Archive for April, 2012

Info item on modular nuclear reactors

April 30th, 2012 29 comments

Since lots of readers are interested, or, perhaps, a few are very interested, I thought I would mention that the US Department of Energy is beginning an effort to promote the development of modular nuclear reactors in the US. The plan is to choose two designs, with the object of having them in production by 2022. It’s pretty much a foregone conclusion that one of them will be the Westinghouse SMR, a cut down version of the Westinghouse AP1000 which is the only serious contender remaining as far as conventional reactors are concerned. That leaves one spot for another contender, call it SMRX.

I therefore need to revisit my previous conclusion on SMRs, namely, that none of them except the Westinghouse have any prospect of being in operation before 2020. First, I think it’s pretty clear that the designs that don’t make the DOE cut are finished – in a generally dire funding environment, who is going to back a horse that has already placed third or worse. Second, the DOE 2022 date is an aspirational target that is virtually certain to be missed, at least by SMRX. But, if things go well, 2025 is a possibility. So, by then we might have one conventional design and two SMRs in production on a serious scale.

Categories: Environment Tags:

Classical economics and recession in many countries (wonkish)

April 27th, 2012 95 comments

Sharp tests of economic theories are rare and hard to find, particularly in macroeconomics. Any examination of particular episodes in economic history necessarily involves counterfactuals, and these provide room for endless dispute. As an obvious example, assessing the impact of the Obama Administration’s 2009 stimulus requires an estimate of how things would have gone without the stimulus, and that is obviously hard to do.

Similarly, arguments about unemployment in the US get bogged down in disputes over whether it is structural or demand-driven and the extent to which policies such as the extension of unemployment benefits to 99 weeks have contributed. 

There is, though, one way in which the current Great Recession/Lesser Depression provides a sharp test of a critical proposition in economics. All forms of classical economics involve, in one form or another, the claim that the causes of unemployment are to be found in labour markets, and not in  macroeconomic variables such as the level of aggregate demand. That’s equally true of the Say’s Law version of classical economics criticized by Keynes, the New Classical macroeconomics of Robert Lucas and the attempts by Real Business Cycle theorists like Kydland and Prescott to explain cyclical fluctuations in terms of labor market shocks.

The crucial problem for all these theories is that labor markets and the associated institutions operate mainly at the national level. Even within the EU, different countries have very different labor markets. So, it is essentially impossible for labor markets in many different countries to move together, except as the result of macroeconomic influences operating at an international level[1]. That means that the occurrence of a sharp and sustained increase in unemployment, taking place in many countries at once, is inconsistent with classical economics.

This point seems trivially obvious, but as far as I can tell hasn’t been made, or at least not clearly. Once it’s conceded, it seems impossible to avoid a view of the world that is basically Keynesian in its analysis of the macroeconomy.  It is possible to hold such a view and reject Keynesian policies on pragmatic grounds, as in Friedman’s critique of ‘fine-tuning’. But the longer and deeper the recession the harder it is to sustain this view.

This seems like a good time to plug the fact that a paperback edition of Zombie Economics will be out soon (May 6) with a brand-new chapter on Austerity, bits of which have been seen here. On 9 May, I’ll be launching an Australian edition, where the added material is a chapter on Economic Rationalism. And a week or two ago, I received some copies of the Italian edition










fn1. Of course, you can cheat and label these macro influences “technology shocks”, then assume them to be internationally correlated. But in the ordinary meaning of technology, there is no plausible way in which economies as disparate as, say, the US and Greece can experience a common technology shock.

Posted via email from John’s posterous

Categories: Economics - General Tags:

The Steep Path to a Nuclear Future

April 26th, 2012 114 comments

That’s the title of my latest piece for The National Interest. The first three paras are below.

In the wake of the meltdown last year at the Fukushima nuclear plant, the viability of nuclear power has been called into question yet again. The Japanese government has closed down all but one of the country’s nuclear plants (though there are plans to start reopening them), and Germany has abandoned a previous decision to keep existing nuclear plants operating. Concern about nuclear power has also increased in the United States, with most opinion polls now showing a majority opposed to further expansion of the industry.

On the other hand, some commentators have been struck by the fact that the disaster did not cause any direct loss of life and that estimates of the adverse health effects of the radioactive releases are very modest. A striking example is English writer George Monbiot. An opponent of nuclear power before Fukushima, Monbiot has switched to the view that nuclear power should be supported as a response to climate change.

Unfortunately, this debate has taken place without much attention to the economics of electricity production. The critical question is whether nuclear power can be a cost-effective alternative as compared to renewables, investments in energy efficiency or even such long shots as carbon capture and storage. A look at the economic cost of the Fukushima meltdown suggests that the path to a nuclear future is steeply uphill.

I’m too busy to referee another fight over nuclear power today, so I’m delaying opening comments here until tomorrow. The TNI post is open to comments there, so that will give everyone a chance to get started straight away.

Categories: Environment Tags:

We shall remember them ? (repost*)

April 25th, 2012 87 comments

On Anzac Day, there are two important things to remember

* Thousands of brave men died at Gallipoli and in the Great War and we should always honour their memory

* The Gallipoli campaign was a bloody and pointless diversionary attack in a bloody and pointless war. Millions of soldiers were killed, and tens of millions of civilians starved and mistreated in a fight over trivial causes that were utterly irrelevant by the time the war ended. The War that was supposed to “end war” only paved the way for the even greater horrors of Nazism and Stalinism. Nothing good came of it.

From what I’ve seen of the last surviving Diggers they were fully aware of both of these things. At one time, it seemed possible that, as the generation who fought in the war passed on, we would forget the first of them. Now the danger is that we will forget the second. We should judge as harshly as possible the political and religious leaders who drove millions, mostly young men, to their deaths, and honour the handful who stood out against the War, including Bertrand Russell and Pope Benedict XV.

* I’ve posted versions of this on previous Anzac Days. There is really nothing new to say, except to hope that we will soon be able to celebrate an Anzac Day without the thought that Australians are still fighting and dying in pointless wars.

Categories: World Events Tags:

Guest tweeting at #Lateline

April 23rd, 2012 23 comments

Showing my dedication to moving with the times, I’ll be staying up late to guest-tweet on #lateline tonight. Covering French elections, tobacco packaging and, inevitably, Peter Slipper.

Update Turned out to be a complete bust from my POV. The whole show (except for an out-of-place Foreign Correspondent style piece on asbestos in Swaziland) was spent on gotcha questions about Slipper, with Roxon playing a straight bat. Nothing on any of the topics where I could have made a useful comment. Apparently, this was unusually bad – #lateline is a trending topic on Twitter tonight, and not in a good way.

Categories: Media, Metablogging Tags:

“Future generations” are already here

April 22nd, 2012 36 comments

The Journal of Public Economic Theory has a special issue on Managing Climate Change, to which they are providing free access (hopefully, this link will work). I’m mentioning it partly because I have an article which I think is really important, even though the point it makes is a simple one, and partly because any initiative to make important information more freely available (even a limite special case like this one) deserves some applause.

My paper is a bit wonkish, but the basic point is simple, and, I think provides a knockdown argument against any form of utilitarianism that discounts future utility (including those misleadingly referred to as future generations.

Read more…

Categories: Economics - General Tags:

The case for narrow banking

April 19th, 2012 24 comments

Here’s my first post under the new approach to blogging I’m trying. It’s the intro to an article I just published in The National Interest. They ran it under the headline “The Next Global Collapse” which is a bit more dramatic than the article itself. The deal with TNI is that I can published the first three paras here, to tease your interest. Thinking about how best to work this, it struck me that it would be really great if readers here would follow the link, comment on the article at TNI, then repost their comments here. Perhaps this might just be duplication, but it might also lead to quite different conversations. So, please give it a try

Four years after the near-meltdown of the global financial system, the world is no closer to an adequate system of financial regulation than it was in 2008. Attempts to regulate the market for derivatives have been stymied by a mixture of determined resistance from the industry and the technical difficulties of defining and regulating such complex and opaque financial instruments. The “shadow-banking” system, associated with investment banks, hedge funds and other speculative financial institutions, is as large and dangerous as ever.

Right now, the only thing preventing a new bubble and bust is the memory of the last one. And with the return of massive profits and bonuses to Wall Street, that memory is fading fast. Already, observers are noticing a renewed appetite for risk, fueled in part by the low returns available on relatively safe investments such as U.S. Treasuries.

As in most unwinnable wars, the time has come when the best option is, in the immortal words of Republican senator George Aiken (speaking of Vietnam) to declare victory and get out. But what does getting out mean, as far as the shadow-banking system is concerned?

Categories: Economic policy Tags:

The new era

April 17th, 2012 82 comments

With a lot of changes going on lately, I’ve taken a bit of time to think about the future of this blog. It will be ten years old in June, which makes it one of the longest running Australian blogs (a few, like Catallaxy, are a little older, IIRC, but their archives seem to have been lost). Those ten years have seen the rise and decline of blogging, particularly individual, independent blogs like this one. The XKCD cartoon linked in this Crooked Timber post tells the story.

The writing was on the wall as early as 2004, when I saw lots of my favorite blogs being assimilated by the Borg that became Crooked Timber. Seeing that resistance was futile, I joined the rush, but have kept this blog going with lots of crossposting, but more specifically Australian content here. Still, group blogs were clearly the wave of (what was then) the future. The most successful in Ozplogistan (the briefly popular name for Australian political blogs) have been Catallaxy, Club Troppo and Larvatus Prodeo. But there haven’t been any new entrants successful enough to attract sustained attention, and now LP is gone.

There are two obvious reasons for the decline of blogging. First, after disdaining everything to do with blogging for years, the mainstream media embraced the idea with enthusiasm five years ago or so, putting much of their content in blog form. The big media blogs now attract much larger audience than independent efforts like this one. Second, there has been the rise of Facebook and Twitter, both of which supply a lot of what attracted people to blogging in the first place. Twitter, in particular, can be quite close to the original form of blogging, based on short (very short in the case of Twitter) links to interesting material found on the web.

So, with the closure of LP and getting booted from the Fin, it seemed like a good time to reassess what I’m doing here. I’ve decided to put most of my effort into work that I can post in larger sites (I’ve had invitations from several, and at this stage I think I will try to play the field, rather than picking just one), but I will make it a condition that I can crosspost here. That will enable the discussion that goes on here to continue, and also make this blog a convenient point to collect all my material.

I’ll close by reproducing this post from 10 years ago

My blog is just about a week old, and I haven’t found the Internet this exciting since I discovered Usenet in the early 90s. Even setting up my website five years ago was not as good. Despite wildly varying ideological views, I’ve had a friendly welcome from bloggers across the board, and I’m already getting links and referrals (My return links will be up soon, I promise). It really seems as if blogs might deliver on the original promise of the Web – certainly the technology seems ideally suited for individuals and small groups, with no obvious way of scaling it up to corporate level. No doubt I’ll get jaded and disillusioned one day, but I hope it will be a long way in the future.

Categories: Metablogging Tags:

The coming boom in inherited wealth

April 16th, 2012 30 comments

As everyone who has been paying attention knows, the news on inequality is nearly all bad. Not only has inequality increased dramatically in the US, but intergenerational economic mobility is declining[1]. And, where the US leads, the rest of the world looks likely to follow. The top 1 per cent lost more than most during the crisis of 2008-09 but, as Stephen Rattner reports here (drawing on work by Piketty and Saez), that was just a blip. A stunning 93 percent of the additional income created in the US in 2010, compared to 2009, went to the top 1 per cent, and there’s no reason to think things were much better in 2011 – average real earnings have fallen yet again, and employment growth, though positive, was still modest. Wealth inequality is also high, though it has not increased as much as income inequality.

The one bright spot mentioned by Rattner is that ” those at the top were more likely to earn than inherit their riches”. Since I’m already noticing that point popping up in the places you might expect to see it (can’t find a link right now), let me point out that Rattner’s explanation, that “the rapid growth of new American industries — from technology to financial services — has increased the need for highly educated and skilled workers” is wrong, and that there is every reason to expect a boom in inherited wealth.

Read more…

Categories: Economics - General Tags:

A real end to an era

April 13th, 2012 260 comments

Bob Brown has just announced his retirement from politics. It comes as a shock, but such announcements usually do. I can’t do justice to Bob’s thirty or more years of activism in a blog post, but there have been few people in political life who’ve achieved as much while not compromising their integrity to secure political support. The Green Party which Bob effectively founded and has largely embodied for many years, has made a big positive contribution to Australian political life

Given the rubbish in the comments threads recently, I’m going to be ruthless in moderating this one. There will be plenty of time for critical thoughts on Bob Brown’s political career and on the Green Party. If you can’t wait for a more appropriate occasion, take such comments to the sandpit. Anything in this post that crosses my subjective line will be deleted with prejudice.

Categories: Oz Politics Tags:

Weekend reflections

April 13th, 2012 105 comments

It’s time for another weekend reflections, which makes space for longer than usual comments on any topic. Side discussions to sandpits, please.

Categories: Regular Features Tags:


April 13th, 2012 212 comments

A new sandpit for long side discussions, idees fixes and so on.

Categories: Regular Features Tags:

Another era ends

April 10th, 2012 21 comments

I’m in transit, so can’t respond at length, but I just found out Larvatus Prodeo is closing down. LP made a great contribution, and will be missed.

Categories: Metablogging Tags:

Fortunate in my enemies

April 7th, 2012 218 comments

That’s how Robert Vienneau described me after some of my stoushes last year.

It seems as if my luck is holding in that respect at any rate. While I’ve had plenty of supportive responses after being booted from the Fin, I’m sure not everyone is sorry to see me go. Most of those in the latter class, however, haven’t seen any need to gloat.

I would have been disappointed, however, if Andrew Bolt had not lived down to his usual form on this occasion. Sure enough, as his fans have advised me both by email and in comments here, he’s written a gloating column, expressing the hope that Laura Tingle (a far better journalist than Bolt could ever be, even if he was trying) will be next to go.

Bolt can’t even manage an original line of attack, dragging out the tired misrepresentation of a 2007 blog post that the Telegraph ran last week.

The great thing about having Bolt as an enemy is that you get his fans thrown in as part of the package. There’s something comforting in knowing that, if someone dislikes you, there’s a high probability that they are the kind of person who comments on Bolt’s blog.

Of course, it isn’t much of a distinction to be one of Bolt’s enemies. With the exception of the late Paddy McGuinness (who at least had some style to combine with the vitriol) I can’t think of anyone who is less discriminating in his hatreds.

Categories: Boneheaded stupidity Tags:

Megalogenis messes up the generation game

April 5th, 2012 23 comments

George Megalogenis is a smart and insightful writer, so I opened his new book The Australian Moment with anticipation. Alas, the very first sentence is the most tiresome of generation game cliches

Every rich nation reveals its character in its most selfish generation – the baby boomers

Showing that invoking the word “generation” instantly reduces your IQ by about 50 points, Megalogenis goes on to support his claim by a discussion of the results of a poll of voters taken in 1972, the year Gough Whitlam was elected, and the year before his government lowered the voting age from 21 to 18.

The baby boom began in 1946, when returning members of the armed services started having big families. The end is usually placed somewhere between 1960 and 1963.

Whichever end date you choose, even the many boomers who were still in primary school ought to have been capable of doing the subtraction that would inform George that anyone born after 1951 (that is, the vast majority of boomers) was not a voter in 1972.

Categories: Boneheaded stupidity Tags:

End of an era (for me, anyway)

April 3rd, 2012 72 comments

A little while ago, I got a message from the Fin to tell me they wouldn’t be running any more columns from me, as they are bringing in some new commentators. Given my run-in with Michael Stutchbury (then at the Oz, now Editor-in-Chief of the Fin) last year, and other changes at the Fin since he came on board, I wasn’t surprised. Still, it’s the end of a long-running association, which started, ironically (at least in the Alanis Morrisette sense of the term) when Michael was opinion editor there. My first column, advocating the exclusion of food from the GST, ran in 1992. I wrote occasional pieces after that, and I was a regular columnist for 15 years, which is a very long stint by Australian standards, at least for someone who isn’t a full-time journalist.

I’ve enjoyed it a lot, and I think I’ve made a useful contribution, but now it’s time to move on. I’ll certainly continue to take part in public debate, through this blog and other media, but this gives me a chance to stop and think more clearly about where I want to go with this part of my life.

Categories: Life in General, Media Tags:

Swan and plunging revenue

April 1st, 2012 24 comments

Treasurer Wayne Swan has switched from a “hard Keynesian” to a structural justification of expenditure cuts. Rather than advocating a rapid return to surplus as consistent with macroeconomic balance and full employment, Swan now says cuts are needed because of structural factors like declining capital gains tax revenue, notably omitted the Howard income tax cuts adopted and implemented almost completely by Labor. claiming, as quoted by the Age and other sources.

Tax revenue, which plunged from the 24.2 per cent of GDP once enjoyed by the Howard government to 20 per cent, is set to recover only slowly to around 22.8 per cent by 2016.

Looking that the 2011-12 Budget papers show nothing of the kind. They are for receipts, not revenue, but they show a decline from 24.9 per cent in 2007-08, the last Howard Budget to a low of 21.9 in 2010-11 (I checked and the final figure was 21.7). The 2012-13 MYEFO has (General Government) receipts recovering to 23.9 per cent of GDP by 2012-13 on current policy. Revenue is higher at 24.5 per cent.

Before I talk about the merits and otherwise of Swan’s strategy, I’d like to get the numbers right. Does anyone have any info?

Update An inquiry to the Treasury produced an amazingly rapid response, pointing me to page 363 of the MYEFO, which is the source of the data. I think it’s fair to say that Swan is engaged in cherry-picking the past and relying on rubbery numbers for the future. The numbers represent tax revenue rather than total receipts. The number for the Howard government is not that of its last budget, but is for 2005-06. That was before some big tax cuts, and also before the establishment of the Future Fund, the earnings from which are not counted as revenue, although the debt interest that could have been saved is an expense. The rubbery projections involve claims that the revenue/GDP ratio will remain almost static from 2012-13 onwards, when bracket creep would typically be expected to produce growth, in the absence of policy change.

I’d suggest a more accurate summary of the data is that, on current policy, receipts are projected to be 23.9 per cent of GDP in 2012-13, down from 25.1 per cent in the last year of the Howard government (Labor has, unwisely, pledged to hold itself below this level). The gap is entirely explicable in terms the unaffordable income tax cuts promised by Howard in 2007 and implemented (with modest changes) by Labor.

It would be easy enough to fill this gap by taking a harder line on tax expenditures and tax avoidance, without cutting the services which, according to Gillard and Swan, we are supposed to trust Labor to deliver.

Categories: Economic policy Tags: