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Archive for October, 2017

The MFP illusion

October 31st, 2017 23 comments

Expanding on a post a little while ago, I have a piece in Inside Story arguing that multi-factor productivity, the Holy Grail of microeconomic reform for the last few decades, is a residual that is and should be equal to zero.

From getting the idea to publishing it took me a few weeks. That’s a huge contrast from last century when the best I could have hoped for is an article in a low-prestige journal, taking a year or more and reaching an audience of, at most, a few hundred.

That’s great for me, as I’m more interested in reaching a large intelligent public than in impressing my fellow economists (I have to do that to keep my job, of course, but it’s not my top priority). By contrast, the general direction of the profession has been towards fewer and fewer articles in an ever-narrower range of prestigious journals.

Monday Message Board

October 30th, 2017 31 comments

Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

Categories: Regular Features Tags:

The end of fossil fuels: some data and quick calculations

October 29th, 2017 44 comments

The International Energy Agency recently released data showing that world coal production fell sharply in 2016, mainly because of big cuts in China. Looking at the graph, it appears that the peak in production was around 2013. The price of coal has experienced a “dead cat bounce” over the last year or so, essentially because China has been closing coal mines faster than it’s been closing or cancelling coal-fired power stations, but the picture tells the story for the future.

Global coal production (source IEA)

Until relatively recently, the decline of coal was the result of competition with gas, while new renewables weren’t even enough to cover the growth in demand. But a quick calculation shows that renewables will soon be taking out a bigger bite. Global electricity generation is currently about 20000 terawatt-hours (TWh) a year, growing at around 1.5 per cent, or 300TWh a year. Installations of solar PV and wind (I haven’t checked on hydro and other renewables) for 2017 look set to come in around 150 gigawatts (GW). Assuming 2000 hours of operation per year, that’s just enough to offset demand growth. So, any future growth in renewables must come directly at the expense of existing fossil fuel generation which in practice will almost always mean coal.

Turning to transport, regular commenter James Wimberley has an analysis of the prospects for peak gasoline (petrol) used in internal combustion engines. Summarising drastically, his best estimate for peak gasoline is 2032. Decarbonization requires an end to petrol-driven vehicle sales by around 2035. On this front, the good news is that quite a few countries, including the UK, France and India are pushing for an end by 2030.

Of course, all of this assumes that the attempts of Trump and Turnbull (along with likeminded culture warriors in Turkey, Poland and elsewhere) to bail out the dying coal industry come to nothing and also that Trump doesn’t manage to destroy the planet through nuclear war.

Categories: Environment Tags:

Lamest. PM. Ever.

October 27th, 2017 43 comments

So, we’ve wasted $100 million on a postal survey that won’t decide anything. It’s already evident that, even with a thumping majority for Yes, the bigots on the LNP backbench will fight all the way to protect the right to be a bigot. They are, in my view, playing a dangerous game here. The existing law gives lots of special privileges to religious organizations that are justified only on the basis that we all need to get along tolerantly. If that rationale ceases to apply, all those privileges are open to question.

Meanwhile, all the fine words about letting the people decide have gone out the window when it comes to indigenous recognition. Even though Abbott has gone along with Turnbull on the decision, I think, if he were still PM. he might have done better on this issue.

In any case, this confirms me in the view that Turnbull is the weakest Prime Minister in living memory. I thought that Billy McMahon was a competitor for the title until I discovered that he took the decision to kill off Australia’s foray into nuclear power (they’d actually excavated the site at Jervis Bay) over the opposition of the redoubtable Sir Phillip Baxter who saw the project as a step towards an atomic weapons capability. The cancellation of this project was a bigger achievement than Turnbull can claim in his 20-odd years in public life, encompassing the Republic referendum, the Murray-Darling fiasco, the downgrade of the NBN and his two years as Prime Minister.

Categories: Oz Politics Tags:

Nuclear starts stop

October 23rd, 2017 40 comments

A steady stream of negative evidence hasn’t shaken the faith of believers in nuclear energy. Many of them are under the impression that the failure of nuclear energy is specific to the developed world, where some combination of environmentalism and NIMBYism prevents the adoption of an obviously sensible solution. It is widely imagined that China, India and other countries are forging ahead. This idea was plausible until fairly recently, but the latest evidence suggests that nuclear power is in terminal decline. Globally, only four nuclear plants commenced construction between 1 January 2016 and 30 JUne 2017. China hasn’t started any new plants this year and is sure to miss the 58GW target set for 2020.

The problem, simply, is that while China’s problems with delays and cost overruns have been less severe than those in the developed world, the same patterns are evident. New nuclear plants simply can’t compete with renewables.

I don’t expect that this will have the slightest impact on the Australian and US right, who have long since ceased to regard evidence as relevant to anything. But, for anyone who is still open to evidence, this debate ought to be over.

