise! He was commissioned specifically to provide alternatives to the archbishop, and that is what he has done.
Mr Hanson: On a point of order: I seek leave to quote from Professor Sinclair Davidson to clarify what I think is Ms Gallagher misleading the house.

That all looks very nasty. Read my initial post and form your own opinion.

The other thing that makes this case interesting is that Katy Gallagher is both the ACT Treasurer and the ACT Heath Minister. I would have thought that combining a spending portfolio with a Treasury portfolio would lead to all sorts of problems. Just like we see here. Now this isn’t her fault – there is a job of work to be done, and she is doing it. It is quite appropriate that the opposition hold her to account, but there is a deeper issue at stake. When you have poor institutional arrangements you get problems. The poor institutional arrangement here is that the ACT parliament is too small. They are not alone in this. The NT parliament and the Tasmanian parliament are also too small. That means doubling up on portfolios and it also means a very small talent pool for ministers. An evenly balanced parliament could mean that a government hardly has a backbench. It is not immediately clear what the solution to this problem is, but I’m flagging this as being a problem worthy of some additional thought.

Part three of Hamilton’s Climate War article is up. Here he suggests that think tanks are involved in criminal behaviour.

The deployment of think tanks and sceptic websites to attack climate science has been a carefully planned strategy that was developed in the United States in the mid-1990s.
…
The hacking into computers at the Climatic Research Centre at the University of East Anglia is only part of a more extensive campaign of black ops organised by elements of the denial industry in the run-up to the Copenhagen meeting. Others include break-ins to the offices of climate scientists, an attempt to infiltrate the computer system at the Canadian Centre for Climate Modelling and Analysis at the University of Victoria by two people posing as technicians, and industrial espionage directed at US green groups.

I’ve never seen that claim before – if Hamilton has any evidence to support these allegations of criminal behaviour he should immediately inform the police. But, of course, he doesn’t. Tomorrow he is going to criticise think tanks for writing papers and books. Today it’s not clear how think tanks go about their business, except they are allegedly well-funded and they are opposed to environmentalism; something about hating the 60s.

Let’s pick up the well-funded argument. Exxon comes in for a lot of criticism in these debates. But how much money have they handed over? According to Jo Nova, Exxon has given about $23 million over ten years. That isn’t nothing, but it’s not much compared to the $79 billion the US government alone has spent on climate change policies since 1989. That number would be much larger if funding from the EU and so on were included. The point well worth remembering is that Exxon is spending its own money, government funding is coercively extracted from the taxpayer.

This idea that think tanks are well funded is very common. Recall Andy Pitman’s comments to the ABC.

Andy Pitman: My personal view is that climate scientists are losing sight with the sceptics, that the sceptics are so well funded, so well organised, have nothing else to do. They kind of don’t have day jobs. They can put all of their efforts into misinforming and miscommunicating climate science to the general public. Whereas the climate scientists have day jobs and this actually isn’t one of them. All of the efforts you do in an IPCC report is done out of hours, voluntarily, for no funding and no pay. Whereas the sceptics are being funded to put out full-scale misinformation campaigns, and are doing a damn good job I think. They are doing at superb job at misinforming and miscommunicating the general public, state and federal governments.

Pitman, however, is himself very well funded. None of that includes the infrastructure costs of the university itself and the facilities he can access. Now this funding and public support shouldn’t be seen as a criticism of Pitman per se. Like all university professors he is expected to raise money from public sources, and given university budget drivers it is more lucrative to get money from public sources than private sources, but to claim that think tanks and climate deniers are well-funded and scientists are not is precisely the kind of statement (‘hide the decline’ becomes deny the government funding) that has gotten them into trouble in the first place.

When I wrote that Peter Garrett’s position was untenable back on 11 February, I had assumed that he would have departed by now.

It seems that I might have been wrong with a common view now being put that Garrett will survive as a weakened minister because the Prime Minister can ill afford to lose a minister at this stage of the political cycle.

This is very sad. While I disagree with much of what Garrett stands for politically, I’ve always thought of him as an honourable person who had strong principles.

I can’t imagine why he wouldn’t resign. His conscience must be torn – he is clearly upset that his pet project has gone so awry. He is very aware of ministerial standards and responsibility for the design and implementation of the insulation program rests entirely on his shoulders. Is it so important to remain a minister? There are so many better things in life he could be doing.

Come on Peter – follow your conscience and resign on principle. You’ll feel better for doing so and you will be doing the right thing.

Here is an interesting article about the perks of office available to some US public servants. Hopefully this is one fashion we won’t copy from the United States.