John Quiggin

It’s time, once again for the Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language.

It’s hard to believe that, three months ago, Australian national politics was (primarily) a contest between two broadly normal political parties. The government was running well ahead, but open to criticism for having talked a lot and done relatively little. The opposition was excessively keen on the maxim ‘the first duty of an opposition is to oppose’, and the alternative policies it proposed were neither as detailed as they might be, nor entirely consistent, but that has always been true of oppositions. Although a change of government in 2010 looked unlikely, there was nothing to suggest that such an event would be a disaster if it happened.

That could not be said today. The government is much the same as before, but the opposition has become a clown show, happy to do or say whatever comes to mind, either to chase votes, secure the support of its base or simply to muddy the waters enough that they have a chance to win in the resulting confusion.
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It’s time again for weekend reflections, which makes space for longer than usual comments on any topic. Civilised discussion and no coarse language please.

A glutton for punishment, I’ve decided the Zombie Economics book manuscript I submitted a month ago (mostly online here) is in urgent need of more zombies. I’ve been struck, even in that short space of time by the extent to which, with undeniable “green shoots” now appearing, the zombie ideas I’ve written about are clawing their way through the softening soil and walking among us again. The most amazing example is that of the Great Moderation – surely you would think no one could believe in this anymore, but they do.

So, I’m planning to add a bit to each chapter, pointing to examples of these ideas being revived. I’d appreciate good examples for the rest: Trickle Down, Micro-based Macro the Efficient Markets Hypothesis and Privatisation (of course, the Queensland government gives an example v close to home).

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My piece in Thursday’s Fin noted the prevalence of delusional conspiracy theories about climate change on the political right, pointing in particular to Lord Monckton, Nick Minchin and the Lavoisier Institute as sources for the claim that the whole thing was a plot to destroy the economy and bring in a communist world government. Among other points on the silliness of this claim, I observed that all credible economists agreed that the cost of measures to stabilise global climate (less than 5 per cent of GDP) on all estimates, did not appear sufficient for the catastrophic destruction required by the conspiracy theorists.

The piece attracted a couple of responses, one from the Lavoisier Institute and one from Sinclair Davidson (who has given Monckton plenty of favorable treatment on his blog, and his pushed conspiracy-theoretic views of the IPCC). Curiously, neither of them mentioned the conspiracy theories that were the main subject of the piece, and which Lavoisier has pushed for years.

Rather they cavilled at the point that the economic costs of an ETS or carbon tax would be marginal. Lavoisier’s Ray Evans did not offer a counterargument, but simply claimed that economists had been wrong when they said the effects of Thatcher’s 1981 Budget would be disastrous. Davidson accepted the standard estimates, but said that, if you converted them into present values at a low discount rate, they looked really big. He also made a spurious personal attack on me (reply over the fold).

This is just silly. Although Australia got off relatively lightly from the GFC, our national income is several percentage points below where it would have been in the absence of the crisis and is likely to remain below trend for some years to come. Has anyone noticed the collapse of civilisation as we know it? Even in countries like the UK, where the impact of the GFC has been many times the size of the maximum estimates put forward by economists for the cost of climate stabilization, many observers believe that the threat of imminent communist dictatorship and a return to the Dark Ages may yet be staved off.

As I said in my original piece, it is tempting to dismiss all this as mere hyperbole. But, for delusionists, the only alternative to crazy conspiracy theories is the claim that thousands of professional scientists have fallen prey to errors that can easily be discerned by the average (scientifically untrained, innumerate, information derived from blogs) rightwing pundit. Now that’s really crazy.

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In discussing the loony antics of Lord Monckton with climate delusionists/rightwingers (the two categories are now pretty much coextensive), I’m struck by the frequency with which I get the line (pushed a little while ago by Janet Albrechtsen) “Well he did say that Rudd and Obama were planning a communist world government, and that Jackie Kennedy killed millions of people and that the child of holocaust survivors was a Nazi and that he was a member of House of Lords, but why focus on that stuff … you should be debating him on the science”

I’m not sure whether the appropriate Monty Python reference is the witch sketch in Holy Grail or “What have the Romans ever done for us” in Life of Brian. Certainly, the idea of supposedly hard-headed politicos going to this guy for scientific advice is one that would stretch credulity even for a Python gag.

I did a couple of interviews earlier this week on South Australian legislation banning anonymous blog comment on the forthcoming election. The same idea came up at the Commonwealth level after the last election and I testified against it at the Parliamentary inquiry – they decided not to go ahead. This time around, the result has been the same. Facing a storm of protest, the SA government has backed down.

I’d like to broaden John Holbo’s CT discussion of the US as a center-right nation to consider the broader idea that the US is, in some sense, exceptional. As Barack Obama correctly pointed out not so long ago, every nation is exceptional in its own way, which tends to undermine the idea that any nation is specially exceptional.

