Culture wars and smelters

January 21st, 2017 6 comments

The Victorian and Commonwealth governments have just announced a bailout of the Alcoa aluminium smelter at Portland, achieved primarily by pressuring AGL to supply cheap electricity. It’s unsurprising that a state government wants to save jobs: that is par for the course. The Commonwealth intervention reflects total policy incoherence. It’s entirely comprehensible, however, in terms of the culture war approach that drives the Abbott-Turnbull government. I have a piece on this at Crikey, reprinted over the fold.

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Categories: Economic policy, Oz Politics Tags:

Australia is naturally suited to a federal system

January 20th, 2017 14 comments

The age-old idea of abolishing the states has popped up again, this time from Bob Hawke. I’ve recycled some old arguments against this idea in the standard form where the states are to be replaced by regional governemnts. I’ve also added some new points, focused on the undesirability of a unitary state. The piece is at The Conversation, entitled If we scrapped the states, increasing Canberra’s clout would be a backward step

Categories: Oz Politics Tags:

Weekend reflections

January 20th, 2017 No comments

After a long break, it’s time for another weekend reflections, which makes space for longer than usual comments on any topic. Side discussions to sandpits, please. Absolutely no personal criticism of other commenters.

Categories: Regular Features Tags:

The LNP-ONP coalition heading for a train wreck?

January 16th, 2017 25 comments

With a Queensland election due in the next 12 months and the usual journalistic speculation about an early election, the LNP will soon be faced with the decision of whether to formalise its coalition with the ONP. At a minimum, that would mean an exchange of preferences. But, given that the LNP doesn’t look like winning a majority in its own right it will be difficult to avoid the question of a possible coalition government. I’ll offer the LNP the unsolicited advice that it would be better, both morally and in terms of long-term self-interest to lose honorably than to win with Hanson.

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Categories: Oz Politics Tags:

Monday Message Board

January 16th, 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:


January 16th, 2017 9 comments

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

Categories: Regular Features Tags:

Jobs, robots and self-driving vehicles

January 15th, 2017 30 comments

Lately I’ve been reading Tim Dunlop’s excellent book Why the future is workless , and thinking about the issues it raises, particularly in the light of the prospect of autonomous vehicles and other transport technologies. Tim raises the obvious question: what will happen to people who currently drive for a living, and the broader issue of whether any kind of work will survive the process of automation.

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The Australian’s clean coal magic trick

January 10th, 2017 26 comments

A day after my post pointing out the failure of CCS, the Oz has a piece by Nathan Vass of the Australian Power Project (which appears to be a solo effort), claiming that it’s finally on the way. My response is in Crikey, with the title above.

Categories: Economics - General Tags:

The IT revolution comes to transport

January 8th, 2017 84 comments

One of the striking features of technological progress over the past fifty years or so has been that of incredibly rapid progress in information and communications technology, combined with near-stasis in most other sectors. Here’s what I wrote on the topic in 2003, and could have reposted, essentially unchanged, a decade later

On most of the obvious measures, technological progress in transport stopped sometime in the late 1960s and, at the frontiers, we are now seeing retrogression.

In 1970, we had regular visits to the moon, and supersonic passenger flight via Concorde was on the way. Now we have neither. Even the space shuttle, designed as a low-cost “space truck” to replace the expensive moon program, is now headed for oblivion, with no obvious replacement.

At a more prosaic level, the 747 jumbo jet, introduced in the late 1960s, is still the workhorse of passenger air transport. Boeing’s attempts at producing a new generation of passenger planes have failed, and the likely replacement for the jumbo jet is the Airbus A380 – essentially just a double-decker jumbo. In all probability, this will be the standard for the next thirty or even fifty years. Of course we don’t have flying cars, or even personal helicopters, as most projections from 50 years ago supposed.

Quite suddenly, this looks out of date. Electric cars, drones and, most significantly, self-driving vehicles have been transformed from curiosities (or, in the case of drones, military hardware with no apparent positive value to humanity) to the likely transport technologies of the near future.

There have been quite a few thinkpieces about these topics, particularly self-driving vehicles, but nothing I’ve seen has been really satisfactory to me. The central focus has been on the challenge of introducing imperfect self-driving vehicles to our current road network. But if we’ve learned anything from the last fifty years (from electronic watches to desktop publishing to digital cameras) it’s that, whatever the initial limitations, a technology that’s been digitised will inevitably improve to the point where it outperforms the analog competition on just about every dimension.

So, it’s safe to predict that, quite soon, self-driving vehicles will be safer and more reliable than all but the best human drivers, and cheaper than vehicles designed for human control. That raises some obvious questions

* what will vehicles be like once the design constraints imposed by the need for a human driver are no longer relevant;

and, more importantly,

* if unskilled or careless human drivers are more dangerous to fellow road users and pedestrians than self-driving vehicles, should they be allowed to drive at all?

To spell out the second point a bit further, if self-driving vehicles are readily available and affordable (and particularly if self-driving technology can be retrofitted to existing vehicles), there’s no argument from the necessity of personal mobility to give speeders and drunk drivers multiple chances to kill other road users. The fact that these people might enjoy driving themselves is scarcely relevant. In fact, to the extent that enjoyable driving is dangerous driving (and, in my limited experience, it mostly is), it’s an argument against allowing it.

Just writing this, I can imagine the ferocity of the responses. I suspect that policies on self-driving cars will turn out to be a long-running front in the endless culture wars in which we seem to be permanently enmeshed.

There’s a lot more to think about here, but that’s enough to be going on with.

Categories: Life in General Tags:

Health policy: Excerpt from Economics in Two Lessons

January 8th, 2017 14 comments

Another excerpt from my book-in-progress, Economics in Two Lessons (partial draft here). As usual, praise is welcome, useful criticism even more so.

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Categories: Economics in Two Lessons Tags:

Clean coal

January 7th, 2017 18 comments

The most plausible argument put forward by opponents of immediate action to mitigate global warming is that some form of ‘clean coal’ technology will emerge that will obviate any need for costly changes in our current way of doing things.

The term ‘clean coal’ is sometimes used to refer to ‘ultra-supercritical’ or ‘high efficiency, low emissions’ (HELE) coal-fired power stations. Despite these impressive sounding description, HELE plants provide only a 30 to 40 per cent reduction in emissions relative to standard coal-fired power plants. They aren’t as clean as gas-fired fossil fuel plants, let alone renewables (or nuclear power, though this isn’t a viable solution for other reasons).

‘Clean coal’ is also used to refer to the idea of ‘carbon capture and storage’, (CCS) in which the carbon dioxide produced in coal-fired power stations would be captured before being emitted into the atmosphere, then pumped into underground storage, or captured through ‘biosequestration’ into products such as biochar.

CCS was an appealing idea for a coal producing country like Australia. Enthusiasm for the idea led to the establishment of the Global CCS Institute in Melbourne. However, the Institute’s own website shows that CCS is not a viable option. After decades of work, there is exactly one operational power plant using CCS, the Boundary Dam project in Canada. Two more, both deeply troubled, are under construction in the United States.

Even if all the coal-fired CCS power plant projects anywhere in the world that are listed by the Institute as possibly happening by 2030 are included, the total amount of CO2 captured would be less than 20 million tonnes a year. That’s about what Australia generates in two weeks.

To sum up, what’s usually called ‘clean coal’ isn’t clean. The real thing, cost-effective coal-fired power stations with CCS, is never going to happen.

Categories: Environment Tags:


January 6th, 2017 15 comments

In the computer business, the term “vaporware” refers to products that are announced, described in glossy brochures, and even offered for sale, but never actually delivered.

A similar term is certainly needed for books. My own book-in-progress, Economics in Two Lessons is years behind schedule, but a first draft is, at least, in sight.

