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Bitcoin’s zero-sum game

January 23rd, 2018 3 comments

That’s the title of my latest piece in Inside Story. Nothing that will surprise anyone who’s been paying attention to what I’ve written on this, so I’ll just cite the conclusion

Since bitcoins are not useful as a medium of exchange, or desirable in themselves, their true value is zero. The highest price at which bitcoins have traded is around $20,000. At the time of writing, the market price is halfway between that level and zero. Pay your money (or not) and take your chances.

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The Rise and Fall of Keynesianism after the GFC

January 9th, 2018 17 comments

International Studies Quarterly has just published a symposium responding to a paper by Henry Farrell and me, which has been released from behind the paywall for the occasion. Our paper has the fairly self-explanatory title “Consensus, Dissensus, and Economic Ideas: Economic Crisis and the Rise and Fall of Keynesianism ” In our paper we looked at the resurgence of fiscal Keynesianism in the immediate aftermath of the Global Financial Crisis and of the successful counterthrust leading to the adoption of austerity policies in the US and Europe.

The symposium has comments from a multidisciplinary group of political scientists, sociologists and economists: Abraham Newman, Andrew Baker, Elizabeth Popp Berman, Paul Krugman, Stephen K. Nelson along with a response from us. It’s great to get these different disciplinary perspectives all in one place, since they all have key pieces of the puzzle, and we are very happy they have chosen to engage with us.

Decarbonizing the economy is easy and cheap

January 8th, 2018 43 comments

Since I wrote my post on good climate news for 2017, a couple of news items have caught my eye

* Britain now generates twice as much electricity from wind as from coal, and around 30 per cent from renewables in total
* More than half the vehicles sold in Norway are now electric or plug in hybrid

My thoughts on these examples over the fold:

TL;DR version: These examples show that, at least for developed countries, massive reductions in CO2 emissions are feasible right now, with no discernible effect on living standards.

Read more…

Categories: Economics - General, Environment Tags:

More public holidays for a sustainable society

December 26th, 2017 43 comments

As I mentioned in relation to their advocacy of an end to coal, the Greens occupy a position where they can put forward policies that are outside the range of possibilities taken seriously by the commentariat. Another recent example is their proposal, during the Queensland election campaign for four additional public holidays. Of course, this idea was ridiculed by the major parties, which are still stuck in a mode of thinking where “jobs and growth” are ends in themselves rather than means to a better life. Jackie Trad, for example, was quoted as responding that “the election was about jobs, and that the proposal was “populist”, while Tim Nicholls described it as “loopy”. The attitudes expressed by Trad and Nicholls are typical of the neoliberal* thinking dating back to the 1980s that still dominates much of the political class.

Before the 1980s, it was generally understood that the benefits of technological progress included reductions in the paid work time needed to achieve a decent standard of living. Over the first three quarters of the 20th century, standard working hours were reduced from 48 per week to 44 then to 40, annual leave became a standard condition of employment, increased to four weeks a year in the 1970s, and the number of public holidays was increased. The last significant move in this direction was the 38 hour standard working week, introduced in 1983. Some more progressive Labor governments, such as that of the ACT have pushed for more public holidays. That’s the exception though: the general direction of public policy has been to push for more “flexible” (that is, flexible at the employer’s discretion) hours and working conditions, fewer long weekends and so on.

If we are to move to a more sustainable economy, a shift away from ever-increasing material consumption is necessary. A reduction in the time devoted to market work and production, as well as being desirable in itself, is an essential part of this process. An increase in the number of official public holidays, and a restoration of penalty rates for holiday work, would be an important signal that the era “jobs and growth” neoliberalism, setting the alarm clock early, and so on, is behind us.

* Here. I’m using “neoliberal” in the broad pejorative sense of “bad assumptions associated with the era of market reform that began in the 1980s” rather than in reference to a coherent theoretical position, for which I would typically use the term “market liberalism”. There’s nothing inherently free-market about the rhetoric of harder work, productivity and “competitiveness”, but the empirical fact is that they go together.

