Month: August 2018

Peace for our time ?

John Quiggin15 Comments

Amid the recent upsurge of leadership speculation, this time affecting the government, a crucial observation on the so-called National Energy Guarantee seems to have been missed.

No one thinks the NEG is a good policy: its selling point is the claim that it could resolve, once and for all, the political fight over climate and energy policy.  After the last few days, that claim has fallen in a heap. A few days after claiming the endorsement of his party room for the previous version of the NEG, Turnbull is doing an emergency rewrite of the NEG to stave off a rebellion and perhaps a challenge to his job.

This half-baked compromise, if it works at all, won’t resolve anything. There’s no target for emissions reductions, which might help get legislation through Parliament, but leaves the most important single issue for later. The already messy pricing system is to be complicated further by unspecified policies to reduce prices directly. And the denialists are still pushing for a publicly funded coal-fired power station.

Supposing this chimera somehow struggles into existence, it will last as long as the political stars with which it is aligned. If Turnbull loses to the right of his own party, the whole thing will be dumped in favor of policies driven by culture war concerns rather than economics, let alone climate. If Labor wins, they will need to dump this mess and start again, effectively from scratch.

I have in my mind a picture of Turnbull, descending the steps of a plane and waving a peace of paper while he announces “Peace for our Time”. I guess that can’t literally happen since the relevant meetings will all take place in Canberra and tarmac photo-ops are confined to state visits these days. But I doubt that Turnbull’s deal will last as long as Chamberlain’s did.

Coal and the nuclear lobby (updated)

John Quiggin190 Comments

Against my better judgement, I got sucked into a minor Twitterstorm over the weekend. The main outcome was to remind me that, while Twitter is useful in the role of a microblog, providing quick links to, and sharp observations on, more substantial material, it is utterly useless as a venue for discussion and debate.

Update : A large number of nuclear fans were eager to tweet and share snarky responses on Twitter, but only three people were willing to debate the issue here. Thanks to David Michie, Jonathan Suhanto and Ben Huxham who did at least respond. For those concerned that I might have a home-field advantage, I suggested that they post on a site of their own, with links, but no one took this idea up.  That says it all for the nuclear “debate” on Twitter, as far as I’m concerned. I’ve muted the lot of them.  End update.

In this case, the debate was over nuclear power, and this post from last year. It’s reasonable to ask why I would bother arguing about nuclear power, given my frequently expressed view that it’s dead as a doornail. The problem is that nuclear fans like Ben Heard are, in effect, advocates for coal. Their line of argument runs as follows

(1) A power source with the characteristics of coal-fired electricity (always on) is essential if we are to decarbonise the electricity suppy
(2) Renewables can’t meet this need
(3) Nuclear power can
Hence, we must find a way to support nuclear

The problem is that, on any realistic analysis, there’s no chance of getting a nuclear plant going in Australia before about 2040 (see over the fold). So, the nuclear fans end up supporting the Abbott crew saying that we will have to rely on coal until then. And to make this case, it is necessary to ignore or denounce the many options for an all-renewable electricity supply, including concentrated solar power, large-scale battery storage and vehicle-to-grid options. As a result, would-be green advocates of nuclear power end up reinforcing the arguments of the coal lobby.

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Economics, Trumpism and Migration (crosspost from Crooked Timber)

John Quiggin18 Comments

It’s obvious enough by now that support for Trumpism in the US and elsewhere is motivated primarily by racial and cultural animus, and not (or at least not in any direct way) by economic concerns. Still, to the extent that Trumpism has any economic policy content it’s the idea that a package of immigration restrictions and corporate tax cuts[1] will make workers better off by reducing competition from migrants and increasing labor demand from corporations. The second part of this claim has been pretty thoroughly demolished, so I want to look mainly at the first. However, as we will see, the corporate tax cuts remain central to the argument.

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Can the electricity system be fixed ?

John Quiggin12 Comments

I’m going to be talking to Steve Austin on ABC 612 Brisbane today, hopefully about COAG’s rejection of the Turnbull government’s National Energy Guarantee. As I said when this policy was cooked up in a matter of a few weeks last year

The most important thing to understand about the federal government’s new National Energy Guarantee is that it is designed not to produce a sustainable and reliable electricity supply system for the future, but to meet purely political objectives for the current term of parliament.

Those political objectives are: to provide a point of policy difference with the Labor Party; to meet the demands of the government’s backbench to provide support for coal-fired electricity; and to be seen to be acting to hold power prices down.

To expand a bit on the first point, this is a policy that won’t survive past the next election. If Labor wins, they’ll need to raise the emissions reduction target and that will entail dismantling most of the elaborate structure of the NEG. If, regrettably, Turnbull is re-elected, he’ll face immense pressure from the backbench to do more for coal. On past form, and the indications of recent weeks, he’ll comply. If it should survive, the policy won’t deliver any significant change from the current no-policy trajectory, because it’s essentially designed to do nothing.

But if not the NEG, what can be done to fix the shambles that is our electricity system? Here’s a very brief outline:

(i) a publicly owned national grid, operated by a statutory authority with a service orientation encompassing the goals of security of supply, affordable electricity, and a transition to a fully renewable generation system
(ii) the abandonment of the electricity pool market, in favor of longer dated supply contracts, with an order-of-merit system of supply management
(iii) a mixture of public and private electricity generation and networked storage
(iv) reintegration of distribution and retail services

Drawing the line

John Quiggin19 Comments

In my last post on Wednesday, I said it was time to draw a line against racism and, among other things, to boycott Sky until it cleans house thoroughly.  As it turned out, I had to put up or shut up on this, much sooner than I expected. Yesterday, I was invited (by one of the few decent commentators on Sky) to take part in a debate on the National Energy Guarantee. As readers will know, I’m keenly interested in this topic, and would have liked to have my say, but I had to decline. If this happens enough, perhaps Sky management will take notice.

Of course, as commenters have noted, it’s not just Sky but the whole Newscorp machine that is now pushing racism[fn1]. Jason Wilson has a good piece on this.

Also as noted by a commenter, I omitted to mention that Sky’s neo-Nazi talent was invited by Adam Giles, former Chief Minister of the NT. and therefore, until a couple of years ago, a member of COAG. It appears that none of his former colleagues on the conservative side of politics has uttered a word of criticism of this appalling behavior. In fact, the only criticism I’ve seen from the right has come from none other than Andrew Bolt. I assume that he was trying to put some distance between Cottrell’s diatribes and the almost identical views he published around the same time.

Some good news is that advertisers are feeling the heat, with Huggies, Specsaveras and American Express withdrawing advertising. Virgin has apparently launched an investigation into whether the interview aired in its lounges, but I’ve seen nothing from Qantas and had no reply to my protest.

!. Or rather, “white nationalism”. As I noted back in 2004, the only genuine instance of political correctness in Australia is that you are never, ever, allowed to call anyone a racist. Even Cottrell, who has openly declared himself a racist, and has been convicted of race hate crimes, is often referred to by euphemisms such as “far-right activist”.

Time to draw a line

John Quiggin24 Comments

It’s unclear to me whether the string of recent expressions of support for racism  (or, if you prefer anti-anti-racism) from Sky, Bolt and Tudge among others) represent a campaign to normalise racism in Australia or a reflection of the fact that, at least on the political right, racism has already been normalized. Either way, it’s clear that this is going to be a defining issue in Australian politics, as it has become elsewhere in the world.

Sky network’s decision to broadcast a sympathetic interview with a Nazi represents a point at which our leaders can draw the line, if they choose. Despite the mealy-mouthed apology offered after a public backlash, this episode was entirely in character for Sky, which has a stable of racist and racism-friendly commentators. I’m pleased to see that Craig Emerson has announced that he is leaving the station. All decent people should boycott Sky until it cleans house thoroughly.

Qantas routinely broadcasts Sky in its lounges. Some reports say the same of Virgin, though that appears to be only occasional. I’ve written to Qantas to complain, and will be looking at alternative options unless there is a satisfactory response.  The more people do this, the harder it will be for them to ignore us.

Contesting contestability

John Quiggin9 Comments

Economics, like fashion, has its hot ideas. Among the hottest ideas of 1982 was the theory of contestable monopoly, described as an ‘uprising’ by its leading proponent William Baumol. To quote the summary in Wikipedia

Its fundamental features are low barriers to entry and exit; in theory, a perfectly contestable market would have no barriers to entry or exit (“frictionless reversible entry” in economist William Brock’s terms).[1] Contestable markets are characterized by “hit and run” competition; if a firm in a contestable market raises its prices much beyond the average price level of the market, and thus begins to earn excess profits, potential rivals will enter the market, hoping to exploit the price level for easy profit. When the original incumbent firm(s) respond by returning prices to levels consistent with normal profits, the new firms will exit. Because of that, even a single-firm market can show highly competitive behavior

Contestable monopoly theory didn’t stay at the top of the hit parade for long. In theoretical terms, it was hard to formulate the hit-and-run analysis in the language of game theory, which was beginning its rise to dominance around the same time. More importantly, at least from my viewpoint, the predictions turned out wrong, most notably in relation to US airline deregulation, which was the primary motivation for the theory. Routes served by only one or two airlines were characterized by higher fares than more competitive routes, and “raids” of the type described by the theory were rarely if ever observed. Looking at Google Scholar, I found hardly any recent papers making use of contestable monopoly theory (feel free to point some out!)

Yet an examination of the policy statements of Australian governments would make it appear that contestability is a central idea in economic theory. Google reveals the term applied to electricity and water consumers, vocational education (a spectacular disaster), the Department of Finance, and even Tasmania.

It seems that contestability, having died as an economic theory in its native country, has been resurrected as a piece of policy jargon in Australia. Presumably, it is supposed to carry with it the positive connotations of the theoretical term. In practice, however, it’s one of the long list of euphemisms for “privatisation”, a word that is almost never used nowadays, except by its opponents.

Brexit and the oral culture of journalism

John Quiggin20 Comments

For anyone following the trainwreck of Brexit, Richard North’s eureferendum.com is an indispensable source. North was (and, at least in principle, still is) a Leave supporter, proposing a model called Flexcit (roughly, the Norway/EFTA/EEA option), but has long since broken with May, Johnson and the rest of the Brexiteers.

North is scathing about the low level of analysis of just about everyone involved in the debate, the only consistent exceptions being Pete North (not sure if or how they are related) and his former employer Christopher Booker who, despite being on the denialist fringe of the climate debate, seems to make sense on Brexit.

I’ll ask a question about Brexit over the fold, but I mainly wanted to cite this important observation. Attacking a recent report, he writes that the author

proudly announces that his piece “is based on conversations” with certain prestigious persons, rather than to reference to primary sources. This so typifies the “oral culture” approach of what passes for journalism, with not even a passing reference to the Commission’s Notices to Stakeholders.

It is probably this superficial, prestige-driven approach which defines the popular Efta/EEA narrative. The average journalist would have a nose-bleed if they ever had to look at a copy of the EEA Agreement. In-depth “research” means looking up back copies of the Financial Times. As for the politicians, they seem to make it up as they go along.

The point about the oral culture is spot-on, I think. I remember observing long ago that journalists, unlike bloggers, assume that they can ring anyone up about anything and expect an answer. That has a huge influence on the way the media work.

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