Still, compared to the developed world in general, it seems obvious that the US is different in lots of ways: an outlier in terms of nationalism, military power, religiosity, working hours and inequality of outcomes and (in the opposite direction) in terms of government intervention, health outcomes and other measures typically associated with welfare states. Among these the outstanding differences arise from the fact that the US aspires, with some success, to be globally hegemonic in military terms and (with rather less success) in economic terms as well.

But, when you think about it, there is nothing exceptional here.
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It’s time, once again for the Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language.

As Harry Brighouse mentioned at CT, I’m sceptical of the value of artificial “thought experiments” in moral philosophy, without having a fully coherent basis for this scepticism. One thing I don’t like about the term “thought experiment” is the implication that the results of such thought experiments constitute data, and therefore that an ethical theory is more satisfactory if it fits such data than if it does not. The way I’d prefer to approach such problems involves an iterative loop, with repeated stages of (i) consider reasonable general principles (ii) compare to intuitions about specific cases (iii) where appropriate, adjust judgements on specific cases (iv) revise general principles to give a better fit to adjusted intuitions. That is, I don’t think either general principles or specific intuitions are trumps.

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It’s time again for weekend reflections, which makes space for longer than usual comments on any topic. Civilised discussion and no coarse language please.

As we’ve been discussing, my invitation to debate Lord Monckton was withdrawn before I could make a decision on it. But, for those interested, my column in yesterday’s Fin presents my thoughts on Monckton’s key claim: that the scientific literature on climate change is a gigantic fraud, cooked up in the service of a conspiracy to inaugurate a communist world government at Copenhagen.

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The Greens have proposed a carbon tax as an interim measure to begin cutting carbon emissions. Although there are strong reasons to favor an emissions trading scheme over a carbon tax in the long run, I think it’s time to look seriously at this option. Here a few points in no particular order.

* since the price of carbon is initially capped under the CPRS, it’s just like a carbon tax in the short run
* the way to dispel public fear of a new tax is to bring it in. Look at capital gains tax and GST, both the subjects of highly successful election scare campaigns (in 1980 and 1993 resp) and both now uncontroversial.
* the capture of the political right by delusionism is now irreversible, as can be seen from the embrace of the obviously loony Lord Monckton. There’s no chance, now or in the foreseeable future of a deal with these guys. In particular, the version of the CPRS negotiated with Turnbull and briefly supported by the majority of Coalition members is unsalvageable in every respect. There’s no way the deal can be modified enough to get Liberal support now, and on the other hand it’s too much of a dog’s breakfast to take to a double dissolution.
* The Greens will almost certainly regain the balance of power in the Senate after the next election. Much as the government dislikes it, they are going to have to rely primarily on deals with the Greens to get legislation through in future. They might as well start dealing now.

In general terms, the government lost control of the debate with the defeat of the Turnbull compromise ETS last year, and has done nothing to regain it. Turning up with the same discredited compromise in February makes no sense at all. This is a time for firm action, not more delay.

Tristan Ewins has set up a website for the group, Movement for a Democratic Mixed Economy. I’ve contributed an article. Go, read and comment (there, not here).

It’s time, once again for the Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language.

Janet Albrechtsen, who previously endorsed Lord Monckton’s conspiracy theory that the draft Copenhagen agreement were designed to bring in a world government has backed away, admitting that his rants about Hitler Youth and similar make it unsurprising that neither Kevin Rudd nor Tony Abbbott would see him during his Australian tour (I delayed in responding to my invitation, and it was pulled).

Albrechtsen has previously shown more willingness to admit error than the average pundit, and this piece counts in her favour. Still, it’s disappointing to see her continuing to suggest that the utterly unqualified and ludicrously wrong Viscount is “powerful” when he talks about the science. She quotes him confronting an activist, and asking

whether she is aware that there has been no statistically significant change in temperatures for 15 years. No, she is not. Whether she is aware that there has in fact been global cooling in the past nine years? No, she is not. Whether she is aware that there has been virtually no change to the amount of sea ice? No, she does not.

Perhaps the activist does not know these things because none of them are true, at least not in the sense that is implied. For example, as predicted by climate models, the dramatic reduction in Arctic sea ice has not not been mirrored in the Antarctic, so with a little ‘virtual’ fudge Monckton’s claim is, kind of, true. The point about statistical significance may be restated as saying that the variability of temperature about the upward trend is sufficiently great that 15 observations is not quite enough to reject the null hypothesis of no change with 95 per cent confidence (when I did stats, the standard number for a decent-sized sample was 30 observatons, but the trend in temperatures is strong enough that we don’t need so many). And the claim about global cooling is typical cherry picking, now out of date. 2009 was warmer than either 2000 or 2001, but Monckton was presumably using the relatively cool 2008 as his endpoint, or maybe the exceptionally warm El Nino year in 1998 as his starting point.

Albrechtsen is no more qualified than Monckton on these points. But she ought to ask herself whether it makes sense to rely on the statistical judgement of a former political advisor (to climate arch-conspirator Margaret Thatcher no less) whose political judgement is so obviously flaky.

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It’s time again for weekend reflections, which makes space for longer than usual comments on any topic. Civilised discussion and no coarse language please.

Given the Republicans’ success in painting the Democrats as the party of Wall Street, it was inevitable that the Obama Administration would announce some measures aimed at bringing the banking sector under more effective control. But the smart money would have been on a symbolic gesture, such as an ineffectual limit on bankers pay.

The announcement today that banks are to be banned from undertaking proprietary trading operations may have proved the smart money wrong. Certainly the sharp drop on Wall Street suggests that the announcement delivers more than expected for the public, and correspondingly less for the shareholders of big financial institutions.

If it is delivered as described, it would force the reversal of the 2008 move by Goldman Sachs and Morgan Stanley to become bank holding companies, with direct access to support from the Federal Reserve and Federal Deposit Insurance Corporation. More generally, it would be a significant move in the direction of narrow banking, preventing publicly guaranteed banks from engaging in the kind of high risk trading that produced the current financial crisis. As Chris Joye points out, narrow banking has surprisingly broad support among economists.

But will it be carried through? The first problem is the dysfunctional US political process, which prevents just about anything from happening. Obama might be able to wedge the Republicans on this issue, but they will probably find an excuse for voting en bloc against any measure he proposes. Under the current Senate supermajority rules that would be enough to stop any reform.

So, it will probably be necessary to scrap the filibuster and pass legislation with a simple majority. And that’s assuming that Obama can command the support of the numerous Democrats who are beholden to Wall Street, just as the Republicans (hypocritically, given their own position) allege.

Leaving aside the political obstacles to getting legislation passed, there’s the problem of making it effective. Even if banks aren’t allowed to own speculative investment enterprises, they can make big money lending to such operations. Then when things go bad, the failure of one or more big speculators can imperil the system as a whole. That’s what happened in 1998 with LTCM.

What matters here is the political dynamic. If the aim is to get back to business as usual as fast as possible, any reform will be short-lived and ineffectual. On the other hand, if there is a permanent shift in public and political sentiment against an economy dominated by the finance sector, things will work out very differently. Instead of eroding control, the discovery of loopholes will lead to tighter and more systematic regulation ending in a full-scale separation of banking and speculative finance.

One sign for optimism is the progress being made on the related issue of tax havens. Until very recently, moves to control the activities of tax havens were almost entirely ineffectual, at most prompting wealthy tax dodgers (and the banks who hid the money for them) to shift accounts from one jurisdiction to another. But as governments have run short of money and tolerance, the picture has changed. A combination of economic/diplomatic pressure on tax havens and a willingness to make use of whistleblowers within banks has rendered international tax evasion far less viable.

Perhaps this time Wall Street really will be cut down to size. If Obama’s Administration is to recover from its current malaise, he needs to win on this one.

I wrote this for Crikey. It should be appearing there soon, I expect

There’s been a bit of discussion about nuclear power lately, but it tends very much to the abstract. I thought I would look into the question of when, if ever, nuclear power might be a reasonable option for Australia to consider, and how we should go about it.

An obvious starting point is the Switkowski report commissioned by the Howard government, which I’ve uploaded here. There are three main points which allow me to provide an answer to the question, at least for the next decade or so.
(i) In the absence of a substantial carbon price nuclear power is not competitive with coal
(ii) First-of-a-kind (FOAK) nuclear plants are likely to be very expensive (above $80/MWh), not competitive with wind or gas (even with CCS)

The estimate is that ’settled down’ long run costs could be $40-$65/ MWh, which is competitive with wind and cheaper (for the moment) than other renewables.

Let’s take “settled down” to refer to a design with at least 5 examples completed and operating in developed countries, at least some of them built on greenfield sites (that is, not next to existing nuclear power plants which already have a lot of the necessary infrastructure). It seems clear that these minimal conditions can’t be met before 2025 at the earliest. The US, which has been attempting for a decade to restart its nuclear industries is still at the pilot stage, exploring a number of technologies, and offering to subsidise the construction of three plant designs for each major option. Most of the proposals are on existing sites, only six have reached the point of a plant actually being ordered, and none is anywhere near starting construction. Given a sharp acceleration in progress, the emergence of a highly successful design and a lot of new orders towards the end of this decade, the 2025 date might just be reached.

That suggests that Australia should forget about nuclear power entirely for at least the next five years. If things are going well for nuclear, and not so well for renewables, that would be the time to start setting up regulatory structures, looking for sites and so on.

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My column from Thursday’s Fin, with a not so subtle plug for my book.

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