The Parentonomics 1st Copy auction is over and I am very pleased with the result; the winning bid was very flattering A$1,001.55. I’ll post more over at Game Theorist when I have spoken to the winner. For now I thought I’d graph what I learned about demand. Turns out that so long as there are at least 33 buyers of the book at its retail price, it will do better at that price than at $1,000. Of course, that high price was most likely a result of the ‘charity’ aspect of this auction. Who knows? It could be an asset.

But I did learn something about all of that. First, eBay is not the place for such things. For starters, there is no opportunity for jump bidding as eBay automates the bids. So there may have been someone who wanted to denate $2,000 but unless there were two, they would be better off doing outside of the auction. Second, because eBay requires PayPal as an option in Australia, once it is there it is used. So that cost me an extra $20. Not that I am complaining about all of that. I am just saying that perhaps the sellers griping about eBay Australia’s tactics have a point.

In an interview with Business Spectator today, the Treasurer, Wayne Swan, said this:

SB: But there’s still no liquidity at all in those securitised debt markets.

WS: Well that’s not true actually.

SB: Well minimal…

WS: … I mean I agree with you that they’ve been very tight, but I think one large company got away with securitisation only last week. It was very expensive, but it’s an encouraging sign though.

SB: There are all sorts of people though putting their hands up asking you to help out by creating something like an Australian version of Fannie Mae [the US Federal National Mortgage Association]. Have you looked at that?

WS: We’re not going down that road.

SB: Why not?

WS: Because I don’t believe it’s the way to go. I’ve made a study of those bodies in the United States and they themselves have been beset with many difficulties over a period of time.

That is one of the key features of Chris Joye and my AussieMac proposal. While the fact that these organisations have existed in the US for decades, Australia needs its own solution. Indeed, one of the things we anticipate that it should be a government-owned entity. It is good to see that the government is now considering the details of how it manages the securitisation industry. With St George today increasing its interest rates again, the last thing the Government wants to find itself in, is with a Reserve Bank trying to get interest rates back down but banking competition (or the lack of it) standing in the way.

[Update: Business Spectator seem to have a different interpretation of what the Treasurer was saying. I guess time well tell on that one.]

As a big climate change policy day comes upon us, there is a new paper out by Melissa Dell, Ben Jones and Ben Olken. They look at the impact of weather and rainfall on countries over the past 50 years (taking into account the fact that different regions have sporadic high and low events). They find that higher temperatures reduce growth in poor countries (but not rich countries) and involve widespread economic and political disruption. This is a predictor of what is to come if temperatures rise (regardless of the cause). To my mind, it puts a premium on thinking how we can shield much of the world’s population that remains exposed to the weather.

So apparently eBay has dropped its PayPal moves in Australia. It never made sense and clearly when challenged by the regulator, they have backed off. So who pays when the regulator effectively enforces common sense?

My submission to the Senate Inquiry into FuelWatch is now public. Click here (it is submission No.1).

From The Australian [HT: Tim Dunlop], opposition environmentalist Greg Hunt:

We are willing to champion real emissions reductions but we do not support pain without gain.

In economic terms, petrol is largely inelastic, which means that as price rises there is only a small change in driving behaviour but a large effect on low-income families.

And what is the evidence to support his claim that petrol is largely inelastic? As I have mentioned before, there is none because it is wrong. Andrew Leigh links to some actual estimates. What is more that same study concludes that “[t]he demand for owning cars is heavily dependent on income.” One possibility the Opposition might entertain is that low-income families are less dependent on cars and petrol prices.

To deal with this type of stuff, let me introduce a new term “Climate Change Policy Denialist.” Hunt doesn’t deny climate change or the need to do something about it. But he does deny that incentives can work to change behaviour and mitigate emissions. To see this further …

That is why, if petrol is to be included in emissions trading, we believe any new carbon tax should be offset by an equal decrease in the excise tax.

Again, if total tax on petrol remains the same, you don’t have a climate change policy. You have “re-labelling.” That said, later in the article he seems to put more faith in price signals (for electricity and hybrid cars) but let’s face it by this point it is very confusing what he wants. And the call for innovation reads like a back-door industry assistance program. Actually, if you ask me, the Opposition wants to be “re-labelled” as environmentally friendly; hence the title ‘Let’s go Green.’ He may have well just said kombya.

As a Mac user, I find the Dashboard function very convenient. (Although it was more so before .mac stopped syncing them properly; hope that comes back). Anyhow, apart from ones pre-installed on a mac, I thought I’d list my main ones:

• Gmail widget: look at unread emails at a glance
• Facebook widget: a quick glance at Facebook news feeds
• Organized: this is a terrific widget that puts calendar, todos, notes and world clocks in one convenient place.
• TV Forecast: shows you what tv programs are coming up.
• BigPond usage: shows your Bigpond usage meter (of course, not provided by Telstra. That would be too customer friendly)

In today’s Age, econometrician, Don Harding, discusses the use of econometric evidence in policy-making. His case is FuelWatch.

