Maths, the key behind a successful business

Recently this article appeared in the New York Times. It is an interesting glimpse into how important data analytical skills is to one of the most successful companies in our times. I particularly like the statement:

"We let the math and the data govern how things look and feel"

Evidently Google are convinced of the importance of statistics in the world of big business.

A move in the right direction!

I suggest Mr Swan and company got one thing right last night, increased funding to the ABS. See here for details.

Louise Adler and Australian stories

I have previously posted on the Productivity Commission's draft report Restrictions on the Parallel Importation of Books. As part of its proposed package of changes, the Commission proposed that the restrictions on parallel imports should apply for only 12 months from the date of first publication of a book in Australia, as opposed to the current arrangements whereby restrictions can potentially apply for the full term of copyright.

In today's Sunday Age, Louise Adler criticises the recommendations, and argues that

.... a marketplace that abolishes the principle of territorial copyright will wind back the clock on a proud and profitable publishing culture, reduce the availability of Australian stories and hand back a monopoly to multinational publishers to make decisions about our market far removed from local realities.

As I have posted previously, parallel import restrictions allow authors and publishers to price discriminate. Restricting supply in the domestic market results in prices for books being higher than elsewhere. While part of the loss of surplus to consumers is transferred to publishers(including foreign owned publishers), part of it is not, and can be considered a deadweight loss. The deadweight loss also includes the extra costs to society of publishing books domestically that could have been imported more cheaply. As CEO and publisher-in-chief of Melbourne University Publishing, Louise Adler obviously has an interest in defending the status quo.

What is also interesting, albeit not suprising, is the way in which the protectionist argument is regularly couched in terms of protecting an "authentic Australian cultural identity" for the benefit of Australian consumers. This argument is without foundation. If an author was concerned about the importation of remainders displacing existing domestic sales, the relaxation of parallel import restrictions on books would primarily affect an author's decision to supply the overseas market, not the domestic market. Furthermore, if there is any relationship between the magnitude of "authentic Australian cultural" externalities and the expected size of the overseas market for particular books, it can be expected to be negative, rather than positive.

Louise Adler supports the retention of a policy that tends to disproportionately benefit those authors who expect large overseas sales, at the expense of domestic consumers. To couch her protectionist argument in terms of ensuring the continued supply of Australian stories for the benefit of Australian consumers is disingenuous at best.

Reporting on property prices

Chris Lloyd, posting at Core Economics, has a post on the reporting of property prices. The most reliable data on property prices is provided by the RP Data-Rismark Property Indicies, which account for the compositional problems discussed below.

There is something about the way real estate trends are reported that borders on the irresponsible....

.... The common thread in all these headlines is they use a measure of middle sale price (usually the median). The headline figures actually differ significantly depending on the data source (REIV or APM) and are possibly dodgy. But regardless of which figure you take, it occurs to me, and I am sure I am not the first to make this observation, that there is a potentially huge transaction bias in these figures....

We are told that the first home buyer’s market is booming. So there are many more sales in the lower price range. So the median or mean sale price would go down, even in a flat market.....

Financing Australia's current account deficit

With constraints on foreign borrowing (and in the absence of significant official intervention in the market for foreign exchange), how is Australia to finance its current account deficit during a global recession? Michael Stutchbury provides the answer, and quotes Access Economics' Director Chris Richardson.

“The boom years masked an underlying worsening in Australia’s foreign debt trajectory, but the downturn is now making our vulnerability on this front clearer,” Richardson says. This limits how much more Australia can borrow abroad to get it through the recession. The alternatives are a recession to club local credit demand and increased foreign equity investment in the Australian economy.

With falling oil prices drying up the petro-dollars, China and Japan have the biggest financial surpluses to invest abroad. This is driving the surge of Chinese investment in Australia’s mining sector, capped by Chinalco’s $US19.5 billion bid to double its equity stake in Rio Tinto to 18 per cent.

In opposing Chinalco’s bid as against the national interest, Turnbull yesterday depicted it as a strategic play by the Chinese state to control Australian resources. But debtors can only be so choosy. Blocking an equity investment from the world’s biggest source of savings amid a global credit crunch would increase Australia’s recession risks. “If we didn’t want Chinalco to be buying up bits of Australia, we shouldn’t have bought so many plasma TVs,” Richardson says.

The Australian and Climate Change

Harry Clarke is less than impressed by The Australian's "ongoing war against climate science". He is not alone.