Categories: Economics - General, Environment Tags:

Sandpit

October 23rd, 2017 6 comments

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

Categories: Regular Features Tags:

Monday Message Board

October 23rd, 2017 11 comments

Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

Categories: Regular Features Tags:

Judaeo-Christian

October 22nd, 2017 36 comments

My son Daniel pointed out to me a feature of Trump’s speech to the laughably named Values Voters summit which seems to have slipped by most observers. As summarized by Colbert King in the Washington Post

Telling a revved-up Values Voter audience that he is “stopping cold the attacks on Judeo-Christian values,” Trump suggested to the crowd, which already thinks a “war on Christianity” is being waged, that invoking “Merry Christmas” is a way of fighting back.

But “Happy Holidays” is exactly an expression of Judaeo-Christian values, coined to embrace the Jewish Hanukkah as well as Christmas. In this context, King’s suggestion that “Happy Holidays” is secular misses the point. The majority of secular Americans celebrate Christmas (happily mixing Santa Claus, carols, and consumerism). They say “Happy Holidays” as a nod to religious diversity among believers, not because they feel excluded from Christmas.

Insistence on “Merry Christmas”, by contrast, is a repudiation of the claim implicit in “Judaeo-Christian”, namely, that Jews and Christians have essentially the same beliefs and worship the same god, and that the differences between the two are ultimately less important than the commonalities. On any interpretation of Christianity in which all who reject Christ (including, I imagine, most of us here at CT) are damned, “Judaeo-Christian” is a much more pernicious version of political correctness than “Happy Holidays”.

I haven’t got to a proper analysis of this, so I’ll turn it over to commenters.

Categories: Economics - General Tags:

Pumped hydro

October 21st, 2017 34 comments

In my Conversation article on the Turnbull government’s plan to keep coal-fired electricity alive, I said that most of the opportunities for hydro-electric power had already been exploited. I was thinking of primary power generation, and in this respect, I maintain my view. However, I neglected the option of pumped storage, where water is pumped uphill when excess electricity is available, then run downhill through turbines to (re)generate the electricity when it is most needed.

My old university friend, Andrew Blakers, now with the Research School of Engineering at ANU emailed me to point out this study, looking at the large number of sites potentially available in Australia, more than enough to backup all the renewable energy we will be generating in the foreseeable future.

This isn’t just a theoretical proposition. The Kidston hydro storage project in the advanced stages of planning, will offer 2000MwH of storage combined with a co-located 270MW solar PV project. The same report mentions some big wind + storage projects.

Still, if Labor is silly enough to endorse Turnbull’s NEG idea, it’s hard to see any more progress being made.

Categories: Environment Tags:

Adani and NEG

October 19th, 2017 12 comments

I’ve published a couple of articles. One, in the Guardian , expands the argument of this post on Adani. The other, in The Conversation, is a response to the Turnbull government’s energy policy, which managed some remarkably good press, though that seems to be fading away as the realities become more evident.

Categories: Economics - General Tags:

The mystery of early elections

October 17th, 2017 28 comments

The TV news hear in Brisbane has been running rumours about an early state election for most of the year. Even though a string of predictions have already proved false, the rumours keep coming. I heard another one yesterday, but today’s news suggests not, though with the odd phrasing

ANNASTACIA Palaszczuk has fuelled speculation she may wait until next year to call the election

which seems to suggest there is something odd about holding the election on time.

I have a couple of thoughts about this. First, I assume that somebody in the government or the ALP machine must be a source for these rumours. But thanks to the conventions of journalism, we never find out who[1]. At the very least, couldn’t political journalists stop repeating claims made by people who have been wrong over and over.

More importantly, why would any government, anywhere, voluntarily shorten its term in this way? The idea, of course, is that the party hardheads know when to seize the ideal moment to capitalize on the government’s popularity. That doesn’t apply in the current case, where the polls have been neck-and-neck. More importantly, this kind of advantage regularly dissipates in the course of an election campaign. Spectacular recent examples include Campbell Newman and Theresa May. But from my casual observation, it’s the norm rather than the exception for governments that go early to underperform expectations. That was true for the federal elections in 1984 and 1998 for example. Hawke expected a huge win in 1984 but ended up with a swing against him. Howard actually lost the two-party vote in 1998, and only squeaked in by good luck.

The issue ceases to be relevant after this election since we will move to four year fixed terms. I support fixed terms, but think three years is long enough for governments to keep themselves safe from voters.

fn1. An even more egregious case of this is the confident assertion the Kevin Rudd undermined the Gillard government, even though he said nothing in public that could be regarded as disloyal (unlike another recently deposed PM). We are supposed to take this assertion as true, even though those who make it refuse to go on record, even in the broadest terms, about what Rudd is supposed to have said and to whom.

Categories: Economics - General Tags:

Monday Message Board

October 16th, 2017 22 comments

Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

Categories: Economics - General Tags:

Breaking ground in Adani’s Utopia

October 14th, 2017 12 comments

Having argued for some time that Adani’s Carmichael mine-rail-port project is unlikely to go ahead, I was initially surprised to read the announcement that Adani says it will break ground on Carmichael rail link ‘within days’. My mental image was of heavy earthmoving equipment excavating the route along which the line is to be laid. This seemed surprising to me, since there had been no evidence that the project was anywhere near that stage.

But a closer reading suggests that the “ground breaking” is of the kind seen in a typical episode of Utopia, in which lots of dignitaries are presented with shovels and turn over a piece of dirt, to “mark the official start” of the project. That is, presumably, a different “official start” from the one that was marked by another ceremony back in June. Obviously, this ups the pressure on governments to lend public money to the project since a failure to do so would mean abandoning a project that is “officially” under way.

Categories: Environment Tags:

Why zero (multifactor) productivity growth is OK for Oz (very wonkish)

October 13th, 2017 23 comments

I’m writing a book chapter about productivity, much of which will be a rehash of my 20-year debate with the Productivity Commission over measures of multi-factor productivity (MFP). In the process, I reread this op-ed by Ross Gittins, and the Treasury article on which it is based, by Simon Campbell and Harry Withers. As a result, I had what seemed to me like a Eureka moment. As with all such moments, of course, my insight might turn out to be either wrong or obvious.
Read more…

Categories: Economics - General Tags:

Save the weekend! (now with link)

October 12th, 2017 19 comments

I have a piece in The Conversation about the decision to cut weekend penalty rates. This decision needs to be put in the context of forty years of policy aimed at pushing down wages, eroding conditions (such as the weekend) and weakening the position of unions.

I talked to Fran Kelly on ABC RN Breakfast just now.

Categories: Economic policy Tags:

Socialism for the 21st century

October 10th, 2017 24 comments

I have a long article in the Guardian putting forward some thoughts about a socialist economic policy program for the 21st century. The headline “Socialism with Spine” is a shortening of my observation that:

As it is used today, the term socialism does not reflect a well-worked ideology. Rather it conveys an attitude that could be described as “unapologetic social democracy” or, in the US context, “liberalism with a spine”

The contraction might have led some readers to expect a position more radical than the one put forward in the article. I’m advocating both a restoration of those aspects of 20th century social democracy that are still relevant today and new ideas to turn the 21st information economy to the benefit of the many, not the few.

Categories: Economics - General Tags:

Sandpit

October 9th, 2017 9 comments

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

Categories: Regular Features Tags:

Monday Message Board

October 9th, 2017 8 comments

Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

Categories: Economics - General Tags:

Who will pay for Adani’s infrastructure? We will

October 7th, 2017 19 comments

A couple of days ago, it was announced that the Fly In Fly Out workforce for Adani’s putative Carmichael mine would be split between Townsville and Rockhampton. Since I’ve long argued that the mine is highly unlikely to go ahead, I didn’t read the news stories closely. So, I missed the fact, buried in the middle of this ABC news report, that the deal requires Townsville and Rockhampton councils to build Adani an airstrip at a cost of $20 million. It turns out that not everyone in Townsville is happy about having their money spent on a project far away from the city.

This outcome is consistent with what I and others have been arguing for some time. Adani has to keep the project alive to avoid recognising the loss of the money its spent so far, and admitting that coal volumes at its Abbot Point port will be far lower than planned. On the other hand, there’s no point throwing good money after bad. So the strategy is to move slowly on the development, building a railway with money from the Commonwealth government and, now, an airstrip paid for by the people of Townsville. When, with much regret, the mine is deferred indefinitely, the Australian public will be the proud owners of a railway to nowhere, with the option of a flight back.

Categories: Economic policy, Environment Tags:

Three observations on guaranteed and universal basic income

October 3rd, 2017 27 comments

I’ve been working for a while on the idea of Universal Basic Income (UBI), and the closely related alternative of a Guaranteed Basic Income (GBI), in which the payment is phased out as income increases. I’ve now developed a very simple model to illustrate some of the crucial points. Here are three observations. Only Observation 2 requires the model, and the assumption that the distribution of income is broadly similar to that prevailing in Australia today.

Observation 1: Any UBI scheme can be replicated by a GBI with the same effective marginal tax rates, and vice versa

Observation 2: A GBI equal to 40 per cent of average income, with a phaseout rate of 40 per cent, would require additional transfer payments equal to between 8 and 10 per cent of national income.

Observation 3: A UBI equal to 40 per cent of average income, with no phaseout, would require additional transfer payments equal around 30 per cent of national income, but would have the same effective marginal tax rates as a GBI.

Monday Message Board

October 3rd, 2017 14 comments

Another Monday Message Board (I’m travelling in the US, so it’s still Monday). Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

Categories: Regular Features Tags: