Month: April 2010

Unit pricing

John Quiggin51 Comments

When we were at the supermarket the other day, I noticed, and made use, of some helpful new information for buying toilet paper. Next to each of the various offerings was the price per sheet. Since the brand was the same, it was easy to identify and buy, the cheapest offering, rather than doing a complex estimation and calculation.

I vaguely assumed I was enjoying the benefits of the market for corporate control, as the supermarket, formerly a small Coles outlet had been taken over by Foodworks. But this article by Ross Gittins informs me that a requirement for unit pricing has been introduced by the Rudd government. Gittins is sceptical, saying:

It’s a nice idea – the kind that appeals to economists – but I doubt it will do much good. It assumes shoppers are a lot more diligent and coldly calculating – a lot more ”rational” – than most of us are.

Since I’m an economist, my delight in this innovation is consistent with the first part of Gittins’ claim, but as a shopper I disagree with the second part. The great thing with this is that I don’t have to be diligent or calculating – the calculation has been done for me. Certainly, I’m benefiting from this without even knowing there was a policy, whereas I never even looked at the unlamented Grocery Watch site.

Hope (crosspost from CT)

John Quiggin27 Comments

I posted this at Crooked Timber. I plan something a little more specific to Australia when I get some time

One reason that many on the left of politics preferred Obama to Hillary Clinton is that his rhetoric, at his best, promised something more than incremental reform, a promise summed up by slogans like “Change we can believe in” and “Yes we can”.

Given the political realities of the US, and the obvious fact that Obama is instinctively a pragmatist and centrist, it was never likely that this would translate into radical policy action in the short run. Still, it seemed at least possible that an Obama presidency would begin a renewal of a progressive project of transformation, setting out the goal of a better world. One respect in which this hope has been fulfilled, for me, is in Obama’s articulation of the goal of a world without nuclear weapons, and in the small but positive steps he’s taken in this direction.

I plan to talk about the specific issue of nuclear disarmament in more detail in a later post. The bigger point for me is that after decades in which the left has been on the defensive, it’s time for a politics of hope. We need hope to mobilise a positive alternative to the fear, anger and tribalism on offer from the right. Centrist pragmatism provides nothing to match the enthusiasm that can be driven by fear and anger, as we have seen.

What the politics of hope means, to me, is the need to start setting out goals that are far more ambitious than the incremental changes debated in day-to-day electoral politics. They ought to be feasible in the sense that they are technically achievable and don’t require radical changes in existing social structures, even if they may set the scene for such changes in the future. On the other hand, they ought not to be constrained by consideration of what is electorally saleable right now.

Over the fold, I’ve set out some thoughts I have for goals of this kind. At this stage, I’m not looking for debate on the specifics of these goals or the feasibility of achieving them (again, more on this later). Rather, I’d welcome both discussion of the general issue of what kind of politics the left needs to be pursuing, and suggestions of other goals we ought to be pursuing

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Straws in the wind

John Quiggin169 Comments

Serious action to reduce CO2 emissions has been stymied in Australia and the US for the moment. So, to get an idea of what is likely to be feasible, and on what timescale, we have to look at Europe, which has both a working Emissions Trading Scheme and a bunch of special incentives to promote renewable energy. At least on the latter point, there is some cause for optimism.

Here’s a graph of new installed capacity and decommissioned capacity for 2009 from The European Wind Energy Association (link here was broken and is now fixed-JQ). The results pretty much speak for themselves, but I’ll add a couple of observations.

The fact that solar PV was a major source of new installed capacity surprised me. Until now, solar (along with fusion) has been one of the contenders for the tag “the energy source of the future and always will be”. But, on current trends, solar is set to be a major contributor in the future. Of course, the outcome so far has been the result of large subsidies, such as feed-in tariffs. But, even as the subsidies are cut back the volume of installations continues to grow. Before long, solar could be competitive with coal on the basis of the ETS and peak-load pricing, without the need for an extra “renewable” subsidy. Gas is likely to be cheapest for some time to come, but there are sound reasons for not wanting to depend entirely on an energy source that can be cut off at short notice.

The other point is that for coal (and also, less surprisingly for nuclear) installed capacity showed a net decline. The combination of the ETS and strong political opposition has made the construction of new coal-fired power stations in Europe almost impossible, at least without a commitment to CCS or some other sweetener.

On this issue, where Europe has led, the rest of the world will follow sooner or later. The big question is whether it will be too late. The good outcomes we are seeing in Europe suggest that, even with a few years’ slippage, big reductions in emissions will be possible in time to stabilise global climate.

Kaggle

John Quiggin8 Comments

At dinner last night (an event to celebrate various research awards won by people at UQ) I was talking with an engineering professor about the question of how to promote innovation without reliance on patents and forms of monopoly rights (usually referred to as intellectual ‘property’). One solution is to offer prizes for valuable discoveries[1]. This is a nice idea, but there are lot of practical problems in setup and administration. Nicholas Gruen has an interesting startup, aiming to simplify this process. Read about it here.

fn1. This doesn’t rule out IP, but it offers a potential alternative.

Which Road to Serfdom?

John Quiggin125 Comments

Both here and at Crooked Timber, libertarianism is getting a bit of a run. So, can anyone find me a copy of Hayek’s prescient 1944 book, The Road to Serfdom, which predicted that the policies of the British Labour Party (policies that were implemented after the 1945 election) would result in relatively poor economic performance, and would eventually be modified or abandoned, a claim vindicated by the triumph of Thatcherism in the 1980s? This book, and its predictive success, seem to play an important role in libertarian thinking.

Despite a diligent search, the only thing I can find is a book of the same title, also written by an FA von Hayek in 1944. This Road to Serfdom predicts that the policies of the British Labour Party, implemented after the 1945 election, would lead to the emergence of a totalitarian state similar to Soviet Russia and Nazi Germany, or at least to a massive reduction in political and personal freedom (as distinct from economic freedom). Obviously this prediction was totally wrong. Democracy survived Labor’s nationalizations, and personal freedom expanded substantially. Even a defensible version of the argument (say, a claim that, Labor’s ultimate program included elements that could not be realised without anti-democratic forms of coercion, and that would have to be dropped if these bad outcomes were to be avoided) could only be regarded as raising a hypothetical, but unrealised, cause for concern.. Presumably, this isn’t the book the libertarians have read, so I assume there must exist another of the same title.

Time for the B team

John Quiggin81 Comments

I spoke yesterday at a Forum on the Bligh government’s privatisation program. I got a presentation ready (it’s over the fold) but spoke off the cuff instead.

As well as my oft-stated critique of the government’s case for privatisation, I took a look at the broader budget problems facing Queensland. Although the government has overstated these problems to promote the privatisation push, they are real enough.

The fundamental problem is that the government is committed both to high quality service and to keeping Queensland a low tax state. According to standard measures, Queensland’s tax effort is about 85 per cent of the Australian average, which amounts to a shortfall of around $1.5 billion, or pretty much the gap the government is trying to fill. In addition, Queensland provides more business subsidies and incentives than any other state, most notably the indefensible Investment Incentives Scheme. To the extent that these incentives actually attract new business to the state they increase the demands on infrastructure and thereby create even more problems. Mostly, though, they are just a waste of money.

The government has committed itself clearly and publicly to providing Queenslanders with services that are as good as those in other states. That can’t be done while also holding down tax revenue.

Looking at the political situation regarding the asset sales, it seems to me unlikely that they can be stopped while Bligh and Fraser are in charge, and unlikely that Labor will change leaders unless electoral defeat appears inevitable. I’ve therefore concluded that, in the absence of such a change, I’ll be giving the Greens my first preference and the LNP my second.

In a democracy, it’s important that parties should alternate in office to some extent, and it follows that it can’t be reasonable always to prefer one major party to the other. As a general rule this hasn’t had any practical implications for my vote – for most of my life, long-running Labor governments were a rarity. But Queensland Labor has been in for 20 years, with only a brief interruption under Borbidge, and it shows. It looks like it’s time to give the other side a go, unimpressive as they are.

Update More from Mark Bahnisch at LP

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Turnbull:An assessment

John Quiggin42 Comments

The announcement that Malcolm Turnbull will not recontest his seat is a big loss to Australian politics, though maybe not as big as some of his admirers have claimed. He is undoubtedly a man of great ability. But, all in all, I’d rank him below all those who’ve held the office of PM in my adult life (that is, from Whitlam to Rudd). On the other hand, I’d rank him above everyone else in that time who has been seriously mentioned as a possible PM, but hasn’t made it[1].

Looking back, Turnbull did surprisingly well in straight political contests – displacing a well-liked sitting member for Wentworth, forcing his way into the Howard Ministry, taking the Liberal leadership and most startling of all, coming within one vote of retaining it when everyone had written him off. On the other hand, he was far less successful on substantive policy issues, even though he was usually on the right side.

On the Republic, Turnbull and the ARM made the totally mistaken judgement that most Australians love the current system, and that the most saleable republic is one that changes nothing – with a president appointed, in effect, by the PM, just as currently happens with the GG. He managed to push this model through the Convention, thereby falling into a trap laid by Howard. For the average person (including me) the idea that we would throw the Queen over for a President, but then have the President chosen for us by a politician, is just silly.

Turnbull also made a bad misjudgement in taking on the water portfolio. I met him when he was in this job, and it was clear he understood the issues and that, left to himself, his policy line would have been identical with that of Penny Wong. But, with Howard as PM, he got nowhere. Howard’s National Water Plan set Australian water policy back a decade and Rudd and Wong are still trying to clean up the mess. Turnbull was in a strong position, and should have insisted on a free hand before he took the job on.

The Grech fiasco, I guess, could happen to anyone, and a large share of the blame belongs with other Liberals, notably Eric Abetz – Abbott is crazy to put this guy up as Senate leader, but that’s by the way.

Finally, there was the ETS. Turnbull’s decision to cut a deal with the government was strategically correct. Strategically, Abbott’s embrace of climate delusionism is a disaster that will haunt the Liberals for decades, if, indeed, they survive it. No matter how many talking points can be brought up, the fact of climate change will force itself on the attention of even the most wishful thinkers, and those who have denied and delayed will pay a high price. Tactically, however, Turnbull was out of luck. Oppositions are naturally predisposed to oppose, and the failure of the Copenhagen talks to come up with a binding agreement made this look like a winning strategy.

There’s no doubt that he leaves a great gap. Add up everyone whose name I can remember on the Opposition front bench (Abbott, Hockey, Bishop, Truss, Abetz, Robb, Joyce) and put them together. They don’t match Turnbull in ability or capacity to make a serious contribution to policy. For that matter, they don’t match up to any of the leading figures on the Labor side (Rudd, Swan, Gillard, Tanner, Faulkner). Put them all together as a tag team and they’d be a good match for, say, Steven Conroy or Jenny Macklin.

fn1. If you agree with this point, that the set of PMs {Whitlam, Fraser, Hawke, Keating, Howard, Rudd} absolutely dominates the alternative set {Bury Snedden, Hayden, Peacock, Hewson, Downer, Beazley, Crean, Latham, Nelson, Turnbull, Abbott} as well as the coulda’been contender set {Bjelke-Petersen, Costello, Elliott, B. Bishop, Hanson, maybe some others I’ve forgotten} it looks as if the Australian political process is doing a good job of putting the most able people into the top job.

Further point Taking this exercise back to WWII adds three PMs of exceptional ability (Curtin, Chifley, Menzies), one definitely sub-par (McMahon, who got the job by intrigue, and lost it at the first election he faced) and two (Holt and Gorton) who are hard for me to assess because they served brief terms before I was old enough to worry much about politics. Of those who missed out, Evatt and Barwick were both reminiscent of Turnbull. Calwell was a fair average opposition leader, comparable to the others I’ve listed, but not outstanding.