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Weekend reflections

June 3rd, 2011

It’s time again for weekend reflections, which makes space for longer than usual comments on any topic. In keeping with my attempts to open up the comments to new contributors , I’d like to redirect discussion, and restatements of previous arguments, as opposed to substantive new contributions, to the sandpit(s). In particular, please post nothing related to nuclear energy. As always, civilised discussion and no coarse language please.

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  1. Ikonoclast
    June 4th, 2011 at 09:53 | #1

    The QCOSS report into the cost of living in Queensland is concerning. Over 5 years, the main rises are;

    Electricity, gas & water – Up 63%
    Public transport – Up 48%
    Insurance – Up 40%
    Rent – Up 35%
    Food – Up 23%
    Clothing & footwear – Up 4%
    Household appliances – Up 3%
    Motor vehicles – No change
    Audio, TV’s, computers – Down 52%

    The Consumer Price Index is up 19.1%, over 5 years which is about 3.5% per annum (I think). Hoewever, I am not sure how they weight the basket. The really concerning thing is that families fixed costs (as against discretionary costs) are rising much faster than headline inlfation. I suspect these fixed costs are also rising faster than the minimum wage.

    This is another example of an unsustainable trend (in Queensland and Australia this time). How long do they (the “ubiquitous they”*) think that ordinary families can survive under this scenario?

    Essentially the “ubiquitous they” means the top end of town; the rich capitalists and their captured party tame-cats, Liberal and Labor. Something has to change in Australia. This country is headed for real social and environmental trouble if we don’t get good policy soon’, very soon.

  2. John Quiggin
    June 4th, 2011 at 10:26 | #2

    I’ve commented quite a few times in the media on this divergent pattern and how it contributes to perceptions that inflation is much higher than the official rate. Broadly speaking, it’s usually the case that high-income earners spend more on imported goods and those are the things that have become cheaper as a result of the strength of the dollar. So, the CPI understates the impact on lower income earners.

    On the other hand, it’s problematic to treat expenditure items like clothing and footwear as “discretionary”. It’s true that they can be deferred for a while, unlike rent or electricity bills, but the shoes that fitted your ten-year-old two years ago won’t fit today’s twelve-year-old. And over five years, even motor vehicles and household appliances aren’t really discretionary for most people.

  3. gerard
    June 4th, 2011 at 10:52 | #3

    that’s crazy. rent, bills, rent, transport, rent and food make up basically all of a low income person’s budget.

    so, inflation must be higher than the official rate for a low income person.

    what’s the obvious solution to this higher inflation? raise interest rates.

    outcome of raised interest rates? boomer landlord who is using your rent to pay off their negative-gearing mortgage will raise your rent to cover the increased cost of their mortgage repayments.

  4. Chris Warren
    June 4th, 2011 at 11:37 | #4

    @gerard

    Raise interest rate to increase the price of credit ….

    This is textbook.

    We need a better theory and response because debt has climbed with little regard to interest rates.

    I purchased my housing in 1986-7 when interest rates in my mortgage document was

    17.25%

    Credit must be regulated, but not merely relying on interest rates.

  5. Ikonoclast
    June 4th, 2011 at 12:43 | #5

    @John Quiggin

    I partially agree about “discretionary” but only partially. Audios, TVs and (to some extent) computers are discretionary. School kids these days tend to need a computer, printer and internet connection if they are not to be disadvantaged at high school. A household with high school student(s) could regard one computer and ancillaries as a fixed need. A car is often discretionary/unattainable for the enemployed. Only some household appliances/whitegoods are a fixed necessity. One would say only a fridge and a stove are necessary. Dishwashers, electric beaters, hair curlers etc etc are all discretionary. Non-functional and fashionable clothes are discretionary.

    Implicit in JQ’s commment (and I don’t think he would cavil with this interpretion), is that this price structure seems, fortutiously* or not, to be tailor made to suit rich to upper middle class and to maximise the “take” from poor people.

    * Personally, I don’t think it’s a fluke at all that the price structure suits rich people. All the policies in place to assist the capitalist and rentier class, definitely skew prices in this manner. Although, the fact that the cheap stuff comes from China also has some impact.

    Policies in place to assist the rich and upper middle include negative gearing, salary sacrifice, corporate welfare, relatively unprogressive tax rate, FHOG, self-funded retiree tax concessions, fossil fuel subsidies and middle class welfare in general. First Home owners Grant, FHOG, shares the key characterictic of all these forms of assistance; namely that you have to already have significant monies to be given even more monies. Nobody is on the state gravy train more than the rich and the opportunist middle.

  6. Donald Oats
    June 4th, 2011 at 14:03 | #6

    Professor Ian Young, Vice Chancellor of Australian National University, says that climate scientists have been shaken by death threats received due to their scientific research, and that the ANU has tightened security and moved the scientists to a “more secure” location.

    No doubt when Abbott first hears of this, he will give a little merry speech about freedom to make death threats (freedom of speech, maybe?), and the right of climate scientists to feel anxiety over having hidden their deceiving ways from everyone for so long. Hah!

    This is the result of a relentless campaign by a small group of d**kheads to dictate what scientists are allowed, or not allowed, to conclude on topics that could threaten mankind’s dominion over nature. Well done, d**kheads, this is what it has come to – science by fiat. It stinks.

    The lead paragraphs:

    Several of Australia’s top climate change scientists at the Australian National University have been subjected to a campaign of death threats, forcing the university to tighten security.

    Several of the scientists in Canberra have been moved to a more secure location after receiving the threats over their research.

    Vice-chancellor Professor Ian Young says the scientists have received large numbers of emails, including death threats and abusive phone calls, threatening to attack the academics in the street if they continue their research.

    Watch the faux-backpeddling by famouse AGW rejectionists begin…

  7. June 4th, 2011 at 14:33 | #7

    Donald, I call that “small group of d**k-heads” the “political class” (includes both major parties and the media, unfortunately also their ABC these days).

    Julian Assange won the Martha Gellhorn Journalism Award a few days ago. I haven’t been able to find that mentioned anywhere in the Australian media.

    It’s not like Assange isn’t newsworthy or that it’s a secret, so this stiffling conformity is exactly how the political class works against properly informing the citizenry.

  8. Ikonoclast
    June 4th, 2011 at 16:14 | #8

    It’s perhaps no accident that late stage capitalism is being propped up by anti-science propaganda and anti-intellectual crypto-fascism. There is no other word for it but crypto-fascism. It’s not open fascism yet but if they get much bolder it will be.

  9. stockingrate
    June 4th, 2011 at 20:56 | #9

    @Ikonoclast
    Domestic population growth is a factor in rising rent, power, water, public transport, and food prices. It also helps suppress wages. Support for the policy of population growth is not limited to higher socio economic groups.

  10. Ikonoclast
    June 4th, 2011 at 21:44 | #10

    @stockingrate

    I am not at all sure why population growth should be a factor in rising rent, power, water, or public transport in Australia. Surely, in a sparsely populated country, economies of scale will accrue as population rises, infrastructure becomes more dense and so on. Therefore these items should fall in cost or at least not rise.

    I mean the above is true while resources are not a limiting factor. For example, land is not a limiting factor in Australia nor are land releases a limiting factor. Rising housing and rental costs are due to asset inflation due to overlending, excessive debt , FHOG and negative gearing subsidies which all make housing an artificially inflated market.

    In addition, something often forgotten is that corporate profits, salespeople’s and trades people’s incomes have in many cases risen faster than inflation; these items actually cause more inflation than basic worker wages. The mining boom too has played a role in inflating trade wages. For example, mining riggers can earn $220,000 a year in Australia. I wonder if Prof JQ earns that?

