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Predictions for 2015

January 15th, 2015

Prediction is very difficult, especially about the future, as Niels Bohr is supposed to have said. I’ve certainly found it so. Apart from the obvious possibility of being wrong, there’s the risk that others will misrepresent you. But, as long as you don’t take it too seriously, it’s helpful to frame discussion around a sharp prediction. So here are three for 2015

1. Peak Oil: I predict that global oil production (conventional and shale etc) will decline in 2015 and will never again reach the peak level of 2014. My reasoning is that 2014 supply can’t be sustained at prices below, say, $75, and (given a downward underlying trend in the developed world), 2014 demand won’t be reached again at prices above $75.

2. The End of Bitcoin: I’ve written in the past that “Bitcoins will attain their true value of zero sooner or later, but it is impossible to say when.” However, I now think the necessary conditions are in place for most holders of Bitcoins to recognise that their asset consists of used-up computation cycles with zero value. In particular, because mainstream merchants now accept Bitcoin (which they immediately sell), it’s possible for hardcore believers to dispose of their holdings without explicitly betting that the price will fall. Of course, the price won’t fall precisely to zero, but it should be well below $100 by the end of the year, and below $10 not long after that.

3. The Paris conference on climate change, will produce a half-baked compromise, which nevertheless represents progress towards stabilization at 2 degrees of warming: OK, this is pretty much a no-brainer, given that this is what we’ve been seeing ever since Kyoto in 1997, but I want to be sure of getting at least one right.

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  1. Uncle Milton
    January 15th, 2015 at 14:49 | #1

    If Bitcoin is actually a useful medium of exchange with lower transactions costs when paying for stuff than with a credit card or debit card then it, or at least the technology behind it, isn’t going to go away.

  2. Vegetarian
    January 15th, 2015 at 14:50 | #2

    Interesting predictions, but the article you link to admits that car use continues to rise in the developing world. And there are a lot more of them than there are of us…

  3. January 15th, 2015 at 15:00 | #3

    Regarding who said that line about it hard to predict, especially about the future, most attribute that to former New York Yankees catcher, Yogi Berra. He is famous for many other odd sayings, among them, “It is deja vu all over again,” “If you come to a fork in the road, pick it up,” and “Nobody goes to that restaurant anymore; it is too crowded.”

    Bitcoin may well go down the tubes, but that will probably not be the end of cryptocurrencies. Several of its competitors are far superior to it on numerous grounds. It had a first mover advantage, but that is rapidly disappreaing as it collapses. Watch its most serious rival, the rising Ripple, now at 20% of bitcoin’s market cap. It has zero mining costs and is being used for transactions, and it is much easier to do so. Bitcoin may be going, but Ripple is likely to be here to stay.

  4. John Quiggin
    January 15th, 2015 at 15:18 | #4

    @Barkley Rosser

    I thought Yogi Berra too, but he’s a default choice for this kind of attribution

    A lot of the rival cryptos have done even worse than Bitcoin. For example, Litecoin has gone from a peak of $40 to a current price of $1.30, a drop of around 97 per cent.

  5. bjb
    January 15th, 2015 at 15:47 | #5

    My favourite Yogi Berra quote is “In theory there is no difference between theory and practice. In practice there is.” – something many economists should take note of 🙂

  6. Donald Oats
    January 15th, 2015 at 15:56 | #6

    Yogi Berra is a legend.

    I predict Australia will sell its soul at the next climate fest, in the same manner as John Howard managed to do, namely late at night on the final day. Robb and McFarlane will attend, Julie Bishop might, but I’m sure Abbott will manufacture a reason for her to be on the other side of the world from the climate fest, if at all possible. Our ministers and senators seem to think a 4C rise in Australian average temperatures is a pleasant thing to dream of…so long as the coal gets sold. I wonder if they could drag Nick Minchin back into the fight for no action on AGW: I’m sure he would be happy to take some taxpayer money in return for a couple of days in Paris.

    I predict the security at the climate fest will be unrivalled in modern history. Even a total ban on protesting in the city limits, perhaps.

    I predict Australia’s a lot of computer networks will get slower internet speeds, and less reliable service, for more money, than 50 other countries. Dec 2015. Thanks, Mr Copper network.

    I predict that the international producers of digital content will continue to gouge the Antipodes, and will by default only offer HD at best. No ultra-HD for us yobs.

    I predict we will continue to dither with ISIL, doing the odd drone strike or bombing, killing innocent and guilty alike. We should either go in as an army and defeat them, or accept we have no useful part to play in that theatre of war.

    And hipsters are definitely in the out-tray.

  7. January 15th, 2015 at 16:07 | #7

    Where a good cryptocurrency might succeed in fitting into the financial system is not all the grandiose things so many of their more ideological advocates push, such as free banking. Where they might have an edge, and it might be Ripple that can pull it off, is in replacing or at least sharply competing with credit cards. Stores like them because they do not charge the fees the cards do, so that provides an opening.

    The problem so far has been with bitcoin transactions taking a long time to complete, usually many minutes. This is because it is set up so that to complete any transaction, the entire history of all bitcoin transactions must be scrolled through. Obviously this is silly. Ripple is a lot faster, although i think still slower than the several seconds it takes to complete a credit card transaction. But if Ripple, or some other cryptocurrency, can get its speed of transaction completion to about the same as for credit cards, stores will prefer one of them (and probably in the end, one will come to dominate) because of the lower fees involved.

  8. BilB
    January 15th, 2015 at 16:21 | #8

    That is a great linked article on driving trends. But as I have only basic intuitions on fossil fuel trends I immediately refer to Robert Rapier who is also making cautious, non binding, predictions.

    http://www.energytrendsinsider.com/2015/01/08/my-2015-energy-predictions/#more-17422

    Predicting (attempting to) the future is one of the most valid forms of gambling and i fully endorse the attempt. I particularly like to predict a future life for my friend’s kids based on how I see them do things, and I am happy to be both wrong and right, it is more about the pleasure of anticipating future adventures. I really don’t think, JQ, that you should be restrained in predictions, there is as much to be learned from either outcome.

    Indirectly I know someone (Libertarian) with a huge wealth from bitcoin, it will be interesting to see how that plays out.

    I will be barracking for you to be wrong on the third punt, though this is wishful thinking on my part.

  9. rog
    January 15th, 2015 at 17:21 | #9

    On $oil while the cost of extraction has increased the cost of production has decreased, mainly because the cost of crude has dropped. Big vertically integrated companies like BP have an edge over single producers.

  10. MWS
    January 15th, 2015 at 18:29 | #10

    @Donald Oats

    Thanks, Mr Copper network

    I prefer “Lord Copper”

  11. jungney
    January 15th, 2015 at 19:34 | #11

    I predict more of the same with occasional glimpses of storms, droughts, floods, fire and famine.

  12. plaasmatron
    January 15th, 2015 at 21:06 | #12

    Quote: “A theory is something nobody believes, except the person who made it. An experiment is something everybody believes, except the person who made it.” ? Albert Einstein

    I predict Saudi Arabia will be the flashpoint this year.

  13. hc
    January 15th, 2015 at 21:22 | #13

    I confidently predict 2016 will occur some time next year. If not then, then at some other time.

  14. Donald Oats
    January 15th, 2015 at 22:17 | #14

    I predict that this prediction of mine will be wrong.

  15. Ikonoclast
    January 15th, 2015 at 22:34 | #15

    I am making no predictions for 2015 as I am getting more cautious.

  16. JKUU
    January 16th, 2015 at 00:48 | #16

    @Barkley Rosser
    I’ve read that Yogi said “When you come to a fork in the road, take it,” not “pick it up” (witty as that might be). Berra says this is part of driving directions to his house in Montclair, New Jersey. There is a fork in the road, and whichever way you take, you will get to his house.

  17. January 16th, 2015 at 03:46 | #17

    Nice predictions Donald. Fingers crossed about the hipsters. c@Donald Oats

  18. Fran Barlow
    January 16th, 2015 at 05:00 | #18

    I predict Abbott will be rolled by his party or the public.

  19. paul walter
    January 16th, 2015 at 05:29 | #19

    He does need to rolled- in briar.

    Peak oil interested me because I’ve already seen reports of the “collapse” in gas fracking and shale processing, elsewhere. But more to the point, these antics with prices have occured in the past a few times, wiped out marginal sources and left a monopoly for remaining suppliers with skies the limit for prices.

  20. BilB
    January 16th, 2015 at 06:05 | #20

    That is almost too much to wish for, Fran. I like Paul Walters version, rolled in tar and then feathers, by his own party,….delightfully ridiculous.

  21. Robert (not from UK)
    January 16th, 2015 at 07:12 | #21

    I have just discerned the fact that fully six months have elapsed since I last encountered a teenage boy with halitosis jabbering ecstatically about how Bitcoin will save the world, cure cancer, and outdo Beethoven in compositional genius.

    Half a year ago such boys appeared to be everywhere.

  22. Ikonoclast
    January 16th, 2015 at 07:17 | #22

    @bjb

    Actually in good theory there is a difference between theory and practice. Good theory recognises both the applications and the limitations of theory.

  23. Ron E Joggles
    January 16th, 2015 at 07:26 | #23

    Listening to Dick Smith on ABC RN Breakfast just now, talking about the importance of moving to a zero-growth economy – I missed any reference to where he might have discussed this recently – and he asserted that the ABC, universities and economists generally are all spruiking growth, despite the obvious fact that unending growth is impossible – mentioned Alan Kohler specifically.
    Dick Smith also asserted that Australians overwhelmingly acknowledged the impossibility of continuing growth, but he is pessimistic that anything will be done before events make the end to growth inescapable.

  24. ZM
    January 16th, 2015 at 07:43 | #24

    I am not sure what will happen at Paris – but expect climate activism to ramp up this year in the lead up to the meeting. Among other things 350.org have a global divestment day planned for February and will presumably have other actions throughout the year. The Pope is releasing an encyclical on the environment, which many parishes will have study groups about and will be having an interfaith council on the environment and speak to the UN in September.

    And the United Nations have linked the summit on climate change to another summit this year that seems to be the follow up to the millennium development goals on poverty and inequality – to encourage community pressure on governments for both summits –

    “Today, more than 1,000 organizations from around the world are coming together to launch “action/2015,” a global coalition calling for pivotal change in 2015 for people and the planet.

    Join us, and tell world leaders that you want ambitious agreements to tackle poverty, inequality, and climate change this year.

    Share this graphic, and learn more at action2015.org. ?#?action2015? “

  25. John Quiggin
    January 16th, 2015 at 07:45 | #25

    @Fran Barlow

    Interestingly, I was considering making the opposite prediction, but decided I lacked the requisite confidence

  26. Hermit
    January 16th, 2015 at 08:09 | #26

    Groups like the IEA are going to look like wallies if liquid fuels peak at 100 mbpd not the 135 they predict. Perhaps the initial effect will be that a bit of belt tightening will save the day or new technology will come along. The outcome may be excessive belt tightening and disappointing technology. That may take until 2020 or so to sink in even if say 2014-2016 is the apex of the production curve.

  27. James Wimberley
    January 16th, 2015 at 08:10 | #27

    – Chinese coal consumption will fall for a second year, confirming the peaking.
    – Indian plans for coal expansion will hit major difficulties.
    – Global solar pv demand will be above 55 GW, quite likely over 60GW.
    – Utility solar system prices will fall below €1/watt in several countries, and $1/watt in at least one.
    – Polycrystalline solar panels will be marketed at 20% efficiency. Prices will start falling slowly again.
    – A research team will present a working tandem cell, perovskite on silicon, made using industrial methods, with an efficiency well over 25%. It won’t be stable enough for production yet.
    – Numerous reports will be issued confirming that the energy transition is cheaper than sticking with fossil fuels, on current national income accounting (that is, including health externalities but not climate risks.)

  28. Fran Barlow
    January 16th, 2015 at 08:25 | #28

    @John Quiggin

    I have had the requisite confidence since before June of 2013. There are no certainties in life of course, and this is a great deal less certain than many other things one could predict. His party rolling him would be a huge gamble, given the dearth of measurably better alternatives (by which I mean ‘Murdoch-acceptable’) and the inability of any new leader to depart sharply and with credibility from the culture war policies of this regime of course.

    Considerations of this kind predispose me to the view that an early election with Abbott as leader might be the less risky course. The party would certainly expect a more hostile senate (which would rebalance the appetites of the party room in favour of a less aggressively reactionary policy especially given the thinning of the ranks) and create a window of opportunity for more mainstream liberals to shape their public policy.

