I’m going to assume (generously, I think) that the minimum size for a successful colony is 10 000. The only experience we have is the Apollo program, which transported 12 astronauts to the Moon (a distance of 1 light second) at a cost of $100 billion or so (current values). So, assuming linear scaling (again, very generously, given the need to accelerate to near lightspeed), that’s a cost of around $100 trillion per light-second for 10 000 people. 1200 light-years is around 30 billion light-seconds, so the total cost comes out roughly equal to the value of current world GDP accumulated over the life of the universe.

Even supposing that technological advances made travel possible over such distances possible, why would we bother. By hypothesis, that would require the ability to live in interstellar space for thousands of years. A civilisation with that ability would have no need of planets.

[joke alert on] On behalf of my fellow Australians, I’m going to make a counter-offer. For a mere $10 trillion, we can find you an area of land larger than a typical European country, almost certainly more habitable than the new planets, and much closer. We’ll do all the work of supplying water and air, build 10 000 mansions for the inhabitants and guarantee a lifetime supply of food. I’m hoping for a spotters fee of 0.01 per cent.[joke alert off]

On a related point, what should we be wishing for here? The fact that no-one has sent a detectable signal in our direction suggests that intelligent life forms similar to humans are very rare. If habitable planets are very rare, then this is unsurprising – interstellar distances preclude both travel and any kind of two-way communication. If on the other hand, the emergence of intelligent life is common, then the evidence suggests that its disappearance, through processes like nuclear war, must also be common.

[^1] Where Earth-like means somewhere between Venus-like and Mars-like.

Unfortunately, that’s where the credit stops. The core of the problem, identified by William Baumol in 1967, is that, for obvious technological reasons, productivity in these services tends to grow more slowly than in other sectors, most notably goods-producing sectors. The Commission’s proposed solution is breathtaking in its simplicity – if we could raise the rate of productivity growth in the human services sector, the problem would go away. Yes, and if wishes were horses, beggars would ride.

My response, which got a run in today’s Courier-Mail, is here.

As Raymond Williams points out in his excellent little book Keywords, from which I got the idea for this series, reform originally meant ‘restore the original form’ of something. In particular the Reformation was supposed to sweep away the abuses of the Papacy and restore the church to its original purity. As this example indicates, the worldview associated with this usage was one of decline rather than progress. The best one could hope for was to get back to things as they were in the good old days. This view was dominant in Western thinking from Plato to the 17th century.

From the 18th century onwards, reform underwent something of a reversal, since it now typically implied forming something new. But since the associated worldview was now one of progress, the assumption remained that reform entailed change for the better.

From the 18th century to the 1970s, the term reform was typically used to describe policies favored by the moderate left, in opposition to advocates of revolutionary change on one side and of conservatism and reaction on the other. From the 1970s to the end of the 20th century, though, the direction of policy change was reversed, with the rise of neoliberalism. However, the term reform continued to be used, even when the policies it described consisted of the dismantling of earlier reforms.

As a result, critics of neoliberal policies have frequently resorted to the use of “scare quotes”, as in my recent reference to ‘workplace reform’, or to similar alerts like “so-called”. While the automatic assumption prevails that the term reform applies only to desirable changes, such devices are necessary.

Where it’s feasible though, the best approach is to define reform as “any program of systematic change in policies or institutions” and make it clear that there is no implication of approval or disapproval.

First, this study should kill off, once and for all, claims made here and in many other places (notably, at Brave New Climate) that the intermittency of renewable electricity is an insuperable problem.[1] The AEMO is the body that manages the electricity market on a minute-to-minute basis, so it has the expertise to assess this claim, unlike the many amateurs who have tried their hands. And, since it might have to do the job, it has no reason to understate the difficulties of a renewables-based system.

Second, the estimate cost of $111 to $133 per megawatt-hour represents an increase of $60-80/MwH on current wholesale prices, or 6-8c/Kwh on retail prices. That’s much less than the increase we’ve seen thanks to the mishandling of electricity market reform. If we wound back those costs, we could actually end up with both 100 per cent renewables and cheaper electricity.

Third, although the study envisages a role for electric vehicles, it doesn’t present a full-scale program for decarbonization. But once you have a scalable, fully renewable electricity supply, everything else is comparatively easy.

Finally, if we take Tony Abbott at his word in wanting direct action to deal with climate change, this report provides him with a blueprint. If we want to, we can eliminate the great majority of domestic CO2 emissions simply by mandating renewable technology and electric vehicles. The cost would be substantial in dollar terms ($250 billion for the electricity component). But, over a couple of decades, it would be a barely detectable deduction from growth in national income.

Update As it turns out, there’s a response at Brave New Climate from Martin Nicholson. Nicholson reports on a study of his own, in which nuclear is included in the mix. On Nicholson’s estimates, this substantially reduces capital costs, a point of which he makes a big deal. But obviously, renewables have much lower operating costs and Nicholson estimates the levelised cost for his system at $124/MWh to $126/MWh. As he says:

As this is in the middle of the AEMO range, wholesale prices are likely to be similar with or without nuclear

Given that very few current-generation nuclear plants have been built, cost estimates for nuclear are speculative. The obvious inference for Australia is that we should push along with renewables, and take a “wait and see” position on nuclear, observing developments in the UK, US, France and China. If they can deliver nuclear safely and at low cost, we can add it to the mix (say, after 2030).

Sadly, I think most of the BNC readership are locked into a position that nuclear must be the answer, which requires them to believe that renewables won’t work. Even a comprehensive demonstration that renewables can deliver a 100 per cent solution at a cost comparable with optimistic estimates for nuclear isn’t going to shift them.end update

fn1. This is part of a rhetorical manoeuvre aimed at pushing the conclusion that nuclear is the only feasible zero-carbon option. Once it’s admitted that 100 per cent renewable electricity is feasible, nuclear advocates need to present a case based on comparative costs. In the Australian context, it will be very hard to make that case, given the need to set up a complete nuclear infrastructure from scratch.

The first point to make about the Budget is that our fiscal position is, rightly, the envy of the world. This is primarily the result of an unprecedented period of economic expansion which began in 1990, when the economy was at the low point of the ‘recession we had to have’. Primary credit for this outcome must go to the Reserve Bank, which made a series of good calls in the 1990s and the early 2000s, and to the Rudd government for the rapid shift from ‘fiscal conservatism’ to Keynesian stimulus after the 2008 financial crisis. This was made easier by the strong growth in minerals demand from China, and the fact that China also implemented a massive stimulus in early 2009.

The Howard-Costello government deserves at least muted praise for not making a mess of this. Howard and Costello kept the budget in balance or just enough above to report a string of small surpluses, and they did not interfere with the Reserve Bank. In their final years of the pre-crisis boom, However, they made a string of decisions that ensured the budget would be in structural deficit once more normal conditions returned.

The 2009-10 budget, along with the emergency measures taken earlier, protected Australia from the impact of the global crisis. By contrast, New Zealand, now being praised by everyone on the political right for returning rapidly to surplus, experienced a recession, pushing it yet further behind Australia in income per person.

At the time of the 2009-10 Budget, the government projected a return to surplus by 2015-16. On the basis of some good news that turned out to be illusory, the target was later moved forward to this year, and turned into an ironclad commitment, which was only abandoned a few months ago. It now appears likely that the deficit will be around $12 billion or 1 per cent of GDP, which is about where it should be.

It follows that there’s no need, in terms of fiscal policy, for any radical change in strategy. If the economy slows further, the automatic stabilizers inherent in the tax welfare system will produce a somewhat larger deficit. If strong growth returns, the original surplus target should be reached.

The big question for this year’s budget is that of the long term levels of public expenditure and taxation. With the announcement, and apparent bipartisan acceptance, of a 0.5 per cent levy to provide partial funding for the National Disability Insurance Scheme, we have finally broken the longstanding taboo on increasing taxation. We can therefore address the central question of fiscal policy: should we pay more tax, and get improved services in areas like health and education, or should we pay less and get less?

The case for paying more and getting more is based on the fact that technological change has reduced the cost of most physical goods relative to ‘human services’ which require skilled labour for their delivery. At the same time, increasing longevity and the disappearance of unskilled jobs have increased the importance of health and education.

Over the next decade or so, addressing unmet needs in human services is likely to require an additional 3 to 5 per cent of GDP*, or around $40 billion to $65 billion a year. It’s worth considering a few options.

Thanks to the dominance of tax-cutting dogma over recent decades, there’s no shortage of options to raise significant additional revenue. The first would be to scale back the tax cuts for high-income earners originally proposed by Howard in 2007 and adopted, in large measure by Rudd. Increasing the top marginal rate of tax to 50 per cent, and applying it to income over $150 000 would recapture only a small part of the increased share of income that has gone to those in the top 1 or 2 per cent of the income distribution. Nevertheless, it would be sufficient to raise close to 1 per cent of GDP per year over the next few years.

Then, there’s a laundry list of concessions and tax expenditures such as the the Seniors Tax Offset and the abolition of income tax on super fund earnings paid to people over 60. Together with the earlier decisions to halve the rate of capital gains tax and end the indexation of petrol tax excise, Saul Eslake lists these as ‘the dumbest tax decisions of the last 20 years’. Again, it would not be hard to find 1 per cent of GDP here.

Given the continued pressure on the States to contribute to the financing of Commonwealth initiatives, and the fact that so much of their own-source revenue depends on inefficient, distorting and regressive taxes like stamp duties and gambling tax, State revenue also needs attention. While the states could do better than they have with payroll and land tax, the only serious option is under the control of the Commonwealth – an increase in the rate of GST, say to 12.5 per cent, which would raise an additional 1 per cent of GDP.

Even in my dream budget, I would not introduce these measures all at once. For the moment, the macroeconomic situation does not require further tightening of fiscal policy. But in the long run, these are the kinds of measures that will be needed.

* GDP is the wrong number to use here. The best estimated of the base for taxation available to the Australian government is NDI (Net Domestic Income). But the habit of referring exclusively to GDP is so ingrained that correcting it seems pointless.

The best that can be said for this kind of thing is that it relieves the monotony of boomer-bashing. Apart from that it is a repeat of the formulaic denunciation of adolescents that has been applied (in my memory) to Gen Y (insofar as this group differs from the Millennials) Gen X (Slackers), Boomers (hippies) and the Silent Generation (the original teenagers). Then there were the Lost Generation and so on back to the (apocryphal, I think) rant often attributed to Socrates. Only those who have the good fortune (?) to come of age in a time of full-scale war miss out on this ritual denunciation.