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It’s Xmas!

December 24th, 2009

However you celebrate, or even if you don’t, I wish all my readers a Merry Xmas. I’ll be back in the New Year, and wish everyone a great 2010.

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  1. paul walter
    December 31st, 2009 at 13:06 | #1

    Me?…Neologisms?…Donald Oats!!
    Alice, you are my best friend. Have a happy new year.

  2. Alice
    December 31st, 2009 at 13:38 | #2

    @Donald Oats
    Don – Paul was quoting Amos Starkadder from the 1932 comic novel called “Cold Comfort Farm” by Stella Gibbons which parodies gloom laden rural life in a fictional village in Sussex!

    Here is a bit

    Each of the extended family has some long-festering emotional problem caused by ignorance, hatred or fear; and the farm is badly run, supposedly cursed, and presided over by the unseen presence of Aunt Ada Doom, who is said to be mad through having seen “something nasty in the woodshed” as a child.

    Flora, a level-headed urban woman, applies modern common sense to their problems and helps them all adapt to the twentieth century.

    I would suggest Amos Starkadder is one of those working against the sensible Flora. Come to think of it I can think of a few Amos Starkadders around now!

  3. Alice
    December 31st, 2009 at 13:40 | #3

    @paul walter
    Likewise Paul (you are my best friend too)….for a minute there I thought you had lost your marbles or seen something nasty in the woodshed. Thank goodness neither…!
    You have a grand new year Paul!

  4. Alice
    December 31st, 2009 at 13:52 | #4

    Ive heard a rumour fireworks is going to use lots of blue…must be to celebrate the blue moon due out tonight.

  5. paul walter
    December 31st, 2009 at 14:22 | #5

    As it turns out, Amos Starkadder is one for whom Flora finds a solution, in the form of a chance to crack it bigtime on the US Bible-Belt hellfire and brimstone Pentecostal circuit.
    Funny how that resonates in these supposedly “modern” times.
    Donald Oats, a “flibbertigibbett” is derived of middle english roots and refers to a “Silly garrralous or scatterbrained person”.
    Kevin Andrews?

  6. Fran Barlow
    December 31st, 2009 at 15:02 | #6

    @Kevin Cox

    You cannot control a system through prices – prices are the governor not the driver of output.

    I’m not fundamentally trying to control through price. I’m merely trying to ensure that every decision is suitably costed, so as to disocurage the system as a whole from making decisions based on transfers from the commons to individuals. To borrow another analogy, at the microbial level, every organism must pay for every bit of its functionality at the cost of energy or “moral hazard” and so every energy expenditure that is not the expression of the organism’s capacity to copy its DNA gets stripped down and discarded.

    Moreover, your reasoning is incorrect. According to Say’s Law, demand and supply are two sides of the same coin.

    The alternative to pricing externalities is not to let them occur by favouring investments that do not have the externalities that concern us.

    That’s just another way of imposing the cost on the users of the function. If you regulate you build in the cost of forfeiting the benefit of the externality but again, to return to the world of microbes, there will be occasions where this is the greater evil and a more nuanced system will produce better and more sustainable results.

    If we make the financial cost of building new renewable energy plants lower than the financial cost of buying an existing energy factory then the system will rapidly change to renewables – without an increase in the price of energy.

    This is simply creative bookkeeping. If you extract a transfer payment to underpin renewables then the people from whom you have extracted it pay the differential. The result is the same — only the method and the transaction overhead may be different. The price of energy will be unaffected. One way or another, all stakeholders pay, because sooner or later, mediated through system constraints, everyone trades their labour’s value with everyone else.

  7. Kevin Cox
    December 31st, 2009 at 15:12 | #7

    @Andrew

    Andrew you are on the right track but the sustainable amount is about $5,000 per year per person or about $100 billion total Australia per year – not a billion dollars per person. Remember what has to happen to the zero interest loans. They must be invested to create NEW productive assets and they must be paid back over the life of the asset. The extra profit after repayments would be about $200 per year so we do not become rich from the loans – although as it compounds we would find that it would give us all a comfortable retirement after a lifetime.

    Contrast this with what happens today. Last year the finance industry increased the total money supply by about $150 billion dollars and the people who can take out loans and the banks with their margin between interest on lending and borrowing took the interest from this extra money in circulation. Unfortunately most of the extra money was not invested in profitable enterprises but went on the flavour of the month asset bubble. The current system is hopelessly inefficient in putting finance into building profitable new assets.

  8. Alice
    December 31st, 2009 at 16:07 | #8

    @Fran Barlow
    We all know the price doesnt include externalities and there is no way to make it include externalities except by intervention. Its the latter that has been sadly missing in the euphoria over leaving markets to sort out the planning and organisation in our society. Im not against markets, I am against unhealthy exploitative markets. Its a question of the degree of faith, not the idea of markets (we have always had markets but we have not always had blind unquestioning faith in markets to organise the structure of our societies for us).

    Says Law has also been criticised and I dont think relying on Say’s Law has sufficient justification ability. Demand and supply is half the problem. Supply can influence demand and vice versa but they are not two sides to the one coin. They may not be forces that adjust to equilibrium and can stay in protracted disequilibriums, especially when there is a dearth of competition which is the case in many markets these days. Market power that reduces competition also disturbs the adjustment to equilibrium, having the potential to make markets, in a sense, fail us all…as they have been doing in many areas (sustainability, the environment, protection of the poor, infrastructure, credit markets and…..the list goes on).

    There have been entire schools of economics devoting themselves to the false god of market supremacy. Its time they evaluated their outcomes.

  9. Kevin Cox
    December 31st, 2009 at 16:11 | #9

    @Fran

    The problem with pricing externalities is that we have no idea on what value to place on them and we have no idea how to measure them accurately.

    Price is the regulator to match supply and demand. Increasing the price in an arbitrary manner and “hoping” that the supply will increase through renewable energy investment is a very convoluted way of trying to increase investment. What is likely to happen (as we have seen with the proposed emissions trading scheme is that the polluters actually make more profit by getting their emissions permits for free). What do you think the polluters will do? I can tell you now. They will increase the cost of energy and pocket the windfall profits.

    A much better approach is to do things so there no externalities. There is no way that you can put a value on a two degree rise in temperature and it is much better not to let it occur. Besides it is morally repugnant to me that we allow people to pay to pollute. We are saying it is OK to do things – no matter what it is – provided you have the resources to pay for it.

    I agree Say’s law is correct in a true open market. Supply and demand are two sides of the same coin – and price is the regulator to stabilise the market.

    What I am suggesting is not creative book-keeping. It is a transfer of profit from future assets from the suppliers of capital to the builders of wealth. The reason renewables are so expensive is the cost of capital. It is perfectly reasonable to charge interest on money created by monetising an existing asset. It is NOT reasonable to charge interest on money created to build a new productive asset when the risk of the loan failing is taken by the community as a whole (which is what I am proposing). Do it right as with the Grammen Bank and the risk of loan failure is close enough to zero that it does not matter.

    The current financial system is such that the cost of finance to build a new asset is at least three times the cost of finance to buy the same asset once it is built. You may not believe me but as builder of assets and as builder of many models to justify investments that is a fact. If it is a truly risky investment the number is closer to 10 and up to 30. (VC’s typically want 20 to 30 times return on investment for risky projects).

    I am not saying we need to change the system or we need to do all our loans as zero interest. All I am saying is that there are some assets it is worthwhile building for the sake of the whole community and we need to find the best way to do it.

    Manipulation of prices is one way. The evidence is not good that this works. For Cap and Trade systems the example quoted is the SO2 reduction but that turns out to have worked because it was cheaper to burn fuel that contained little sulphur and so the cost of removing a small amount of sulphur was more than offset by the other savings. With a price on carbon we have no such luck.

    Reducing the cost of finance to build assets is another way of encouraging investments. I say it is time to give this option a go. It is not a new idea and was first thought of by Benjamin Franklin although he did not quite express it that way. It is also the underlying idea of “The New Deal” but again it was not described that way. The extra bit I bring to the idea is to give the zero interest loans to those who contribute the least to the problem in the first place – namely the low consumers of energy. That seems to me to be fair and reasonable.

  10. Alice
    December 31st, 2009 at 18:33 | #10

    @paul walter
    “of a chance to crack it bigtime on the US Bible-Belt hellfire and brimstone Pentecostal circuit.”
    You say funny how that resonates in modern times…?? You mean the hellfire and brimstone preachers of anti tax anti intervention anti government anti environmentalist anti solutions doing the anti science pentecostless circuit??

    Yes – it sure does resonate.

  11. Donald Oats
    December 31st, 2009 at 23:28 | #11

    @Alice
    Aunt Ada Doom definitely rings a bell. Goodness, in my childhood I used to read these old books and comics that my Grandma had kept from her childhood (I think); they were there partly for nostalgia and partly for the various anklebiters and other youngsters to amuse themselves with. Don’t recall ever reading this particular comic tho’ yet the names and words Paul and your good self have mentioned sound familiar. Perhaps they just became part of the lexicon of youth back when my parents were young, and I’ve heard it from one of them. Dunno.

    Anyway, it is 3 minutes to go before the Murray Bridge Spectacular to hail the New Year!
    See you in the Two Tenners :-P

  12. Alice
    January 1st, 2010 at 15:33 | #12

    Well I took myself off to see Avatar in 3D. Seriously I liked it! It was great. Humans didnt come off looking too good though…

  13. paul walter
    January 2nd, 2010 at 16:23 | #13

    Don, the Brits have done a number of adaptations for TV of it; the most recent “ripping yarn” involved Joanna Lumley and was good for a big grin right the way through.
    If you get a copy, I’ll defy you to keep a straight face for more than a few moments at a time.

  14. Michael of Summer Hill
    January 2nd, 2010 at 17:05 | #14

    Happy New Year to all. And just in case you missed this, the French will be freaking out when they find out Toreador Resources, a Texas oil company, will be fracking under the Paris Basin looking for liquid gold.

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