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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. 

Categories: Economics - General Tags:

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.

Categories: Economics - General 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.

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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.

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:

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

Categories: Economics - General Tags:

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.

Read more…

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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:

Less is more

May 28th, 2017 12 comments

Reading the news, I find a lot of items demonstrating a scale of values that makes no sense to me. Some are important in the grand scheme of things, some are less so, but perhaps more relevant to me. I think about writing posts but don’t find the time. So here are a few examples, which you are welcome to chew over.

* Blowing things and people up is seen as a demonstration of clarity and resolve (unless someone is doing it to us, in which case it’s correctly recognised as cowardly and evil). The most striking recent example (on “our” side) was the instant and near-universal approval of Trump’s bombing of an airfield in Syria, which had no effect at all on events there. In this case, there was some pushback, which is a sign of hope, I guess.

* The significance of art and artists is determined by the whims of billionaires. Referring to the sale of a painting by Jean-Michel Basquiat for over $100 million the New York Times says

most agree that the Basquiat sale has cemented his place in the revenue pantheon with Pablo Picasso and Francis Bacon; confirming that he is not some passing trend; and forcing major museums to acknowledge that, by not having the artist in their collections, they passed over a crucial figure in art history.

[1]

* As far as economic research is concerned, less is more. More precisely, an academic economist with a small number of publications in top-rated journals is better regarded by other economists than one with an equal (or even somewhat larger) number of ‘good journal’ publications along with more research published in less prestigious outlets. I can vouch for that, though it’s less of a problem in Australia than in less peripheral locations. I have the impression that the same is true in other fields, but would be interested in comments.

[fn1] To be fair, this is preceded by a brief acknowledgement that “auction prices don’t necessarily translate into intrinsic value”, but there’s no suggestion that any other measure of intrinsic value is worth considering.

Categories: Economics - General Tags:

Churchgoing Labor voters

May 15th, 2017 32 comments

What proportion of Australian voters regularly attend church and identify as Labor voters? How many of those are social conservatives in the mould of, say, Joe de Bruyn? If I’ve interpreted this piece by Crikey’s Pollbludger correctly, the answer to the first question is about 4 per cent. The relevant bits

This is partly reflected by the long-term decline in religious observance, with the proportion of respondents who attended services at least once a month falling from 23% in 1990 to 17% last year.

….

Of still greater interest is a pattern over the past decade in which the observant have grown more pronounced in their identification with the Coalition rather than Labor, with the gap reaching a new peak of 52% to 25% in the 2016 survey.

25 per cent of 17 per cent is 4.25 per cent.

Turning to the second question, I’d be surprised if socially progressive observant Christians (and members of other religious) didn’t account for 5 per cent of the total population of Australia. So, if Labor gets the support of half of those, that would leave less than 2 per cent of the population in the religious conservative Labor voting category. That’s comparable to the support for the HEMP (pro sex, pro marijuana) party in the last Senate election.

Read more…

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Keating on the end of market liberalism

May 11th, 2017 25 comments

Among the 29 people to hold the office of Prime Minister in Australia, Paul Keating is probably the one with the sharpest intellect[1]. So, his abandonment of market liberalism is worth noting.

Read more…

Categories: Economics - General, Oz Politics Tags:

Drones (the good kind)

May 8th, 2017 38 comments

It’s now pretty clear that renewables can replace fossil fuels in their main uses, electricity generation and land transport, at a very modest cost or, as appears to be the case for electricity, with a cost saving. But that still leaves room for doubt over whether the economy can be fully decarbonized in time to hold CO2 concentrations to 450 ppm or below. Among the big gaps are air and sea transport.

I’ve tended to argue on the basis of the idea of induced innovation that, since there are plenty of possible options, at least one will work out, given some incentives to reduce CO2 emissions. That’s proved true for electricity (solar and PV worked, while other promising contenders like geothermal and Gen III nuclear haven’t), and more recently for storage. But it doesn’t seem to satisfy everyone.

So, I was struck to realize that drones (which I’ve always thought of either as toys or as particularly nasty weapons systems) may be on the way to displacing a good deal of air and sea freight transport in the relatively near future. Initially at least, the bigger ones are likely to use conventional engines, but with greatly reduced fuel costs, as with this proposal. But it’s easy to imagine a version that carries its own solar PV system being developed in the future – possibly slower but even cheaper than the current verison.

Moreover, the size and capacity of battery-driven electric drones is increasing all the time. The current leader appears to be the Griff 300, which can (as the name indicates) lift 300kg, including its own weight of about 65 kg. Apparently there is a Griff 800 either released or in the works. At least to my understanding, there’s no fundamental scaling limit here, although there will obviously be plenty of technical challenges. On the other hand, with batteries getting lighter every year, performance can be improved over time without any significant change in design.

None of this deals with passenger air travel which looms larger in the culture wars over energy policy that its objective significance as a source of emissions justifies. But again, in the absence of fundamental limits (the kind that apply, for example, to carbon capture and storage), a sufficiently strong incentive will in all probability bring forth a solution.

Categories: Economics - General Tags:

Sandpit

May 8th, 2017 2 comments

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

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My submission to the government’s Climate Change Review

May 2nd, 2017 25 comments

Submission’s to the government’s review of climate change policy close on Friday (so there’s still time to send one to [email protected], even if it’s just “Stop Adani”). It’s obvious to everyone now, including the government, that energy and climate policy are in a complete mess. So, there must be some chance of a radical change, possibly even one for the better. And there are plenty of options on the table.
I just put in a very short submission, which is below.

Submission
The terms of reference for this review refer to the government’s commitment to addressing climate change and to ensuring the adoption of effective policies.  However, these supposed commitments are contradicted by the government’s failure to respond, as legally required, to the Special Review of Australia’s Climate Goals and Policies, undertaken at the current government’s request by the Climate Change Authority.  
The final report of this Review was delivered to the government on 31 August 2016. Under the relevant legislation, the Minister was required to table the government’s response to the recommendations of the Review within six months, that is, by 28 February 2017. This requirement has been ignored.
I was a Member of the Authority until March 2017. I resigned when it became apparent that the government had no intention of responding to, or otherwise taking account of, the comprehensive Special Review in which I had taken part.
The absence of any response reflects the inability of the government to offer a coherent alternative to the policy toolkit recommended by the CCA. The current review should adopt the recommendations of the CCA Special Review, particularly including the introduction of an emissions intensity scheme for the electricity sector.

John Quiggin
Professor of Economics, University of Queensland
Former Member, Climate Change Authority
This submission is made in a private capacity and should not be assumed to represent the views of the University of Queensland or the Climate Change Authority

Categories: Economics - General, Environment Tags:

Monday Message Board

May 1st, 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.

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Too cheap to meter

April 26th, 2017 26 comments

Reading about the UK National Grid recently, I came across the interesting concept of demand turn up. Unlike the usual form of demand side management, where users are paid to cut usage in periods of excess demand, demand turn up involves making small payments to users willing to increase demand when the supply from renewables exceeds demand.

This looks strange at first sight, but it simply reflects the fact that, once the capacity is installed, the marginal cost of renewable electricity is zero. In the short run, taking account of the costs of shutdown and startup, the marginal cost of electricity from an operating renewable generation source is negative*.

So, demand turn up is just an application of marginal cost pricing, the same as off-peak pricing for coal-fired power.

The broader point is that claims that the electricity supply system must have a large component of coal-fired to meet “baseload demand” reflects the assumption that the system must meet the demands generated by a pricing system set up for coal (or nuclear which is broadly similar).

Categories: Economics - General, Environment Tags:

Sandpit

April 10th, 2017 28 comments

A new sandpit for long side discussions, conspiracy theories, idees fixes and so on. As an example, alternative theories about the gas attack in Syria belong here.

Categories: Economics - General Tags:

Monday Message Board

April 10th, 2017 53 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:

Margins

April 4th, 2017 14 comments

We’re all used to the fuss that takes place when the Reserve Bank cuts interest rates and banks don’t follow suit. On the other hand, when rates go up, the increase is almost always passed on rapidly and in full. But does this matter in the long run, or does competition sort things out. In this context, my wife Nancy pointed me to this interesting graph from the Housing Industry Association.

It seems pretty clear here that bank margins have increased steadily over the past ten years. I haven’t checked the data, but at least for mortgage rates, the current numbers look right to me.