The opinion piece makes a number of points. First, in a clever piece of data extraction, Harding was able to scrape the pricing data from ACCC graphs published in its report. He then used that data to try and replicate the ACCC results. This data had not been available beyond the ACCC (who used legal powers to obtain it) and despite repeated attempts on my part I have been unable to convince Informed Sources to release the data for use by academics. In that regard, Harding’s approach, while imperfect, is the best outsiders can do.

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… you side with Milton Friedman on this one.

A reader pointed out this Slate article about a drive to send books to Iraq. There have been a number of these of the years for various countries. I always thought that it would be especially good say for textbooks rather than selling them for a few dollars on the second hand market. Oops, I am being a tad evil here because I guess I have an interest in reducing the liquidity of that market. Nonetheless, it is still potentially a socially desirable idea and worth considering as your books gather dust or prop up tables.

… and a ton of other stuff; hopefully temporarily. Andrew is going to Treasury for six months to try his hand as a public servant. On the one hand, I see this as a terrific opportunity, rarely afforded Australian academics, to see government from the inside. For what Andrew does that is essential and so long as it is temporary, his academic career will not suffer for it.

But for me personally, this is a big change. Andrew and I have written many papers over the past few years and continue to do so. Some of those are in the publication train but there will inevitably be a pause to the creation of new ones. But Andrew’s blog was the reason I got into this business and I get so much from reading both it and his AFR columns that were, by far, the best in the country. Many will miss that.

There is, however, another role Andrew was playing. For media commentary (not just on our joint work), we were each other’s fall-back. For instance, recently, I decided not to comment any more on the baby bonus and the timing issues that this would create today and tomorrow. Andrew stepped in and was there to save me from having to explain my decision to journalists. I’ll have to do my own wriggling now.

It is not all cost. One of the biggest mysteries Andrew and I had to deal with was why our push to have the baby bonus installment stopped failed earlier this year. The evidence and economics were compelling and it was a new political party in office. But yet we failed. Interestingly, one clue on that has come to light and it turns out that the policy we will have from 1st January, 2009, is in fact an original Latham era policy to do with parental leave. We had not been aware of this. The original policy involved fortnightly payments and a more stringent means test. But it was not motivated like Costello’s ‘one for the country’ absurdity but about parental leave. Hopefully, it will morph into that.

As a (temporary) insider, Andrew will likely get to learn more about what makes policies get traction and what doesn’t. This will be a valuable for all of us.

The head of National Australia Bank in Australia, Ahmed Fahour, came out against government intervention in some places and for it in others. From The Sheet:

Fahour said deposit insurance could do more harm than good and he was equally sceptical about the so-called AussieMac proposal.

“This would effectively mean government would get into the business of purchasing home loans and then issuing them to investors as residential mortgage-backed securities relying on the government’s AAA rating.

“I would much prefer to see the issuers of RMBS making sure their products are less complex and completely transparent, so investors have confidence in them and can adequately assess the underlying return.

“Government intervention may forestall the work necessary to achieve these improvements and ultimately limit access to finance, inhibit innovation and lessen the efficiency of our financial system.”

OK that is all very well but one of the roles of AussieMac was to provide that transparency and stimulate others by creating competitive pressure to do the same.

But Fahour is not above some help: “One initiative I would urge the government to consider is better tax treatment for Australian deposits.” He argues that long-term savings get such tax treatment. But, come on, those long-term savings should be underpinning mortgages as much as short-term deposits. Why ask for favourable tax treatment for deposits that do not provide long-term stability for credit sources? It seems to me that banks are quite happy for government help where it suits them but not others.

According to ABC News, HECS architect, Bruce Chapman has finally released his proposal for paid parental leave using an income-contingent loan (through CEDA). His baseline idea, which I have endorsed many times, is that parents will be given income support during maternity leave in the form of a loan that will be paid back through the tax system. This is a fair way of approaching the issue, is compatible with government support (both minimum wage paid leave and return to work tax credits) and is easily funded.

Now I haven’t seen the final version of the report but my only quibbles are the emphasis on maternity as opposed to parental leave and I think that the base for repayments needs to be based on household rather than individual income.

[Update: OK I have seen the final version. Sadly, it is not publicly available. You need to pay CEDA for it. But they have moved to a household income test and parental leave in general. So much for quibbles.]

There is a very interesting conversation going on between some very noted individuals at this new blog. It started with this Davos speech by Bill Gates. Ed Glaeser has joined in to support it somewhat while economists such as Steve Landsburg, Richard Posner, Gary Becker and others are doing the typical economist thing and wondering whether corporate social responsibility or what have you is a good idea. Perhaps cure government first.

My submission to the conversation (I have no idea whether they will publish it or not) is over the fold.

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and what I mean by that is using monetary incentives to encourage fertility. From the New York Times magazine a long article about problems in Europe. With all the discussion again this week in Australia about the baby bonus and alongside it, parental leave, some choice quotes:

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