    One could make a case that trade incomes are excessive in this country and I do make that case. OK, it’s hard, dirty work sometimes but I’ve done it as a labourer and machinery driver (in my younger days) and quite freankly it doeesn’t take much brains or education in most cases.

  11. Scott
    June 5th, 2011 at 07:33 | #11

    I want to just intervene here at this point to object to the use of the phrase ‘fascism’ as a descriptive term for our massively corrupt and decayed semi-democratic system. Genuine fascists would be as appalled by our current arrangements as anyone else, since they held that the State should dominate the corporate sector; quite the reverse to our current arrangements. The phrase ‘corpocracy’ would be better.

    In fascist societies, the corporate elite kept their wealth but lost their political power; I doubt any German corporation in 1941 thought invading the USSR was a good idea.

    From the point of view of us peons at the bottom there’s no great difference between a fascist regime and a corpocracy, but if you wish to understand why they do what they do, this seems a pretty important distinction.

  12. Fran Barlow
    June 5th, 2011 at 08:18 | #12

    @Scott

    Strictly speaking, f@scism is a violent plebeian movement in which the interests of smallholders and the ruined middleclass join with big business to assert the primacy of local jurisdiction over cultural life and investment policy. During this phase, all actual or putatively deviant elements within the polity are atomised and forced into submission through violent intimidation by gangs of patriotic citizens while the typically weak state and the boss class stands to one side.

    When f@scist movements achieve state power, they rapidly morph into more simple forms of corporatist bonapartism, relying not on the violent extra-state actions of their plebeian gangs but on elements of the new state regime. Post H|tler’s Night of the Long Knives the German regime effected this transition. So one may say that After 1934, the regime was better described as corporate-bonapartist rather than f@scist. By that time, there were no publicly organised non-state actors for patriotic gangs to intimidate. The most useful of these to the regime were simply incorporated.

    I also deprecate the misuse of the term “f@scist” by liberals and others to describe reactionary or authoritarian movements lacking the perspective of violent and systematic physical intimidation of elements of the polity seen as deviant, with a view to rewriting the boundaries between state and civil society in favour of a truly parochial state.

  13. Salient Green
    June 5th, 2011 at 09:15 | #13

    Corporatocracy is the term Scott and you are correct.
    http://en.wikipedia.org/wiki/Corporatocracy

  14. Salient Green
    June 5th, 2011 at 09:19 | #14
  15. Chris Warren
    June 5th, 2011 at 10:04 | #15

    I suppose there may be different forms of fascism – Roman fascism, Nazi fascism, corporate fascism, traditional fascism (as in some states in India) plus religious fascism as missionaries and local police ran aboriginal reserves in Australia.

    Fascism does not need corporations as much as corporations need fascism.

  16. Ikonoclast
    June 5th, 2011 at 10:44 | #16

    I did use the term “crypto-fascist” not “fascist” if people want to check. I did say it wasn’t open fascism yet.

  17. Chris Warren
    June 5th, 2011 at 11:16 | #17

    “Crypto-fascist” is pretty good. But it always raises the question – what does this really mean?

  18. Ikonoclast
    June 5th, 2011 at 11:17 | #18

    BTW, the simplest and best definition of fascism is the Marxist one.

    “Fascism in power is the open, terroristic dictatorship of the most reactionary, the most chauvinistic, the most imperialistic elements of finance capitalism.”

  19. Ikonoclast
    June 5th, 2011 at 11:31 | #19

    @Chris Warren

    The coining of “crypto-fascist”is sometimes attributed to Gore Vidal although it had appeared earlier (according to Wikipedia) in the 1990′s writings of a German author.

    It implies a secret desire for, or even secret support of fascist tactics especially violence, bullying and intimidation of opponents (especially intellectuals and persons with a social conscience) along with disenfranchisement of minorities and eventual neutralisaion of all opposing views. Eventually, if they feel empowered and emboldened enough, crypto-fascists will declare themselves openly and support overt fascist actions.

  20. Ikonoclast
    June 5th, 2011 at 11:43 | #20

    JQ, what is your view on this part of my comment 10 from (way) above?

    “I am not at all sure why population growth should be a factor in rising rent, power, water, or public transport in Australia. Surely, in a sparsely populated country, economies of scale will accrue as population rises, infrastructure becomes more dense and so on. Therefore these items should fall in cost or at least not rise.

    I mean the above is true while resources are not a limiting factor. For example, land is not a limiting factor in Australia nor are land releases a limiting factor.”

  21. Ken Fabos
    June 5th, 2011 at 12:05 | #21

    Having read Peter Phelp’s extraordinary attack on climate scientists at The Drum I have to wonder if, because he is NSW Government Whip in the Legislative Council, this is the party line all Coalition members are expected to espouse or at least refrain from actively contradicting? Would Barry O’Farrell have known and approved? Known but not approved? Neither known nor approved? I don’t see any way this makes O’Farrell look good.

    Perhaps we should be thankful that Phelps so clearly reveals his colours; he’s either gullible enough to consider Monckton an accurate source or so attached to his convictions he’ll deny reality to maintain them. Or finds truth and reality an encumbrance best ditched in pursuit of his political goals. All in all it’s disquieting.

    I

  22. Dave
    June 5th, 2011 at 12:29 | #22

    My problem with the use of fascism is that it often ignores two crucial elements of fascism.
    One, the level of ideology, fascism makes a reactionary critique of capitalism: that the unified, homogeneous and productive community is being disrupted by forces from without i.e. finance capitalism or Jews. And the fascism becomes an option for capitalism as a mode of governance only when faced by a genuine and emancipatory critique of capitalism. Both Zizek and Postone have written about this.
    I think the difference would be that in many places of the world today there exist small but effective fascist movements who contribute to maintaining an racialised and tense public atmosphere that facilitates authoritarian governance in post-liberal states

  23. Sam
    June 5th, 2011 at 13:05 | #23

    @Ikonoclast
    Population level alone should be a factor in rising water prices around the country. Most metropolitan regions are now so lacking in natural water supplies that they have to impose year-round draconian water restrictions. Water stress is a factor in decisions by government to release land too slowly to keep prices from rising.

    As well as overall population *level* though, another concern is rapid *increase*. This has required a large extra investment in infrastructure (both private and public), which has to be borne by the the public in increased utility and house prices. I’m not sure who came up with the following vignette, but it’s a nice way of looking at it.

    Imagine a stable population, and a 50 year average depreciation of infrastructure capital (roads, electricity, houses etc.). This means a 2% capital infrastructure bill borne by the population. Now imagine on top of that, a 2% population increase. We now have to increase the amount of total infrastructure by 2% a year, meaning a 4% capital bill. So a 2% increase in population translates to a doubling in the capital bill.

  24. John Quiggin
    June 5th, 2011 at 13:12 | #24

    @Ikonoclast
    Sam’s points are valid, but the recent increases in prices are primarily the result of the set of regulatory changes that used to be referred to as “deregulation”.

  25. Ikonoclast
    June 5th, 2011 at 14:46 | #25

    Crikey, nobody reads what I actually wrote.

    1. I did not use the term fascism, I used the term crypto-fascism.

    2. I said higher population density must give economies of scale IF resource limits are not a problem. I was making a theoretical point which is also practical for the time period in question as Australia had hit not resource limits when this fixed cost inflation took off. I do not believe Sam’s points are valid. Density increase should give economies of scale if all other factors are equal. I am saying the “growth on its own causes inflation” argument is fallacious. If it were true, we could kill or much weaken inflation by stopping growth (which later course of action I actually agree with as I am a limits to growth thinker).

    Am I technically wrong? Does growth on its own cause money inflation? Surely not.

    Taking up JQ’s point, “the recent increases in prices are primarily the result of the set of regulatory changes that used to be referred to as “deregulation” “. This represents a clear policy and outcome of wealth transfer from worker/consumers to owners of capital in said industries. It’s time to reverse these anti-worker policies.

