The Rise and Fall of Keynesianism after the GFC

International Studies Quarterly has just published a symposium responding to a paper by Henry Farrell and me, which has been released from behind the paywall for the occasion. Our paper has the fairly self-explanatory title “Consensus, Dissensus, and Economic Ideas: Economic Crisis and the Rise and Fall of Keynesianism ” In our paper we looked at the resurgence of fiscal Keynesianism in the immediate aftermath of the Global Financial Crisis and of the successful counterthrust leading to the adoption of austerity policies in the US and Europe.

The symposium has comments from a multidisciplinary group of political scientists, sociologists and economists: Abraham Newman, Andrew Baker, Elizabeth Popp Berman, Paul Krugman, Stephen K. Nelson along with a response from us. It’s great to get these different disciplinary perspectives all in one place, since they all have key pieces of the puzzle, and we are very happy they have chosen to engage with us.

Decarbonizing the economy is easy and cheap

Since I wrote my post on good climate news for 2017, a couple of news items have caught my eye

* Britain now generates twice as much electricity from wind as from coal, and around 30 per cent from renewables in total
* More than half the vehicles sold in Norway are now electric or plug in hybrid

My thoughts on these examples over the fold:

TL;DR version: These examples show that, at least for developed countries, massive reductions in CO2 emissions are feasible right now, with no discernible effect on living standards.

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Why “extremely unlikely” climate events matter

I’ve just been advised that my latest article “The importance of ‘extremely unlikely’ events: Tail risk and the costs of climate change” has come out online in The Australian Journal of Agricultural and Resource Economics. For those who can use it, the DOI is 10.1111/1467-8489.12238. For everyone else, here’s a link to a pre-publication version. The main points are

* The IPCC convention is to use the phrase “extremely unlikely” to refer to outcomes (in particular, values of climate sensitivity) in the range of 0–5 per cent.
* Most of the risks against which we act to protect and insure ourselves (for example, car crashes, premature death in any given year) are “extremely unlikely” by this definition
* Around half, or even more, of the expected welfare loss from climate change arises from the worst-case 5 per cent of high values for climate sensitivity.

Nothing really startling here, but it’s the other side of the coin to the contrarian suggestion that since there’s a 5 per cent probability that global warming will turn out not to be a problem, we should do nothing.

The predictable, and predicted, failure of electricity market reform

David Blowers from the Grattan Institute has a piece in The Conversation (also on the ABC) headlined A high price for policy failure: the ten-year story of spiralling electricity bills. It’s not bad, and is notable for the observation that

History may judge the introduction of competition to the retail electricity market as an expensive mistake.

I don’t think we need to wait for history; in fact, we didn’t need to wait until 2017.

Most of the problems that have subsequently emerged were evident when I first addressed this issue in a paper in 2001., published in the Economic and Labor Relations Review

Here’s my conclusion

The National Electricity Market is still developing. Some problems that have emerged in the early stages such as the disparity between the substantial price reductions for large customers and the largely unchanged prices paid by households will fade away as the market matures. Other issues such as the structure of the industry and the degree of horizontal and vertical integration will be resolved by a mixture of market processes and regulatory interventions.

Some problems, however, are likely to become more rather than less acute. The Australian National Electricity Market commenced operation in a period of oversupply so that problems of market power and excessive prices have not emerged until recently. It remains unclear whether an electricity auction market can produce adequate incentives for investment while generating appropriate prices for consumers. Similar problems are emerging in relation to the regulated monopoly component of the industry, the transmission and distribution sector. Regulators must set prices that do not reward inefficiency or allow monopoly profits, but nevertheless provide appropriate incentives for new investment. This is a delicate balance.

In the longer term, the problem of the environmental impact of an industry relying predominantly on carbon-based fuels remains to be addressed. A market solution would involve the creation of emissions credits that could be traded along with electricity in national markets. Although limited steps have been taken in this direction, much remains to be done.

Some good news on the global climate

I’ve published a couple of articles recently on climate issues. One, in Inside Story, is an expansion of a post here, making the case that 2017 was a good year for climate policy globally. One more item to add to the list: India’s additions of coal-fired generation capacity are running at the slowest pace since 2006.

The other, in New Matilda, was about the (lousy) economics of the Adani coal mine-rail-port project. It’s part of a series on the struggle against the mine by indigenous Wangan and Jagalingou (W&J) people. Publication has been a bit slow, so my article doesn’t keep up with all the latest events, which seem likely to ensure that this disastrous project won’t proceed. The most important has been the split between Adani and its main contractor EDI Downer, one of a handful of companies with the expertise to run a mine on this scale. Adani’s current claim that it will operate the mine itself seems untenable, according to everything I’ve read.

UBI, work and unions

I’m working with Troy Henderson from the University of Sydney on a book chapter looking at union responses to the idea of a universal basic income (UBI),which have covered a range from supportive to strongly hostile, with the latter view predominant in Australia. Here’s a draft of my section of the chapter. Comments much appreciated.

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