    They’d be kidding themselves about winning though, even with Murdoch’s backing, and so one suspects that a large swathe of LNP lower house members would be given tacit licence to distance themselves from Abbott in order to save themselves, which would destroy the election for them and probably still not save many coalitionistas. Abbott would probably still win Warringah — it would be a turnup for the books if successive LNP PMs were defeated in their own seats and Warringah is a lot more blue-ribbon than Bennelong was in 2007 — but if a strong anti-Abbott conservative Indie stood — a kind of Ted Mack/Cathy McGowan character — one can indulge the thought.

  29. sunshine
    January 16th, 2015 at 08:34 | #29

    I predict
    – That terrorists and militarised democracies will continue to enhance each others power fast. We will continue to surrender our freedoms and bear productivity, dollar ,and goodwill costs as the security state grows rapidly .Most Aussies wont care much.
    – Richmond will win the AFL.

  30. Donald Oats
    January 16th, 2015 at 11:58 | #30

    @Ron E Joggles
    Dick Smith made a doco which aired on ABC last year, in which he talked about zero growth economies. Technically, what he is really talking about (as I understand it) is the situation where economic growth is not through finite resource exploitation or population growth, but through technological change. In other words, we stop our relentless population growth, we find other ways of doing things so as not to exhaust finite resources, and we live in a stable fashion. Plenty of scope for innovation in a “zero-growth” economy.

    Thing is, we are in a new wave of capitalism, one where the means of production are increasing automated, and where the prospect of individualised manufacture (e.g. by additive manufacturing, aka 3D printing) creates a new world of opportunity. The question is whether there will be sufficient new types of jobs to replace the ones lost, and whether people can cope with the cognitive demands of those new jobs.

    The new wave capitalism isn’t necessarily at odds with zero-growth economy, but a clash is certainly possible.

    Finally, while a lot of companies are pushing the wearable tek idea, there is going to be a backlash—soon. Once employers attempt to track their employees using such tek, I think the consumer interest in it will abruptly decline. I hope that people simply won’t accept employers doing this—tracking heartrate, location, movement—and will draw the line, arguing that a person has some rights to privacy which trump an employer’s rights. If there is no backlash, we’ll rue that day we just meekly put on the tek bracelet. [Obviously there are some jobs where the tek is unequivocally good, e.g. police on the beat; I’m talking about standard white-collar/blue-collar employment.]

  31. Donald Oats
    January 16th, 2015 at 12:04 | #31

    @Donald Oats
    Oh, and I’ll make the prediction that if the Freedom Commissioner has the case of employers demanding employees adopt wearable tek, the “Freedom” Kommisar will say “Oh, if you are employed you must do what your (infallible master) employer commands.” instead of saying “People have the right to privacy, even when at work. Unless it is a matter of personal safety (e.g. police on the beat), no employer has the right to demand employees wear trackable tek.”

    Freedom, until employed—bonded.

  32. Cambo
    January 16th, 2015 at 12:39 | #32

    @Fran Barlow Re: Warringah challengers for TA

    You’d probably be dreaming of Peter Macdonald who was a Ted Mack contemporary – but he’s taken on Tony Abbott before. You might also dream of Godfrey Bigot who went against Bronwyn Bishop at every opportunity.

  33. David Allen
    January 16th, 2015 at 14:05 | #33

    @Fran Barlow

    In your last comment you mention “mainstream liberals”. What kind of beast is this? Are they like “good Germans”?

  34. January 16th, 2015 at 16:35 | #34

    @Donald Oats

    We can expect world population to stop growing some time this century. It would happen a lot faster, if we eliminated poverty faster, and got women into the workforce faster – but it is happening in most of the world already. See Hans Rosling’s TED talk on youtube https://www.youtube.com/watch?v=fTznEIZRkLg

    So if we can survive the next few decades of population growth, we’ve got a chance to see what a no-growth world looks like. I’ll be dead by then, but I reckon it will do just fine.

  35. Donald Oats
    January 16th, 2015 at 17:03 | #35

    @David Allen
    Good question. I’m pretty sure that in the current government, the set of “mainstream liberals” is an empty set.

  36. John Street
    January 16th, 2015 at 18:19 | #36

    I predict every single economic indicator worth mentioning will be worse at some time in 2015 under Tony’s leadership??? than they were at any time under Julia.
    And I will pick which ones are worth mentioning.

  37. Fran Barlow
    January 16th, 2015 at 21:51 | #37

    David Allen

    @Fran Barlow
    In your last comment you mention “mainstream liberals”. What kind of beast is this? Are they like “good Germans”?

    1. You left out the qualifier ‘more’ before ‘mainstream liberals’. 😉

    2. There were good Germans — but they were brutally repressed.

  38. Jordan
    January 17th, 2015 at 00:49 | #38

    For 2015 i predict the growth of MMT acceptance continuing above 33%.

  39. sunshine
    January 17th, 2015 at 06:17 | #39

    I thought I should make a less certain one so – I predict that the appointment of Scott Morrison to the Social Services portfolio will be a disaster for him and the Coalition. I cant imagine how someone of his basic (repulsive) personality type could succeed there.

  40. rog
    January 17th, 2015 at 06:41 | #40

    I predict that after each disruptive event one or more people will say “I told you so”. This applies especially to financial markets where bets are made on anything and everything.

  41. Ikonoclast
    January 17th, 2015 at 08:04 | #41

    @Jordan

    I assume that is 33% per annum? How will we measure the acceptance rate of MMT? Can I assume someone has the 2014 acceptance level already measured as a baseline?

  42. Ivor
    January 17th, 2015 at 09:40 | #42

    rog :
    I predict that after each disruptive event one or more people will say “I told you so”. .

    Including Marx from his grave ????

  43. J-D
    January 17th, 2015 at 10:31 | #43

    @Uncle Milton

    So long as Bitcoin remains a useful medium of exchange, it isn’t going to go away. Being useful as a medium of exchange means that people accept it in exchange for goods and/or services; if people won’t accept it in exchange for goods and/or services, then it ceases being useful as a medium of exchange.

    As long as people accept Bitcoin in exchange for goods and/or services, it won’t go away. How long will people continue to accept Bitcoin in exchange for goods and/or services?

  44. Jordan
    January 17th, 2015 at 18:43 | #44

    @Ikonoclast
    My prediction is all arbitrary, it only presents my optimism that MMT acceptance will continue at ever faster rate.

    I am noticing that “many” leftish economic blogs are having more and more MMT comentators, that one US senator took a major MMTer as economic adviser a month ago, that more blogs are openly discusing MMT concepts, even some prominent economists.
    mikenormaneconomics.blogspot.com gathers ever more posts about MMT based discusions and increase of it in a last year is very visible.

    Alternet, Yves Smith, FLK, truthdig are posting MMT discusions while that was very rare a year ago. Even the blogs that banned me a year ago now talk some Keynesian.
    Some guardian articles have comentariat by mostly MMTers which is huge change from a year ago. Youtube MMT viewing has increased dramaticaly, it almost doubled in a year even tough the numbers are still small.

    And sure, my attempt to join absurd and optimistic predictions for this post is visible.

  45. Ikonoclast
    January 17th, 2015 at 20:13 | #45

    @Jordan

    I am hoping to get hold of an MMT textbook or two soon so I can understand exactly what it is. It cannot be just;

    (A) A description of Modern Monetary Systems (MMS);

    therefore it must be

    (B) A Macroeconomic theory within the setting of Modern Monetary Systems;

    because it seems explicitly to not be;

    (C) A Microeconomic theory of any kind.

    As such (meaning it is B) MMT must be a system-dependent and institution-dependent macroeconomics dependent for its existence as a valid field on the existence of;

    (1) Capitalism (which the current MMS serves);
    (2) Government operations;
    (3) A mixed economy (Point 2 being greater than a minimalist state).

    This is not to minimise the possible importance of and useful advances in MMT. I don’t think the capitalist world or mixed economies are disappearing anytime soon short of a major world wide collapse or cataclysm. MMTs buffer stock employment model looks like an excellent idea to me but then I am not an economist of any kind.

  46. Ikonoclast
    January 17th, 2015 at 20:15 | #46

    MMT’s buffer stock employment model (short paper by Bill Mitchell):

    http://e1.newcastle.edu.au/coffee/pubs/wp/1997/bse.pdf

  47. Jordan
    January 17th, 2015 at 21:38 | #47

    @Ikonoclast

    MMT is only a description of fiat monetary system A)

    and only FIAT. It is not a description of other monetary systems. I asked leaders of MMT many times to help me describe other systems like those under the Gold Standard (Croatia has fixed exchange rate) or of those that have flexible exchange rate but debts in foreign currency. They responded that then Mundell-Fleming model applys, so called IS-LM-BoP model not MMT.

    The Mundell–Fleming model has been used to argue that an economy cannot simultaneously maintain a fixed exchange rate, free capital movement, and an independent monetary policy. This principle is frequently called the “impossible trinity,” “unholy trinity,” “irreconcilable trinity,” “inconsistent trinity” or the “Mundell–Fleming trilemma.”

    Fiat basicaly means power-the right of decision/ sovereignity.

    The term derives from the Latin fiat (“let it be done”, “it shall be”)

    WIkipedia quotes

    So, MMT describes basicaly that outcome of economic results will be fully dependant on governmental decisions. That there is no free market but the one that depends on governmental decisions. It is not for sole capitalist or for sole communist use, any kind of economic set-up can use it, it is decision of government how they will use money on which they have fiat.

    Basically it tells you that where government decides to move money to, the resources will move there too. It describes the power of government and if they decided to use it properly.
    It is the non-moral description of money flows that then you can use your moral standing to create policy. Policy options are endless and moraly determined. While other economic theories use moral biased assumptions and then build upon it.

    MMT helps me understand that there is private money creation too, allmost at will, not only government creation.
    If you need to buy something now, you take out credit and get it and inflation will eat the burden down.

    Banks can create credits only when clients ask them to. This is private creation of money for your needs when wage doesn’t allow for you to buy.
    It is almost like communist idea within capitalism itself. “To all according to needs”. Except that the differences in wages which sets the limits for credits is the cause of rising inequality. Those with higher wages can take out larger credits (can print more money) and with it take out larger benefits-> growing inequality.

    This is where i say that Pikkety could describe his 600 pages onto one page using MMT to pinpoint the source of rising inequality in capitalism.

    And when predicting the future it is where money evolution is going to-: private money creation not limited by wages on much larger levels then now. There will be different limiting factor for credit limit. Credit terms will further evolve to be more of ‘according to needs’.
    Credit is huge benefit to you on fixed low rate with moderate inflation and then add interest tax deduction too – very positive real terms. If the credit has to be paid off in constant real terms, then it is not much of a benefit.

    To me, MMT helps me understand how the present problems of secular stagnation, globalization, automatization are the solutions too to environmental problems. Problems have solutions inside them using FIAT power as a motivation factor in cooperation to solve problems-> Dynamic system.

  48. Jordan
    January 17th, 2015 at 22:31 | #48

    @ Ikonoclast

    Joe Guinan

    Modern monetary theory destroys the intellectual basis for austerity but needs a more robust political economy.

    ‘The study of money, above all other fields in economics’, John Kenneth Galbraith wrote, ‘is the one in which complexity is used to disguise truth or to evade truth, not to reveal it … The process by which banks create money is so simple that the mind is repelled’ (Galbraith, 1976, 15-29).

    My mind was repelled by MMT untill i realised that debt forgivness is the basis for economic growth in capitalism. Debt forgivness by mechanism of fixed rate with inflation (positive real rate) and bankrupcy procedings.
    I was clearly biased by exponential quality of growing debt and belief in ‘all debts must be paid’ which by careful investigation of reality was shown that is not true at all-> Machiavelian reality.
    Debt forgivness that allows for getting out of mistakes and start over and everyone is better off-> Pareto efficiency.

    Neoliberalism is cutting us from debt forgivness, the basis for growth, inviting adjustable rates for loans and limiting bankrupcy processes. But that is only the zeitgeist of peoples morality; do not let anyone get from under the debts. EU is an example of selfdestruction caused by “all debts must be paid”. No forgivness – every individua is responsible- individuality, it is acctually a false morality of ‘all debts must be paid’. MMT is giving me the way out of it.

  49. Ikonoclast
    January 18th, 2015 at 06:15 | #49

    @Jordan

    I will wait until I read “Modern Money Theory – A Primer on Macroeconomics for Sovereign Monetary Systems” – By L. Randall Wray and also Bill Mitchell’s textbook book which comes out this year I believe.

    However, I hold to my position that a mere description of an extant fiat money system cannot be economics on its own. It must be developed at least to the point of macroeconomics. If, for example, it asserts (as it does) that unutilised capacity (labour and plant) can be put into action via deficit spending and that this will not be inflationary provided there are no economic “bottlenecks” then this is a macroeconomic statement at least.

    I think MMT does assert that the Modern Monetary System (MMS) has changed some of the parameters of macroeconomics especially in changing what one might call the “possibility-space” in macroeconomics. A sovereign fiat currency issuing government has new possibilties in how it can order its economy according to how it orders its budget. This seems to me to be the central claim of MMT.

    A central problem in economics (in my layperson’s view) is that some schools want to argue that only (some) real systems matter and other schools (like MMT and finance economics) want to argue that only formal systems matter. When you pin them down they deny it but in essence their models make those very simplifications and abstractions.

    Even the schools that talk about real systems (human agents, resources and products) tend to ignore the real natural systems behind the real economy systems. Somebody or some interdisciplinary team needs to unify economics by unifying biophysical economics, microeconomics, macroeconomics and the study of formal systems. (And unifying only the valid parts thereof I might add.) A full systems approach is needed included a unification of how formal systems interact with real systems.

    If the above is too big an ask then tough… the theoretical economics project has failed.

  50. Jordan
    January 18th, 2015 at 07:55 | #50

    @Ikonoclast

    I agree with you on almost every point except on real-formal systems. You gave the answer to it.

    A sovereign fiat currency issuing government has new possibilties in how it can order its economy according to how it orders its budget.

    That is how formal and real system interact. By the process of choosing its budget it afects the real system, everything else has evolved to follow such decisions and produce the desired outcome.

    MMT started first as a tool to invest, to help investors decide what matters. Mosler did this. MMT was initially called Mosler economics. A banker and very succesfull investor. To know what matters for better investing, we need to know how the system functions. This is the description of the system as it is.
    Lately it is developing into economic policy prescriptions as many more are understanding it and then applying it to present problems.
    Present problems to reach real solutions are misconceptions about the system so MMTers are reacting to false solutions and offering alternatives, they are not proactive yet and not offering the solutions to all problems that other theories had time to develop for.

    Also MMT is dabling in analysis of why formal systems are not reacting properly to conditions in real system and correct it. It is going into sociology and psychology to find causes of such problems. But it is always using dynamic system as a model, as a template to view the world.

  51. John Quiggin
    January 18th, 2015 at 10:51 | #51

    Please confine MMT discussions to open threads or sandpits

  52. January 18th, 2015 at 21:27 | #52

    Re prediction 3

    The homogenised virtual climate models show a warming of about 2.1 degrees C per hundred years and the satellite readings show about 0.7 degrees C for the same period. The real answer is probably somewhere in the middle(1.4degrees C), so a do nothing compromise will get you less than your “stabilization at 2 degrees of warming” (that is if these alarmists can measure the actual global temperature to within 2 degrees C; which is highly unlikely, as they are forced to construct a homogenised virtual one).

    Oh well we can have a consensus warming of “2 degrees”

    We are reminded of the dangers of consensus science in the past. For example, in the 18th century, more British sailors died of scurvy than died in battle. In this disease, brought on by a lack of vitamin C, the body loses its ability to manufacture collagen, and gums and other tissues bleed and disintegrate. These deaths were especially tragic because many sea captains and some ships’ doctors knew, based on observations early in the century, that fresh vegetables and citrus cured scurvy.

    Nonetheless, the British Admiralty’s onshore Sick and Health Board of scientists and physicians (somewhat akin to the current Intergovernmental Panel on Climate Change) dismissed this evidence for more than 50 years because it did not fit their consensus theory that putrefaction (or internal decay) caused scurvy, which they felt could be cured by fresh air, exercise and laxatives.

    “Consensus” science that ignores reality can have tragic consequences if cures are ignored or promising research is abandoned. The climate-change consensus is not endangering lives, but the way it imperils economic growth and warps government policy making has made the future considerably bleaker. The recent Obama administration announcement that it would not provide aid for fossil-fuel energy in developing countries, thereby consigning millions of people to energy poverty, is all too reminiscent of the Sick and Health Board denying fresh fruit to dying British sailors.

  53. Nevil Kingston-Brown
    January 19th, 2015 at 10:40 | #53

    I predict that someone, somewhere, will publish an explanation of the GFC and its aftermath that is more nearly correct than any other, but no-one will realise.

  54. Nevil Kingston-Brown
    January 19th, 2015 at 10:41 | #54

    @phoenix
    Conspiracy theories are supposed to go in the sandpit.

  55. Dave Lisle
    January 19th, 2015 at 11:04 | #55

    @ Pheonix
    This is an adroit piece of analysis. To parse: there is a scientific consensus that it is a good idea to try to limit temperature increases to 2 degrees C —- there was once a scientific consensus that turned out to be wrong —- therefore (small leap of faith here) all scientific consensuses are wrong and policies that are informed by them are bogus. Did I miss something??

  56. Nevil Kingston-Brown
    January 19th, 2015 at 13:48 | #56

    @phoenix
    Phoenix neglected to add that he plagiarised his post from a WSJ Op Ed by John Christy, who got the basic facts wrong, including the name of the Royal Navy Sick and Hurt Commissioners.
    http://thinkprogress.org/climate/2014/02/21/3314301/scurvy-wrong-john-christy-climate/
    TL;DR: Lind, the guy who recommended citrus to the Commissioners, also sold them a citrus concentrate of his own devising which had no Vitamin C (because it was boiled to reduce it); the Commissioners tried it, it didn’t work, so they tried other things (e.g. Sauerkraut with James Cook); eventually they tried citrus preserved by a different method, it worked, and the RN became the first navy in the world to mandate consumption of lime juice against scurvy, hence the slang term “Limey” for a British sailor and brits in general.

    That Vitamin C was the curative agent wasn’t conclusively proved until 1932. By the arguments of inactivists like phoenix, the RN should have waited until 1932 to introduce citrus to their men.

  57. J-D
    January 19th, 2015 at 17:04 | #57

    @phoenix

    Human beings are fallible and therefore any human judgement may turn out to be incorrect. However, agreement between people, or consensus, does not make them more likely to be incorrect. Also, expertise does not make people more likely to be incorrect; rather the reverse.

  58. Collin Street
    January 21st, 2015 at 06:50 | #58

    Human beings are fallible and therefore any human judgement may turn out to be incorrect. However, agreement between people, or consensus, does not make them more likely to be incorrect. Also, expertise does not make people more likely to be incorrect; rather the reverse.

    If you are engaging with someone who believes X, whose belief in X is manifest in their actions, telling them, “actually, X isn’t true at all” isn’t going to convince them, is it.

    This extends just as much — more so — to misunderstandings about how implication works and the logical/mathematical basis of causation as it does to what colour crows are. If someone isn’t very good at logic, good logic will not convince them. You’ll need to find another approach, or you’ll need to find a way of stopping their conclusions from mattering.

  59. plaasmatron
    January 23rd, 2015 at 19:02 | #59

    King Abdullah is dead. My prediction of problems in Saudi Arabia begins to play out…

  60. John Quiggin
    January 23rd, 2015 at 20:32 | #60

    Worse, it looks as if Christy is repeating the “Flat Earth myth” myth. It would be interesting to do a more comprehensive Google search. I bet his sources will be find somewhere in the rightwing blogosphere from which Phoenix just extracted his version of Christy.

  61. John Quiggin
    January 23rd, 2015 at 20:39 | #61

    And bingo! This comment in Watts Up With That

    http://wattsupwiththat.com/2014/02/02/if-99-doctors-said/

    appeared on 2 Feb 2014. Three weeks later, Christy and McNider push the same line

    http://www.maninsociety.com/global-warming/mcnider-and-christy-why-kerry-is-flat-wrong-on-climate-change

  62. Jim Rose
    January 25th, 2015 at 15:55 | #62

    Test post to see if I can get through the spam filter

  63. Chris O’Neill
    January 27th, 2015 at 15:13 | #63

    I predict that global oil production (conventional and shale etc) will decline in 2015 and will never again reach the peak level of 2014. My reasoning is that 2014 supply can’t be sustained at prices below, say, $75

    No doubt oil will run out eventually, but how do you know that production can’t be sustained through 2015 at $75? The price only needs to be high enough for wells to operate in the black to make it worth continuing production, even if they can’t repay the cost of capital. No doubt the high operating cost wells have taken a hit in capital value from a price of $75 and no new wells will be developed (*), but the only circumstance in which existing wells should shut down is where their operating cost exceeds $75. Do you have any information on how much production has an operating cost higher than $75?

    * This will mean that production will slow eventually but there are probably new wells that have yet to begin production.

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