  26. Ikonoclast
    June 5th, 2011 at 15:07 | #26

    I’ll just add a point or two.

    Economists generally agree that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply.” – Wikipedia.

    I believe most economists of most schools would also say that productive growth and technological progress in themselves lower prices and also that increased density and economies of scale lower prices. The lowered costs of TVs and electronic goods are a case in point for the former and lowered costs of water delivery to people in the natural monopoly era before privatisation are an example of the later.

    No, I cannot intellectually lie down and accept a common right-wing myth like “economic growth causes inflation” in an era before limits to growth are functionally reached. This right-wing myth is promoted along with others to obscure the real reasons for the engineered wealth transfer away from workers to the owners of capital.

  27. Chris Warren
    June 5th, 2011 at 15:59 | #27

    No-one had said “economic growth causes inflation”.

    Sam has pulled a common trick. If the necessary expenditures increase in line with population, then there is no obvious reason to expect price increases.

    Just be cause a gross “bill” goes up, does not mean that prices rise. There may be a slight effect due to overcrowding.

    Assuming no variation in average productivity or average depreciation or new technology.

  28. stockingrate
    June 5th, 2011 at 16:08 | #28

    Population growth and other poor policy, such as deregulation, exacerbate each other, leading to bad outcomes – eg housing bubble, eg Brisbane road tunnels.

    Moreover these poor policies (population growth and deregulation) have a degree of common motivation, for want of a better term: a market-fundamentalist boosterism (and its cousin, infrastructure-fundamentalist boosterism).

    My impression is that references to economies of scale often feature in this boosterism with diseconomies of scale not given equal prominence. An example of diseconomy to population scale: land surface for roads in inner Brisbane is a limited resource, consequently tunnels have been dug at great capital cost and high operating cost – and higher prices.

  29. Ikonoclast
    June 5th, 2011 at 16:53 | #29

    What you say of the tunnels is true. When oil gets scarce and cars get scarce too, then the tunnels will definitely look like white elephants. However, it’s my hope they will then be converted to mass transit tunnels (rail or trams) so there may be some good in them.

  30. Sam
    June 5th, 2011 at 19:00 | #30

    @Ikonoclast
    I think it’s quite unfair of you to claim I don’t read what you write. Whatever you think of the reasonableness of my counter-arguments, they are genuine responses to your claims.

    All major cities in this country have experienced the constraint of water. This has resulted in water price rises, water rationing, and a reluctance by governments to release land for housing. Do you accept that Australian cities have been water stressed?

    @Chris Warren
    I have not pulled any trick. This is a commonly accepted explanation for high prices in a fast growing population without natural resource constraints. Capital expenditure makes up a significant part of overall costs. It does rise linearly with population, but that linear function has a y-intercept well above the x axis and is borne by everyone.

    Consider the electricity network. Everyone pays for its running through their quarterly bill. Now first assume a stable population, and assume that every year about one in 50 electricity lines are knocked down (by storms, depreciation, whatever) and need to be replaced. The affected customers aren’t asked to foot the bill for replacement, rather the utility pays for this out of general expenditure and charges everyone for it on their bill. In effect, 50 streets pay for one random street’s line replacement. Also assume that every year 1 in 50 powerstations need to be replaced, also requiring more capital expenditure. If these expenditures make up 20% of the utilities costs, it makes up 20% of a customer’s bill.

    Now imagine the population starts growing at 2%. New suburbs have to be built, or old ones have to have their lines upgraded to carry more current. For every 50 existing powerstations, one more needs to be built. When a new dwelling is first connected, the customer pays only a nominal fee (around $100). This is much less than the average amount of installed capital for that residence’s supply. Of course someone has to pay for the new lines and generators but who? Well, everyone of course. In effect, those 50 streets still have to pay for the replacement of one random street’s capital stock, but also the creation of one more street’s capital. Capital expenditure has now gone from 20/100 of the bill to 40/120, and the bill itself has increased by 20%.