The prize, in this respect, must surely go to Keith Windschuttle. His Fabrication of Australian History: Volume I, released in 2002, made a big splash This was not so much because of the contents (some quibbles over footnotes, along with a lawyerly attempt to blame Tasmanian indigenous people for their own disastrous fate). Rather, it was the promise of future volumes II and III, on a yearly schedule. Volume II, in particular, was supposed to be in advanced state of preparation and would refute Henry Reynolds’ work on the violence of the Queensland frontier. Volume III was to do the same for WA.

Year followed year, and nothing appeared. Windschuttle got a number of gigs on the strength of his promises, notably including a seat on the ABC Board and the editorship of Quadrant. He also turned out a book on White Australia and then, confusingly, a Volume III of Fabrication, which was not the promised WA volume, but a rehash of the rightwing side of the Stolen Generations debate. He then promised a Volume II, for 2015, which of course has not appeared.

In all the time since 2002, as far as I can tell, he hasn’t released so much as a magazine article backing up his claims about WA and Queensland. I doubt that this can be simple laziness. More likely, he started the research and realised that the evidence wasn’t going his way. Rather than act like the objective historians he claims to admire, and report the facts, he strung along his fellow-believers in the inherent goodness of British civilization with promises that, Real Soon Now, he would come up the facts to refute those nasty leftists.

I was going to let sleeping dogs lie, but Windschuttle has appeared with another new book, this time attacking constitutional recognition of indigenous Australians. So, in honour of the non-appearance of the book that was going to set the historians straight, I propose the term “Windyware” for all such non-books.

Categories: Economics - General Tags:

Market Failure and Income Distribution: Notes for Economics in Two Lessons

January 5th, 2017 10 comments

For quite a while now, I’ve been working through my book-in-progress, Economics in Two Lessons (partial draft here), focusing on applications of Lesson 2

Lesson 2: Market prices don’t reflect all the opportunity costs we face as a society.

Thinking about the standard market failures (monopoly, externality and so on), I’ve come to the conclusion that I need to say more about the interaction between market failure and income distribution. I’ve already looked at the opportunity costs involved in income redistribution and predistribution, but different kinds of questions are coming up in relation to issues like monopoly, privatisation and for-profit provision of public services.

The discussion here and at Crooked Timber has been very helpful in stimulating my thoughts, but I need to do a lot more clarification. Some preliminary thoughts are over the fold: comments and criticism much appreciated.

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Categories: Economics in Two Lessons Tags:

Open thread

January 5th, 2017 12 comments

An open thread until I get around to posting again.

Categories: Metablogging Tags:


January 5th, 2017 1 comment

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

Categories: Regular Features Tags:

Education: Excerpt from Economics in Two Lessons

December 29th, 2016 21 comments

Here’s another excerpt from my book-in-progress, Economics in Two Lessons. As usual, praise is welcome, useful criticism even more so. You can find a draft of the opening sections here.

In the section over the fold, I’m looking at education.

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Categories: Economics in Two Lessons Tags:

Public Services: Excerpt from Economics in Two Lessons

December 28th, 2016 10 comments

As we saw in Section …, Lesson 1 does not apply to public goods, which can be used all, without any diminution of their usefulness, and for which no price can be charged. Many of the core activities of government may be regarded as providing public goods. These include public health measures, the control of air pollution, urban planning, police services and national defense.

More abstract services such as the legal system, the definition and enforcement of property rights, systems of weights and measures and so on are also public goods. Less obviously, macroeconomic management is a kind of public good (or sometimes a public bad). The level of economic activity, the rate of inflation, exchange rates and interest rates affect everyone, though in different ways.

Most advocates of Lesson 1 recognise at least some of these forms of public good provision as essential. The big disputes arise over services such as health, education and welfare services, which have long been provided, or at least funded, by governments. These services are commonly referred to as ‘human services’, and typically involve a personal relationship (doctor-patient, teacher-student, caseworker client and so on) between the service provider and the recipient.

Although these services are sometimes referred to as public goods, they don’t, in general, meet the criteria economists use to define public goods. A hospital bed or school place provided to one person isn’t available to others, and prices can be charged for access to these services.

On the other hand, neither do these services the standard conditions of Lesson 1. There are two central problems that arise. First, these services are expensive and recipients are rarely in a position to pay for them directly. As a result, all of the problems of risk and insurance, discussed in Chapter 10 …, apply to the financing of these services.

The second problem is that the relationship between providers and recipients typically involves an imbalance of information, power or both. A student is not in a good position to judge whether the education she is receiving is good or bad. Similarly, a patient must rely on their doctor’s expertise and professional ethics to get the appropriate treatment. In other cases, such as that of police services, there is also an imbalance of power, which may be misused.

Advocates of Lesson 1, such as Milton Friedman in Free to Choose have generally accepted the need for public funding to overcome the problems of financing education and, at least in some instances, health care. However, Friedman and others have assumed that any other problems can be overcome by market competition and consumer choice. Indeed, they have argued that market competition will help to prevent corruption and abuses of power that arise when governments provide services directly.

As a result, market advocates have favoured policies based on concepts such as ‘contestability’ and ‘contracting out’, in which for-profit firms compete to provide publicly funded services. The archetypal example is the perennial proposal for school ‘vouchers’, that is, funds allocated to students or their parents which can be paid to whichever school they choose to attend.

This idea was elaborated into a complete ‘reinvention of government’ by writers like Osborne and Gaebler in the late 20th century and implemented, to a large extent, in the wave of market liberal reform led by the Thatcher government in the UK. As a result, we have accumulated plenty of experience of market contestability and for-profit provision.

Theoretical analysis doesn’t give any clear answer as to which model of provision is likely to be best for services like health and education. However, after several decades of experience with market-oriented contestability, the empirical evidence is stark. For-profit provision of such services is at best problematic, and at worst disastrous.

The only other model with success comparable to that of public service provision is not-for-profit provision by organisations with a charitable or activist mission. Church-run schools and hospitals, and activist-run services like women’s shelters and services for the unemployed and homeless, have complemented the public sector, meeting needs that have been unrecognised or underserved.

The issue is not, in the end, one of public versus private. Rather it is the fact that market competition and the profit motive inevitably associated with it is antithetical to the professional and service orientation that is central to human services of all kinds.

Categories: Economics in Two Lessons Tags:

Monopoly and Regulation: Excerpt from Two Lessons book

December 24th, 2016 24 comments

Here’s another excerpt from my book-in-progress, Economics in Two Lessons. As usual, praise is welcome, useful criticism even more so. You can find a draft of the opening sections here.

In the section over the fold, I’m looking at public ownership.

Read more…

Categories: Economics in Two Lessons Tags:

Fuel efficiency standards could help curb Australia’s persistently growing emissions

December 24th, 2016 13 comments
Categories: Environment Tags:

That was quick

December 22nd, 2016 47 comments

Not long after the election, I perceived the signs of an emerging semi-formal coalition between the LNP and One Nation. Less than three months later, here’s Jeff Kennett, generally seen as a relative moderate in the Victorian Liberal Party, endorsing the idea.

To repeat what I said then, I remain convinced that this will prove a path to disaster for the LNP in the long run. One Nation is already repeating the history of meltdowns we saw in its first big run, and making clear that it stands for nothing beyond incoherent gesture politics. That’s true of rightwing identity politics in general, which is why I think it can’t last. It can, however, do plenty of damage in the meantime.

Categories: Oz Politics Tags:

Privatisation and education re-re-re-post

December 21st, 2016 10 comments

I’m working on my long running book project Economics in Two Lessons, and I dug out this old post, originally written in 2008, which remains strikingly relevant today.
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Categories: Economic policy Tags:

The economics of open borders

December 21st, 2016 76 comments

A colleague recently sent me a paper on the economics of open borders, by John Kennan, which I hadn’t known of before, though it came out in 2013.
Kennan’s conclusion is striking

Liberal immigration policies are politically unpopular. To a large extent, this is because the beneficiaries of these policies are not allowed to vote. It is also true, however, that the enormous benefits associated with open borders have not received much attention in the economics literature.20 Economists are generally enthusiastic about free trade. But if free movement of goods is important, then surely free movement of people is even more important.
One conclusion of this paper is that open borders could yield huge welfare gains: more than $10,000 a year for a randomly selected worker from a less-developed country (including non-migrants). Another is that these gains are associated with a relatively small reduction in the real wage in developed countries, and even this effect disappears as the capital–labor ratio adjusts over time; indeed if immigration restrictions are relaxed gradually, allowing time for investment in physical capital to keep pace, there is no implied reduction in real wages.

So, is Kennan right about the benefits of open borders? And if so, is there a way of transferring some of those benefits to already-resident wage earners who would otherwise lose, or at least not gain, from expanded migration?
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Categories: World Events Tags:

If the Productivity Commission puts ideology ahead of evidence, do we still need it?

December 21st, 2016 23 comments

That’s the title of my latest piece in The Guardian. It’s a response to the Productivity Commission’s report on competition in human services. I wrote a submission in response to the draft report a while back, but it had no impact, and neither did any other evidence.. If anything, the final report is slightly worse than the draft.

My final para

Rather than close on a negative tone, I’ll make one suggestion for contestability. Private sector consulting firms have demonstrated a long-standing expertise in producing impressive looking reports to support the (predetermined) conclusion required by the client.

Given the predictability of the Productivity Commission’s conclusions on topics like this, private firms would have no difficulty in replicating them. Surely this is a service that could do with being opened up to the chill winds of competition.

Categories: Economic policy Tags:

Monday Message Board

December 19th, 2016 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:

Monopoly and Regulation: Excerpt from Two Lessons book

December 17th, 2016 12 comments

Here’s another excerpt from my book-in-progress, Economics in Two Lessons. Rather than work sequentially, I’m jumping between:

Lesson 1: Market prices reflect and determine opportunity costs faced by consumers and producers.
Lesson 2: Market prices don’t reflect all the opportunity costs we face as a society.

In the section over the fold, I’m looking at monopoly and regulation. Next up, public ownership.

As usual, praise is welcome, useful criticism even more so. You can find a draft of the opening sections here.

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Categories: Economics in Two Lessons Tags:

Are young Australians (mostly) Christians ?

December 16th, 2016 24 comments

Regular readers will know that I’m not a great fan of analysis based on generations (Boomers, X, Millennials and so on). Most of what passes for insight on this topic consists of the repetition of unchanged cliches about the rigidity and hypocrisy of the old, the laziness and irresponsibility of the young, and so on, applied to whichever cohort happens to be old or young at the time.

But there are some genuine differences between cohorts, typically determine by the time they have entered adulthood. One of these is religion.
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Dutton, cringeworthy and (literally) un-Australian

December 15th, 2016 40 comments

Peter Dutton’s attempts to promote an “uprising” in support of Christmas, and against “political correctness gone mad” are un-Australian in all sorts of ways, but most obviously in the stunning cultural cringe they reflect. He’s borrowed the catchphrase of a British tabloid in an attempt to import a US culture war campaign that has been going on so long it’s a Christmas tradition in itself (I observed that it was old stuff, back in 2004). This guy is the best the Trumpist faction of the LNP/ON can come up with?

Categories: Boneheaded stupidity, Oz Politics Tags:

Solving Newcomb’s problem with (possibly non) expected utility theory

December 12th, 2016 19 comments

The Grauniad has just resurrected Newcomb’s problem. I have a slightly special interest since the problem was popularized by one of my betes noires, Robert Nozick. So, in asserting that there’s a trivial solution, I have something of a bias.
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Categories: Philosophy Tags:


December 12th, 2016 11 comments

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

Categories: Regular Features Tags:

Monday Message Board

December 12th, 2016 2 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: