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Archive for the ‘Economics – General’ Category

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

Categories: Economics - General Tags:

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.

Categories: Economics - General Tags:

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

Categories: Economics - General Tags:

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…

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:

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…

Categories: Economics - General Tags:

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.

Categories: Economics - General Tags:

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.

Categories: Economics - General Tags:

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.

China, me old China

April 4th, 2017 22 comments

One of the reasons I like blogging and opinion writing is that I’m better at thinking up ideas than at the hard work needed to turn them into properly researched journal articles, which is the core business of being an academic. So, it’s great when an idea I’ve floated in a fairly half-baked form in a blog or magazine article gets cited in a real journal article. Even better when it’s a colleague or, in this case, former colleague who cites me.

James Laurenceson, formerly of UQ and now Deputy Director of the Australia-China Relations Institute at UTS, has an article just out in the Australian Journal of International Affairs (paywalled, unfortunately, but well reading if you can get access), on Economics and freedom of navigation in East Asia, which cites a short piece I wrote last year and reproduced here. My key points were
* Contrary to many claims, China has no interest in blocking trade in the South China Sea, since most of it goes to and from China
* For the smaller volume of trade between other countries, the cost of taking a more roundabout route is so small that China could not exert any significant leverage by restricting access to the South China Sea
* There’s nothing special about this case. The whole idea that navies are vitally needed to keep sea lanes open is nonsense

Where I based the first two claims on a bit of Google searching and a couple of academic papers, James has developed the argument in convincing detail, addressing a wide range of possible counterarguments. If I could find someone to do the same thing for my third claim, I’d be very happy.

Categories: Economics - General, World Events Tags:

The IPA and 18C

March 22nd, 2017 60 comments

The obsessive desire of the current government to protect the right to offend and humiliate people on the basis of their race or religion has been driven, in large measure, by the Institute of Public Affairs. The IPA has a mixed* record on freedom of speech, and on the kind of offensive speech that is the subject of 18C.

Some IPA fellows, such as Chris Berg and Matthew Lesh take the Voltaire line, defending free speech even when they don’t like the content. And, as far as I can tell, neither Berg nor Lesh has ever said anything offensively bigoted.

Unfortunately, they appear to be in the minority at the IPA. More representative of the general atmosphere of the IPA are cases like this and this, where IPA fellows were caught saying in public the kind of thing they want to protect legally.

And while Berg is keen to protect the right to boycott, the IPA also published this piece, suggesting that critics of coal could be prosecuted under the Corporations Act. I had a long series of Twitter exchanges with Tim Wilson, then “Freedom Commissioner” and now a Liberal MP, in which I asked if he would disavow this suggestion. He evaded the question repeatedly then (IIRC) blocked me.

Overall, I’d say the IPA should clean up its own act before pretending to lead a crusade (or jihad) for free speech.

* I mean this literally, not as a euphemism for “bad”

Categories: Economics - General Tags:

Adani, with an asterisk

March 22nd, 2017 20 comments

Back in December, Gautam Adani came to Queensland and gave a very positive view of the proposed Carmichael coal mine in the Galilee Basin. Things went pretty quiet for a while after that, but it appeared that a final announcement on the project would be made in April. Now, Anna Palaszczuk and a number of lesser dignitaries have been to India and brought back the news that the project will shortly be approved by the Adani board, at least if Mr Adani has his way, which seems guaranteed.

That came as a surprise to those of us who have long argued that the project is hopelessly uneconomic, even on the optimistic view that the current uptick in the coal price will be sustained.

But it turns out that there’s an asterisk. The approval will be subject to finance. Anyone who’s ever sold a house knows that means nothing is guaranteed. In Adani’s case, the initial stages of the project will need $2.5 billion in bank finance, as well as a concessional loan of up to $1 billion from the Commonwealth’s Northern Australia slush fund.

You might think that at least the second of these is a safe bet. But Aurizon (the former Queensland Rail) has come up with a competing proposal, which doesn’t have the problems associated with Adani’s opaque (to put it mildly) financial structure.

The real problem though is with the banks. Of the big Australian banks, Westpac is the only one that hasn’t ruled itself out. But they will presumably want only a small share of the risk, as part of an international consortium and there are no obvious candidates. Moreover, given the combination of reputational and project risk associated with a massive coal mine at a time when coal is clearly on the way out, any sane lender would demand a hefty rate of interest and lots of security. It’s hard to see Adani coming up with either.

So, I’m guessing Adani is still playing for time. We’ll probably see a very big announcement with a very small asterisk. Crunch time won’t come until June, when they need to come up with some real money.

Categories: Economics - General Tags:

Aandpit

March 20th, 2017 24 comments

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

Categories: Economics - General Tags:

I can’t work with her: Turnbull

March 18th, 2017 41 comments

I read this headline and my immediate thought was that Putin, antivax and the disastrous WA election had finally galvanised our hapless PM into breaking with Pauline Hanson. Alas, it turns out the “her” in question was the newly elected ACTU Secretary Sally McManus, who had dared to espouse the doctrine that it is sometimes appropriate to break unjust laws. McManus joins the company of such monsters as Martin Luther King, Mahatma Gandhi and Nelson Mandela. Fortunately for Malcolm, all of these lawbreakers have one thing in common that ensures that, were they still alive, Pauline Hanson would be doing her best to keep them out of the country. He can rest easy knowing that he stands with all the “ordinary” (sound of dog whistle here) Australians represented by the One Nation faction of his coalition.

Categories: Economics - General Tags:

Sandpit

March 13th, 2017 103 comments

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

Categories: Economics - General Tags:

A bit more on grid renationalisation

March 7th, 2017 9 comments
Categories: Economics - General Tags:

Workless, or working less?

February 1st, 2017 55 comments

That’s the title of my review of Tim Dunlop’s excellent new book, Why the Future Is Workless, published at Inside Story. It’s over the fold.

Read more…

Categories: Economics - General 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.

Read more…

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:

Windyware

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:

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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Thursday Message Board

December 8th, 2016 41 comments

The site outage that has kept the blog off air for several days has now been resolved, so here’s a once-off Thursday Message Board, for comments on any topic. Civil discussion and no coarse language, please.

Categories: Economics - General Tags: