Some good news from the US Congress

The US Congress is rightly regarded as a dysfunctional mess, blocking vital legislation for trivial partisan reasons. But occasionally, things work out for the best. A variety of critics ranging from left and liberal Democrats to members of the Tea Party appear likely to derail ‘fast track’ authority for Obama to sign the appalling Trans-Pacific Partnership. By contrast, the Abbott government is keen to sign this secret deal and has dropped Labor’s objections to clauses that would allow foreign corporations to sue our government for policies inconsistent with the market liberal ideology that informs the treaty. Let’s hope the whole thing is slowed down until the 2016 election year. If that happens, the pressure to renegotiate the deal, or scrap it altogether, will become intense.

Coincidentally, Wikileaks has published a draft chapter from the agreement, hidden from us by our governments and making clear what everyone knows. This isn’t about trade but about imposing market liberal institutions, including strong intellectual property in pharmaceuticals, copyright and so on.

Colin Clark lecture

I presented the Colin Clark lecture today, on the topic “National Accounting and the Digital Economy: The Case of the NBN’

Synopsis

Colin Clark’s greatest contribution to economics was his pioneering role in the construction of national accounts. In the industrial economy of the 20th century, the central problem in the national accounting was the need to avoid double counting, by measuring only the value added at each stage of production. This problem is closely related to that of benefit-cost analysis for public projects. In the 21st century digital economy, value is primarily derived from the flow of information rather than physical inputs and outputs. This creates new problems for national accounting, and for benefit-cost analysis. One example of these problems is the question of how to evaluate alternative proposals for the National Broadband Network.

Paul Syvret covered it in the Courier-Mail. I also did an interview with Steve Austin on the local ABC 612[1], which started off with a brief discussion of Rudd’s economic legacy, and another for AM on Radio National which didn’t make it to air.

The slides are here

fn1. Illustrated with a slightly goofy candid shot, taken in the ABC Green Room

Fiasco

If you want a single episode to summarize the fiasco that is the Abbott government, the first working hour of the 44th Parliament would be hard to beat.

First, the government had to gag the Opposition seeking to get any kind of information about the government’s signature issue, Stopping the Boats. If anyone had said, 20 years ago, that it would be necessary to read the Jakarta Post to find out what our own government was doing, they would have been greeted with incredulity.

Then, having specifically nominated juvenile insults like “Electricity Bill” as the kind of thing his new Speaker, Bronwyn Bishop would rule out of order, he had to watch as his attack poodle, Christopher Pyne used that very insult and was supported by Bishop. Then, of course, Abbott voted to uphold Bishop’s ruling.

Then, having wasted the first hour of the Parliament, Abbott announced his discredited bill to repeal the carbon tax. Meanwhile, the vice-president of our most important neighbour, representing a government Abbott has already insulted half a dozen times in as many weeks, was left to wait in an anteroom.

The Labour government of the last six years had its low points, to be sure. But it’s hard to imagine that those who voted for this crew (or for their former ally, Clive Palmer) aren’t experiencing a fair bit of buyer remorse.

When the facts change, I change my mind – what do you do?

This quote is attributed, perhaps spuriously to Keynes. A sharper version of the same point is made here by Noah Smith, exploring the concept “Derp”, “”the constant, repetitive reiteration of strong priors”, where “strong priors” in the technical Bayesian sense, mean that ” … you really, really believe something to be true. If your start off with a very strong prior, even solid evidence to the contrary won’t change your mind. ”

A notable example of this, very relevant on this blog, and cited by Smith, is the cost of solar energy. Roughly speaking, the cost of solar modules has fallen by a factor of 10 over the past few years, and the cost of installed systems by a factor of three. If that hasn’t changed your mind about the relative merits of alternative policy option, then you must have really strong priors, and in that case, you shouldn’t be engaging in debate, since your mind can’t be changed by evidence. As Smith observes, “That is unhelpful and uninformative, since they’re just restating their priors over and over. Thus, it is annoying. Guys, we know what you think already.”

But, it’s easy to throw stones, so I thought I would check my own archives to see if I was guilty of Derping on this point. Here is what I thought in 2004

Nuclear (fission) power is probably the cheapest large-scale alternative electricity source (there are some sites where wind is cost-competitive, and similarly for geothermal) but it is still a good deal more expensive than coal or gas. How much more expensive is hard to tell because the industry is riddled with subsidies, but I’d guess that the full economic cost is about twice as high for nuclear electricity as for coal or gas. Moreover, most recent construction has been in places like China and Korea where safety standards may not be as high as they would have to be to get nuclear energy restarted in the developed world as a whole.

What this means is that nuclear power won’t enter into calculations until we have a carbon tax (or equivalent) steep enough to double the price of electricity. It’s clear though, that much smaller increases in costs would make a wide range of energy conservation measures economically viable, as well as reducing final demand for energy services. Implementing Kyoto, for example, would not require anything like a doubling of prices. Whether or not a more radical response is justified, it’s clearly not going to happen for at least a decade and probably longer.

Nevertheless, if mainstream projections of climate change turn out to be correct, and especially if, as Lovelock suggests, they turn out to be conservative, we’ll eventually face the need for new sources of electricity to replace fossil fuels. Solar photovoltaics are improving fast but still a long way from being cost-competitive. So it may well be that, at least for an interim period, expansion of nuclear fission is the best way to go.

I didn’t mention carbon, capture and storage, but I also supported that as a good option for Australia, assuming it could me made to work.

The facts have changed, and I have changed my mind. I now think the role of renewables, and particularly solar is going to be much larger than seemed likely ten years ago, nuclear much less, and CCS marginal.

Update Obviously, this post was intended to provoke a reaction from the critics of renewable energy (normally, also advocates of nuclear) who regularly comment here, challenging them to say how they had adjusted their views in the light of the evidence of the last decade. Most commenters responded thoughtfully. But our single-topic nuclear fans, Hermit and Will Boisvert, responded by herping even more flerps of derp. Despite being reminded of the topic, they just kept on pumping out the same constant, repetitive reiteration of their priors that defines derp. This does, at least provide me with some guidance. From now on, comments from single-issue pro-nuclear commenters (specifically, the two mentioned) will be deleted unless they contain a point that has not been made previously or (highly improbably) a change of view.

Armistice and Remembrance

I usually write a post on 11 November, the anniversary of the armistice that brought a temporary end to the Great War that engulfed Europe in 1914 and continued, in one form or another, until the end of the 20th century. But nothing I write could match this from Paul Keating. The core of the piece

The First World War was a war devoid of any virtue. It arose from the quagmire of European tribalism. A complex interplay of nation state destinies overlaid by notions of cultural superiority peppered with racism.

The First World War not only destroyed European civilisation and the empires at its heart; its aftermath led to a second conflagration, the Second World War, which divided the continent until the end of the century.

But all of it is worth reading and remembering, along with Keating’s 1993 speech at the funeral of the unknown Australian soldier.

Pandora Post-mortem

I have a piece in the Guardian responding to the pro-nuclear film Pandora’s Promise. The core of my argument is that, in most countries, political resistance to nuclear power is no longer the primary problem – the big difficulty is with the economics. The key paras

he fact that the world has not turned to nuclear power as a solution to climate change is a matter of economics. In the absence of a substantial carbon price, nuclear energy can’t compete with coal and other fossil fuels. In the presence of a carbon price, it can’t compete with wind and solar photovoltaics. The only real hope is that, if coal-fired generation is reduced drastically enough, always-on nuclear power will be a more attractive alternative than variable sources like solar and wind power. However, much of the current demand for “baseload” power is an artifact of pricing systems designed for coal, and may disappear as prices become more cost-reflective.

To put the point more sharply, if we are convinced by the arguments of Pandora’s Promise, what would the makers of the film have us do? Stop protesting against nuclear power? Most of us did so decades ago. Abandon restrictions on uranium mining and export? The Australian government has done so already, with barely a peep of protest. The only remaining restrictions on exports to India relate to concerns about nuclear weapons proliferation, not nuclear energy, and seem likely to be dropped in any case. Give nuclear power a level playing field to compete against renewables? In the US at least, nuclear power is already treated more favourably than alternatives, leaving aside the massive subsidies already handed out in the 20th century. The same is true in many other countries that have sought, with limited success, to promote a nuclear renaissance.

Two of the leading environmentalists quoted as supporting nuclear power are Mark Lynas and George Monbiot. They have some interesting reactions to the recent announcement that EDF will build a nuclear reactor, Hinkley C, under a deal with the UK government. Monbiot sees it as a disaster, going for massively expensive Generation III technology when the alternative was to build an Integral Fast Reactor, a design with lots of theoretical advantages but one that has never been built (other breeder reactors have been expensive failures). Lynas, writing before the announcement has a more sanguine view of the cost. Lynas compares the “strike prices” offered by the UK government for various renewables, ranging from 100stg/MWh for onshore wind, to 305stg/MWh for experimental technologies like wave and tidal energy. Offshore wind (the only source without severe supply constraints in the UK context) comes in at 150 and large-scale solar at 125. These are guaranteed for 15 years from 2014. Hinkley has as strike price of 92.50, for 35 years from the estimated start date of 2023.

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