  31. Sam
    June 5th, 2011 at 19:01 | #31

    @Ikonoclast
    I think it’s quite unfair of you to claim I don’t read what you write. Whatever you think of the reasonableness of my counter-arguments, they are genuine responses to your claims.
    All major cities in this country have experienced the constraint of water. This has resulted in water price rises, water rationing, and a reluctance by governments to release land for housing. Do you accept that Australian cities have been water stressed?

  32. Sam
    June 5th, 2011 at 19:01 | #32

    @Chris Warren
    I have not pulled any trick. This is a commonly accepted explanation for high prices in a fast growing population without natural resource constraints. Capital expenditure makes up a significant part of overall costs. It does rise linearly with population, but that linear function has a y-intercept well above the x axis and is borne by everyone.
    Consider the electricity network. Everyone pays for its running through their quarterly bill. Now first assume a stable population, and assume that every year about one in 50 electricity lines are knocked down (by storms, depreciation, whatever) and need to be replaced. The affected customers aren’t asked to foot the bill for replacement, rather the utility pays for this out of general expenditure and charges everyone for it on their bill. In effect, 50 streets pay for one random street’s line replacement. Also assume that every year 1 in 50 powerstations need to be replaced, also requiring more capital expenditure. If these expenditures make up 20% of the utilities costs, it makes up 20% of a customer’s bill.
    Now imagine the population starts growing at 2%. New suburbs have to be built, or old ones have to have their lines upgraded to carry more current. For every 50 existing powerstations, one more needs to be built. When a new dwelling is first connected, the customer pays only a nominal fee (around $100). This is much less than the average amount of installed capital for that residence’s supply. Of course someone has to pay for the new lines and generators but who? Well, everyone of course. In effect, those 50 streets still have to pay for the replacement of one random street’s capital stock, but also the creation of one more street’s capital. Capital expenditure has now gone from 20/100 of the bill to 40/120, and the bill itself has increased by 20%.

  33. Sam
    June 5th, 2011 at 19:09 | #33

    Actually, I should have made more clear. It’s not so important that capital expenditure has a positive intercept, more significant than this is that it has a very high gradient. Society has to collectively pay for all the extra capital any new person requires.

  34. Alan
    June 5th, 2011 at 21:28 | #34

    Prof. Quiggin (and others of course!), I would be interested to read your thoughts on this:

    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1770882

    I see one objection, that it depends on objective and non-manipulable data. Those who would have to pay would simply declare that the measurements are wrong. That’s what they are doing now, after all.

    In the unlikely event that this objection could be overcome, what are ramifications of the proposal be?

  35. Alan
    June 5th, 2011 at 21:29 | #35

    Oops

    … what are the ramifications of the proposal?

  36. Freelander
    June 5th, 2011 at 21:57 | #36

    @Alan

    If a market is comprised of a bunch of ignorant gamblers you cannot expect their pattern of betting to reveal anything of value about future outcomes in the real world. For such a market to work, first, some participants must know something, and second, those knowledgeable participants must have sufficient access to funds so their actions (bets) are able to move the market in a way that their knowledge is transmitted. Third, the idiots must be in such small numbers or illiquid mass that their stupidity can’t swamp the actions of the knowledgeable. As Keynes suggested a market can stay wrong long enough to exhaust your bank balance.

    The linked to paper… interesting in theory but as for policy relevance, I suggest: keep smoking the happy baccky.

  37. Chris Warren
    June 5th, 2011 at 22:17 | #37

    Sam

    None of this substantiates that population increase causes price increases.

    Capital expenditure makes up a significant part of overall costs. It does rise linearly with population, but that linear function has a y-intercept well above the x axis and is borne by everyone.

    This does not contradict either prices remaining constant or prices falling to a new equilibrium.

    But if introduce strange, novel circumstances, such as:

    … affected customers aren’t asked to foot the bill for replacement, rather the utility pays for this out of general expenditure and charges everyone for it on their bill.

    Then obviously, with this distortion, others will suffer a price increase – but this manipulation could have occurred with a stable population if some chosen customers aren’t asked to foot their bill.

    Similarly if further distortions intrude such as …

    When a new dwelling is first connected, the customer pays only a nominal fee (around $100).

    Then again – a subsidy exists and this obviously leads to artificial price increases for others.

    When new lines and generators are paid for properly they are paid for by the new population. There is therefore every reason to assume the required capital expenditure remains at 20% unless other factors (other than population increase) intrude.

    The only way population increase can increase prices, is if new people have lower productivity than existing population. But this also means that prices may decrease if the new people have greater productivity than the existing population.

    The high prices in an expanding population are an example of capitalist opportunism – not a natural phenomena of population increase. The other reason of course is overcrowding and increased scarcity of the previous standard of consumption.

  38. Ikonoclast
    June 6th, 2011 at 00:38 | #38

    @Sam

    Yes, I accept that Australian cities have been water stressed both by drought and flooding rains.

  39. Sam
    June 6th, 2011 at 00:54 | #39

    So you’re saying we should ask every new homeowner or renter to pay society for all of their infrastructure capital up front. That would be tens of thousands of dollars, quite out of reach for most new immigrants and twenty-somethings. Your solution is quite impractical.

    There are other reasons population growth would raise prices too. Even if each person paid for all their own public infrastructure, it would still take scarce workers to build the extra houses, electricity lines, water pipes etc. These workers would otherwise have been doing something else productive, producing widgets for example. The fact that they are not means less widgets are produced, and the economy has to somehow reflect this. In a market economy this shows up in higher prices for those widgets. This isn’t the only solution of course. Other types of economies would just have shortages. However this is achieved though, somehow or other the newcomers’ co-opting of workers must cause everyone else to consume less widgets.

  40. Sam
    June 6th, 2011 at 01:04 | #40

    @Ikonoclast
    So on what basis do you deny the validity of my points?

  41. Freelander
    June 6th, 2011 at 01:20 | #41

    @Sam

    If a homeowner can afford to buy a house, why can’t they afford to pay for the associated infrastructure? Someone pays for the infrastructure. The question is who ought to pay for it, not whether they can ‘afford’ to, whatever that might mean. And if borrowing is required, is there any good reason why anyone other than who ought to pay for it should do that borrowing? Borrowing to purchase an asset, especially a house, isn’t exactly a new thing.

    Other than that, I agree with your concern that population growth may raise prices. Those who favour population growth are those who would be net beneficiaries. I don’t know that it is clear that the current crop of Australians would be net beneficiaries from a large population increase, but some already wealthy Australians would be large net beneficiaries. As usual, their net gains would be significantly larger than economy wide net gains, if any.

  42. Ikonoclast
    June 6th, 2011 at 06:57 | #42

    @Sam

    I think we ended up arguing on different premises and thus arguing at crossed purposes. My premise was that economic growth alone and of itself does not cause inflation. I ruled out imminent resource limits for the sake of that theoretical argument. Your premise was that some resource limits (water for example) had come into play in the real period under discussion. Thus we were at cross purposes, me being one step back at the theroretical level, you being one step forward at the practical level.

  43. Sam
    June 6th, 2011 at 09:22 | #43

    @Ikonoclast
    Well part of my argument was the practical objection that Australia was not in your theoretical category. The other point I made though, was that growth should cause price increases even if your no natural-resource limits scenario was applicable. Why do you think that my argument is wrong?

  44. Sam
    June 6th, 2011 at 09:30 | #44

    @Freelander
    You make a fair point. I suppose we could force every new citizen to pay for all their infrastructure capital up front or take out a loan to do so. We could charge every new immigrant tens of thousands of dollars to set up here, and also charge every new parent the same. I agree this would solve the cross-subsidisation problem, but I think it would also create a new equity problem. Anyway, I guess the point I was making is that because at the moment we don’t do this, growth causes price increases for others.

  45. Chris Warren
    June 6th, 2011 at 09:50 | #45

    Sam

    Yes, everyone needs to pay for such services in due course. This does not have to occur immediately but only on balance, over a working life, if we assume the productivity of society is not harmed by population increase.

    There is no reason why population increase, by itself, increases prices.

  46. Sam
    June 6th, 2011 at 09:54 | #46

    @Chris Warren
    Now wait a second. I agree that we could force everyone to take out a loan to cover their infrastructure costs, but you didn’t respond to my point about labour costs. Taking scarce labour away from other productive purposes does increase prices.

  47. Chris Warren
    June 6th, 2011 at 10:32 | #47

    Sam

    If you increase the population there is no need to make labour scarcer.

    There is no necessary increase in current loans per capita.

    Labour costs may increase but ONLY IF the population increase harms society. Labour costs may fall if population increase benefits society. These are second effects.

    You can take labour away from productive purposes even if there is no change in the population. This will increase prices in one market but decrease prices in another.

    Again – there is no reason for a population increase to necessarily impact on prices.

    Prices rise if population increase harms society (because new people have lower productivity over their available working life).

    Prices fall if population increase benefits society (because new people have greater productivity over their available working life).

  48. Sam
    June 6th, 2011 at 11:04 | #48

    @Chris Warren
    We should be in the sandpit. My response is there.

  49. Steve
    June 7th, 2011 at 15:54 | #49

    John, what do you (and other readers) make of this whole Bitcoin concept. A colleague told me about it this morning, and I’ve been reading a bit, it seems bizarre – a peer-to-peer “crypto-currency” that has increased in value 200-fold in the last year, and has risen in value from $9 to $18 in the past few days.

    http://www.smartmoney.com/invest/stocks/the-currency-thats-up-200000-1307029053200/?link=sm_newsticker

    http://www.bitcoin.org/

    http://en.wikipedia.org/wiki/Bitcoin

  50. Ikonoclast
    June 8th, 2011 at 08:05 | #50

    I smell bitfraud. It looks like a form of Ponzi scheme where earlybirds make money and latecomers lose money. The Wikepedia entry reads like an advert written by interested parties.

    Also, what is to stop the makers who control the whole thing from having created a “backdoor” so they can make bitcoins at will and then secrete them on to the system and sell them?

  51. Christopher Dobbie
    June 8th, 2011 at 09:21 | #51

    Curious to know how much Queensland Government debt is?

  52. Freelander
    June 8th, 2011 at 13:53 | #52

    Something interesting about Ross McKitrick, well-known climate change denier, that may be widely known but I didn’t know before, apparently he is an evangelical christian and that plays some role in his denialism. He is a member of the “Cornwall Alliance for the stewardship of creation” and a signatory of their “Evangelical Declaration on Global Warming”. Well that answers the frequently asked question “God knows how he came up with that?”.

    http://www.cornwallalliance.org/articles/read/an-evangelical-declaration-on-global-warming/

    What can one say?

    Hallelujah!!!!

  53. Ikonoclast
    June 8th, 2011 at 16:04 | #53

    @Freelander

    They say what they “believe” and what they blanket “deny” and then call their statements facts in the next section. It would be laughable if it wasn’t so tragically stupid. It’s dogma at its worst. Intelligent religious people (there are such) would find this fundamentalist nonsense lamentable.

    Hmm now, let me apply their reasoning on them. Hang on, renewables cant be as useless as they say because God in his infinite power and wisdom would have made renewables capable of sustaining us when non-renewables ran out.

  54. Freelander
    June 9th, 2011 at 07:13 | #54

    The religious based stewardship of creation idea is that the environment can’t get on without us. But how did it get on before humans were around?

    Oh, wait. Evolution is cr*p. Humans were always around to steward nature. God created everything 6000 years ago.

    Explains everything. So McKitrick’s objections are basically theological rather than scientific.

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