Categories: Economics - General, Oz Politics Tags:

The strategic supply curve

December 22nd, 2017 9 comments

A plug for a recent paper: one of my Twitter followers asked for a non-technical explanation, so here it is.

Flavio Menezes and I just released the latest version our paper “The Strategic Industry Supply Curve,” available here. The central aim of the paper is to extend the standard graphical analysis of supply and demand, familiar to every first-year economics student, to cases where markets are imperfectly competitive (monopolies and oligopolies). At present, these markets are analyzed using quite different theoretical tools, making only limited use of graphical representations.

The main innovation is the notion of the strategic industry supply curve, representing the locus of Nash equilibrium outputs and prices arising from additive shocks to demand.  Special cases include monopoly, Cournot and Bertrand oligopoly and competition in linear  supply  schedules.

As in the standard graphical analysis, we can
* use measures of consumer and producer surplus to determine the distribution of the welfare gains from trade between consumers and producers
* derive elasticity measures for supply and demand
* analyse the comparative statics of cost shocks
 
Our analysis allows us to view imperfect competition as analogous to a case where producers engage in ‘cost-padding’.  That is, the difference between the strategic supply curve (an equilibrium concept) and the industry supply curve (the sum of the supply curves of individual firms) can be seen as the measure of the ‘economic rents’ afforded by imperfect competition.
 
Our analysis has important implications for competition policy. For example, competition regulators examine industry supply curves, but do not directly assess the efficient costs of production. So, they are unable to distinguish directly between efficient costs and the ‘cost-padding’ associated with strategic behavior. Rather, the extent of such cost-padding is implicit in the the specific form of competition that it is assumed in the analysis (e.g., Cournot versus (differentiated) Bertrand). Conversely, assumptions about the form of competition are largely arbitrary and not informed by data. The approach in merger regulation contrasts sharply with that of monopoly price regulation, where the focus is on determining the monopolist’s efficient cost, so as to set efficient (in a second-best sense) prices.

The arbitrary nature of economists’ assumptions about the strategy spaces appropriate for game-theoretic representations of economic problems has been a long-standing theme of ours (refs). In this paper, we have turned this criticism around and shown how an explicit treatment of the strategy space can not only yield powerful new tools for economic analysis but can enhance the scope of such familiar tools as demand-supply diagrams.

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Socialism and social democracy

December 19th, 2017 48 comments

From a comment on a Facebook post by Max Sawicky, asking about the difference between socialism and social democracy (sadly, I think the context was one of the internecine disputes in which the left has long specialised, though the right has now caught up and surpassed us).

Socialism and social democracy

I’ve switched back and forth between the two terms, with a more or less constant understanding of their meaning. For me, “social democracy” refers to the actual policy program advocated and to a significant extent implemented by social democratic parties in the mid-20th century: free and universal health care and education, a social welfare system sufficiently broad and generous to eliminate poverty, full employment and strong unions, in the context of a mixed economy. “Socialism” refers to a fundamental transformation of the capitalist system incorporating and going beyond the social democratic program to end large-scale capital and dependence on wage labour.

That is, as I use the terms, social democracy refers to a contemporary policy program and socialism to a utopian aspiration. During the period of neoliberal dominance, , I described myself as a social democrat, defending the achievements of the 20th century and trying to extend them where possible. Now that there is an opening for the future, we need the kind of utopian vision I associated with “socialism”.

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Quiggin quizzical

December 17th, 2017 39 comments

My observations on the electricity demand associated with Bitcoin made it into the ABC News Quiz last week, which is a kind of fame, I guess.

Meanwhile, I had another piece in the Guardian, this time looking at the fact that, despite being called a “cryptocurrency”, Bitcoin is used even less as a currency now than it was several years ago. The core problem is that the system is so overloaded by miners creating new coins that processing transactions is slow, costly or both I mentioned the fact that game company Steam had stopped accepting coins and that the list of merchants accepting Bitcoin is small enough to fit on one page. Checking further I concluded that this list is out of date, but not in a good way. Lots of those included, such as Expedia, no longer accept Bitcoin, if indeed they ever did. Here’s one person’s experience. Bitcoin is now a “crypto asset” which is even more obviously a Ponzi fantasy than the original currency story.

One response I got was that transaction speed would soon be greatly improved by something called Lightning. Checking on this it appears that this is software in an alpha (very early) stage of development, which would allow any two parties to set up a transactions account separate from the main Bitcoin blockchain, and only occasionally update the main account. An analogy, for readers of a certain age, is the era before Bankcard, when, if you wanted to do something other than paying cash, you maintained a separate credit and debit account with every store you dealt with. This does not seem like the dawn of a new era to me.

Categories: Economics - General Tags:

A barbarous relic

December 13th, 2017 29 comments

That’s what Keynes called the gold standard nearly a century ago, and he was right. I was reminded of this by the commentary on my latest piece on Bitcoin, published in the Conversation and also the ABC. I restated the points I made in my 2015 article on the massive and wasteful use of electricity in Bitcoin mining. The key points are that the cost of mining Bitcoins will inevitably rise until it is equal to the price for which Bitcoins can be sold, and that the great bulk of this cost is the electricity used to run specialised computer systems.

The responses included a great deal of huffing and puffing to the effect that I know nothing about cryptocurrency and shouldn’t comment, but showed no understanding of the central point, let alone any attempt to refute it. The scale of Bitcoin’s electricity use (which was hard to observe directly when I wrote in 2015 is now so massive as to be undeniable.

The other response, standard in cases like this, is whataboutery, that is, attempts to point out other wasteful uses of electricity compared to which Bitcoin is allegedly insignificant. I addressed one of these in the article, responding so someone who claimed that the electricity used by Bitcoin (serving at most a few million people) is “only” one-third of that of the rest of the global financial system.

Some other whatabouts led me to some interesting thoughts. One, which I plan to look at further is the use of electricity in electronic equipment on standby. The other, pushed with some vigour by commenters is gold. So, is gold worse than Bitcoin

Read more…

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Monday Message Board

December 4th, 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.

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Bitcoin now a much bigger waste of energy

December 2nd, 2017 27 comments

I’m giving a talk tomorrow at a Colloquium organized by a group called Sort, on The Wasteful Economics in Resource Recovery, and I’ve been asked to talk a bit about blockchain technology. That reminded me that I needed to take another look at the issue, and what has changed since 2015 when I wrote that

at most of the market value of a Bitcoin reflects the electricity wasted in the calculations needed to “mine” it, with the obvious disastrous implications for the global climate.

and concluded that the sooner this collective delusion comes to an end, the better.

As far as I can determine, the only thing that has changed is that the Bitcoin bubble has got massively bigger and that the associated waste of energy is now much more widely recognised than when I first wrote about it.

Despite the huge increase in the market value of bitcoins, they seem further than ever from becoming an actual currency. Unsurprisingly, there’s no sign that governments are willing to accept bitcoins as legal tender. Nor is there any sign that they are displacing standard forms of money. On the contrary, bitcoins now seem to be seen as a financial asset, with no real suggestion that they will ever be a general medium of exchange.

As a check on this, here’s a list of firms that accept bitcoin as payment, which fits easily on to a single page. Sydney readers who would like to buy a beer with bitcoin are in luck, or were back in 2014 when the Old Fitzroy got a bit of coverage for saying it would accept bitcoins. There’s another pub listed in London, and that’s about it as far as drinks are concerned. After nearly a decade, Bitcoin acceptance remains the stuff of publicity stunts, not a serious commercial option.

At least by repute, bitcoins are used more extensively in covert transactions such as those involving drug trading, tax evasion and money laundering. But that’s scarcely a good reason to bet on them beintg around for a long while. If the scale of the problem gets large enough to cause real problems, governments will act to shut the whole system down or regulate it to the point where the compliance costs make the whole idea unattractive.

At any rate, the durability and magnitude of the Bitcoin phenomenon, running for nearly 10 years and with a putative value of nearly $US 100 billion, provides us with a very sharp test of the Efficient (financial) Markets Hypothesis. If Bitcoin eventually becomes a currency, the EMH and its supportsr will be vindicated, and I (along with quite a few other economists) will have a lot of egg on my face. If the bubble bursts, the roles will be reversed.

Finally, I should give a plug to Gridcoin. This is a project that aims to avoid the massive waste involved in Bitcoin by making calculations that are actually useful to science. This is a worthwhile idea. But with a current market capitalization of $21 million, it’s obviously got a long way to go.

There are also alternatives to the “proof of work” method of validating changes to the blockchain, such as “proof of importance”, which is analogous to Google’s page ranking systems. I’m still trying to find out more about these.

Categories: Economics - General Tags:

Appearances

November 29th, 2017 5 comments

I’ll be at the State Library of Queensland tonight for Science Says!. I don’t know what I’ve let myself in for, but I’m assured it will be fun.

On Sunday, I’ll be talking at a Colloquium organized by a group called Sort, on The Wasteful Economics in Resource Recovery.

My last event for the year (I think!) will be a talk about the Economics Nobel award (yes, I know) at the Economics Society of Australia Christmas party. Free for members, probably not of much interest to others.

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Some whataboutery from Tim Nicholls

November 13th, 2017 10 comments

Among the tools used to defend the indefensible, the most widely used is “whataboutery”. When faced with a criticism you can’t answer, you point to something allegedly comparable done by someone supposed to be on the same side as your critic, and ask the critic “what about …”

A recent example (Hat Tip Bill Wallace). Presented on ABC TV with my observation that his election promises represent an arithmetic impossibility, Tim Nicholls resorted to whataboutery, suggesting that I had gone easy on Anna Palaszczuk in regards to the use of transfers of debt between the general government sector, GBEs and public service superannuation. Oddly enough, I’ll be covering this exact point in an article I’m now writing for The Guardian. The relevant para

Labor has been able to improve the accounting performance of the general government sector by requiring public enterprises to make bigger contributions to the budget and by making transfers from the funds hypothecated to pay for public service superannation. This doesn’t change the financial position of the public sector as a whole, but makes the budget sector look better. The relevant criteria is public sector net worth and net financial worth, which are unaffected by such manoeuvres. Fortunately, public sector net worth has never been a problem: the Queensland government had net worth of over $170 billion when the Costello Commission reported, a figure that is projected to exceed $200 billion by 2020.

Some broader responses:

* Whataboutery is a very weak defence in a clear-cut case like this. Even if I were an ALP hack (readers of this blog can judge for themselves), it wouldn’t invalidate the point I’m making

* I don’t think Palaszczuk is open to the specific criticism I’m making of Nicholls. She hasn’t promised to cut taxes or improve the budget balance, and her election spending promises look to be the kind of thing that can be managed within the normal budget process

* I’ve already been critical of both sides in this election campaign. My only published opinion piece was a criticism of Palaszczuk’s pro-Adani policy, which she has subsequently reversed (not claiming cause and effect here, of course). If Nicholls cares to put up an election platform that adds up and protects crucial services from cuts, I’ll be the first to congratulate him.

Read more…

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Armistice Day, 2017

November 11th, 2017 20 comments

Another Armistice Day and the prospects for peace are bleaker than they have been for years. Not only are militaristic demagogues in the ascendancy just about everywhere, but the cult of the military is increasingly unchallenged, even in countries generally seen as peaceable, like Canada. Then there’s the threat of nuclear war posed by a much more capable North Korea, and the erratic responses of the Trump Administration.

It’s a day on which I feel increasingly alone. It seems obvious to me, 100 years after the bloodiest year of war in Australia’s history and the revolutions the war produced, that war and revolution are almost invariably a pointless waste of life and human potential, usually ending in disaster for all, and that even grave historical and social injustices are better resisted by peaceful means than by resort to force. But every military anniversary reminds me that this is the view of a small and shrinking minority.

One day, perhaps, peace will come. But not today.

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The laws of mathematics don’t apply to the LNP

November 6th, 2017 15 comments

LNP promises don’t add up

It is common for political parties to promise more than they can deliver at election time. Even by the relative lax standards of Australian campaigns, the LNP Plan “Getting Queensland Back in Business” stands out for its unreality. 

The Plan only promises to create 500 000 jobs through a fiscal policy that involves

* Cutting taxes;

* Increasing expenditure; and

* Improving the budget balance

These are all desirable objectives, but it’s a matter of simple arithmetic that all three can’t be achieved at once.

Reductions in revenue

The LNP plan proposes to:

* Increase the payroll tax threshold

* Freeze registration for 6-cylinder cars

*  Write down the value of GOC assets in electricity, and increase competition to drive down prices.  This must entail a reduction in the flow of dividends to the general government sector The LNP has criticised the current governments reliance on dividends from GOCs but has made no suggestion as to how this revenue source will be replaced.

Increased capital expenditure

The LNP Plan proposes a substantial increase in  infrastructure spending.  The strategy implies that spending will be increased by up to $3 billion a year. Explicit commitments of $1.3 billion for water projects and $500 million ‘Royalties for Regions’  are included in the Plan.  The Plan commits to building a new coal fired power station at an unstated costs. It has also been suggested that the M1 will be duplicated at a cost of $2.4 billion

Current expenditure

The LNP plan announces no cuts in current expenditure, other than symbolic targets such as the Safe Schools program and executive bonuses in energy businesses, which would yield minimum savings. The LNP has promised no forced redundancies and has advertised its intention to build schools and hospitals, though without a specific budget. The Plan includes expenditure commitments including a crime action plan, a youth employment plan and assistance for tourism.

Greatly improved budget balance

Following the recommendations of the Costello Commission of Audit, the LNP proposes to target a surplus on fiscal balance rather than, as at present, net operating balance. The difference between the two is net capital investment, currently around $3 – $4 billion. Proposed increases in infrastructure spending would make this difference even greater.

500 000 jobs

As for the 500 000 jobs promise, it turns out to be a simple statistical trick.  In previous election campaigns, it’s been common to commit to employment targets for a three-year term in government.  Nicholls has shifted the goalposts by promising to create the jobs over a period of 10 years, an annual rate of 50 000 jobs a year.  That’s only marginally greater than the rate achieved during the term of the Palaszcuk government. The implied annual rate of growth is 1.9 per cent, again only marginally higher than the rate of growth under recent Labor governments. It would, however, be a significant improvement on the outcome under the Newman government, when less than 50 000 additional jobs were created in a three year term of government.

Summary

Despite Malcolm Turnbull’s recent suggestion to the contrary, the laws of arithmetic apply in Australia and, in particular to Australian governments. The promises made by the LNP can be delivered only through large, unannounced cuts in general government expenditure. This is consistent with the strategy adopted by the Newman government in 2012, and by the Abbott government in 2013. 

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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.

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:

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.

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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.

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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.

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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.

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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…

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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.

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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.

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The opportunity cost of the Melbourne Grand Prix

September 15th, 2017 37 comments

Last Sunday, my wife Nancy and I had a great weekend in Mooloolaba, where I took part in the Ironman 70.3 event, along with a thousand or so other competitors from around Australia and the world as well as hundreds of spectators. As Nancy said, even though the Sunshine Coast isn’t far from Brisbane, we’d never get around to going if there weren’t an event like this, but the beautiful setting makes us keen to return.

While I was there, a friend mentioned that the Melbourne Ironman event had been cancelled because the date of the Grand Prix had changed, producing a clash. That got my mind away from transition times and back to economic policy.
Read more…

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Another appearance (updated)

August 2nd, 2017 2 comments

I’ll be on Sky at 7pm tonight talking to Peter Switzer talking about Zombie Economics and my views on the Australian economy.

Update There’s a link to the talk here

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Special bonus talk: Customs House tomorrow 8am

August 2nd, 2017 Comments off

Any Brisbane readers interested in my talk on toll roads have a special opportunity to hear it tomorrow morning at the Customs House, with breakfast starting at 8am. It’s the UQ School of Economics annual Colin Clark lecture, and the scheduled speaker has fallen ill, so I’m off the bench as a substitute. More details shortly, I hope.

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The nuclear renaissance dies, forgotten and bankrupt

August 2nd, 2017 24 comments

Unless you were paying very close attention, you probably haven’t seen the news that construction of two Westinghouse AP-1000 nuclear reactors at the Virgil C. Summer plant in South Carolina has been abandoned, following the bankruptcy of Westinghouse earlier this year. There are two more AP-1000 reactors under construction at the Vogtle site in Georgia, which are also likely to be scrapped. Either way, this seems the right moment to mark the end of the nuclear renaissance which offered high hopes in the early 2000s. The biggest remaining carbon capture and storage project, the Kemper plant in the US, was also abandoned a month ago.

So, at this point, there is no alternative to the combination of renewables, storage and energy efficiency. This would be a good moment for those environmentalists who accepted and promoted the nuclear story to recognise that any further efforts in this direction can only harm the prospects for a low-carbon future.

More soon on this, I hope

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Unscrambling the Toll Road Egg

July 31st, 2017 26 comments

That’s the title of a presentation I’ll be giving to a seminar run by the Institute for Sensible Transport in Sydney. Registrations are open until tomorrow (Tuesday 1 August) for those with a professional interest. For my readers, in general, here’s a link to the presentation. Please advise if the link works, or doesn’t, as it’s a newish feature in Dropbox I haven’t used much

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Technology to the Rescue ?

July 12th, 2017 38 comments

There’s been a fair bit of buzz about an article in New York Magazine with an apocalyptic picture of climate change over the next century. I’ll for a more complete response later. But as it happens, I was already thinking about a much more optimistic post.

From the Climate Change Authority, of which I was a Member until recently, here’s a set of emissions trajectories consistent with a 67 per cent probability of limiting warming to 2 degrees.

There’s a pretty good case to be made that we are on the blue trajectory, and that, with decent political outcomes, we will be able to go below it and hold warming to the Paris aspirational target of 1.5 degrees. That would still have plenty of negative effects, for example on coral reefs, but it would not be an existential threat to humanity.

The points that are critical in the blue trajectory are a peak in emissions, right about now and a drop to zero net emissions by 2050. The first looks to have been achieved. As for the second, we are already seeing commitments to this goal from developed countries and jurisdictions, and there’s every reason to think it can be achieved at low cost.

As an economist, this is about the outcome I would have expected given a global commitment to an emissions trading scheme with a carbon price on a rising trajectory to $US100/tonne or so. In fact, we’ve seen nothing of the kind. There has been no real global co-ordination, and where carbon prices have been imposed, they have been low and limited in scope.

Instead, we’ve had a series of favorable technological surprises of which the most striking have been the plummeting cost of solar photovoltaics, and advances in battery technology allowing both low-cost electricity storage and affordable electric vehicles. There’s no reason to think these advances have run out, or that any of the remaining problem areas (air transport, cement manufacture and so on) will prove insuperable.

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Categories: Economics - General, Environment Tags:

A new New Deal?

June 25th, 2017 4 comments

I’ll be talking to the Fabian Society in Melbourne on Wednesday night, looking at the failure of neoliberalism and options for a new “New Deal”.

Categories: Economics - General Tags: