Monday Message Board

Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please. If you would like to receive my (hopefully) regular email news, please sign up using the following link You can also follow me on Twitter @JohnQuiggin, at my Facebook public page   and at my Economics in Two Lessons page

23 thoughts on “Monday Message Board

  1. Two landmarks.
    The London ULEZ – a horrible acronym for “ultra-low-emissions zone”, but I suppose we are stuck with it – came into force last midnight (**** It’s historic, as London is SFIK the first city of any size anywhere to bring in a serious policy against pollution from fossil-fueled vehicles. In the details, it’s pretty conservative. Sensibly, they are using the simple technology (number-plate recognition by cameras and a vehicle database) already in use for the congestion zone. It works by a fee rather than a ban: a flat £12.50 daily charge for cars, plus a much steeper £160 penalty if you don’t pay in advance. The fee is only payable by ICEVs that don’t meet recent EU standards, so it’s not yet a zero-emissions scheme. However, nothing stops the standards from being progressively tightened up. The area is a square mile or so of central London, to be greatly expanded in 2021. The Mayor of London, centrist Labourite Sadiq Khan, does not seem to be paying any political price for the policy. He suffers like me from adult-onset asthma.

    Now: who will follow? In the UK, a good many cities are doing so, led by Leeds and Birmingham ( Several German cities including Stuttgart are considering diesel bans, politically more difficult. (A penalty fee takes Blofeld and Goldfinger in their Rollses out of the equation, it means nothing to them.) It’s easy enough for mayors to sign up to green electricity and electric bus policies, these cost nothing. Low-emission zones require more bottle.

    Two: A tiny Canadian air taxi operator, Harbour Air, is going all-electric. It’s a niche operator that only flies small seaplanes on half-hour flights among the fjords of the Pacific coast. But this is a business that depends absolutely on its equipment being safe and reliable. (**** Sure, this is just a straw in the wind, but it’s significant all the same. Unlike shipping, the aviation industry is seriously preparing for an electric future. The engines, control systems, and safety certification should all be there when batteries finally get good enough for commercial passenger flight.

  2. rog,

    Yes, unfortunately, I am coming round to the theory that humans are dark by evolutionary design. Given how humans game everything for self interest, it’s hard to believe we are progressing. Our science and tech are progressing but we are not. That actually makes the situation more dangerous, not less.

  3. Historian Yuval Noah Harare says we ,our ways of organising ,and our tech are one system which grows in size and power by very effectively gathering resources and using them to grow and perpetuate that system .Its about power ;- happiness ,health ,or anything like that ,is not necessary. One day the tech may just go on with the task by itself, we wont be necessary either.

    Physically sick and unhappy people who have lots of babies will predominate over healthy happy ones who dont, in a similar way a sick unhappy system can predominate. To me it seems that people normally choose power over happiness, or they just think that power will make them happy. Ask anyone why they want all the tech and they will normally say something about happiness and/or power -but I’m not sure general happiness levels are rising at all.

  4. I’d be interested in John’s views on the proposal to get the Fair Work Commission to support a “living wage” by increasing minimum wages.

  5. Minimum wage workers should get a living wage. Businesses which cannot pay a living wage cannot pay the reproductive cost of labor. All such businesses are getting a subsidy from somewhere else to run their businesses, if they manage to stay in business. Quite commonly, businesses which cannot pay a living wage get subsidies (indirectly) from Centrelink and thus from other taxpayers . The family person without a living wage can get family payments from Centrelink. This often makes up the difference to an overall living income. The business which cannot pay living wages is subsidised by those that can plus by higher paid workers.

    I’m not against subsidies, per se, as they can be useful in some cases as a kind of negative Pigovian tax. However, government has to be very careful what and how it subsidizes. For example, the diesel fuel rebate subsidizes farmers, miners, a proportion of country people and the fossil fuel industry. If we got more selective, we might want to remove some of these from receiving a subsidy. There is an excellent case that fossil fuels should receive no subsidy. In fact, they should be paying negative externality costs. There is a good case that miners should receive no subsidy. With farmers and country people in general I can think of some good equity reasons, social reasons, food security reasons and decentralization reasons for some subsidies.

    This analysis implies that some subsidies are blunt instruments. Subsidies (and implicit subsidies) when used need to be very carefully targeted.

    When big business is making super and/or record and/or un-taxed profits, the case to pay minimum wage workers less than a living wage is non-existent and an indication of the emergent selfishness, greed and anti-social nature of the rich and well off in an under-regulated capitalist system which enables these behaviors.

  6. Iconoclast, In standard economics workers in competitive labour markets are paid the value of the marginal product of labour and this depends on the value of output and the workers’s productivity. If productivity is low and/or the value of output produced is low then workers will not be paid much.

    If society decides that wages thus paid are less than an acceptable minimum standard then the standard prescription from all the economics I know is for the government to intervene by subsidizing the wage and funding this subsidy from taxes. I know of no economic theory that suggests firms should pay the higher wage themselves since, in a decentralized economy, the firm will then respond by employing fewer workers – at thec margin it is no longer profitable to employ the marginal workers.

    I Australia’s minimum wage is around 60% of the median wage. Are you saying that people cannot subsist on this and that others in the community need to subsidise them to keep them alive? I am unconvinced by this argument and, even if it is true, this would not be an argument for creating unemployment by requiring firms to employ workers who do not cover their cost since that would seem to me to simply create unemployment and hence even larger subsidies.

    Maybe setting a high minimum wage will improve the bargaining position of workers and maybe the theory is all wrong and, as some have suggested, increases in wages have no impact on employment. John normally supports these sorts of interventions and I wondered what his line on this issue would be.

  7. A powerful group calling for actiin in climate change with lived experience. And aupport. Via Climate Council…

    “”Today, 22 of my former colleagues, all senior fire and emergency service leaders from across Australia who have also seen these changes, have joined me to take a stand. Together, we are united in calling for urgent action to curb climate change.

    These leaders are men and women who have been on the frontline of some of the worst threats and extreme weather events our nation has seen, from raging bushfires to devastating floods and cyclones.

    All of us have experienced how climate change is intensifying the impacts of extreme weather events. We have seen our emergency services becoming more and more overwhelmed, as they struggle to cope with intensifying extreme weather driven by climate change. Emergency services simply don’t have the resources or capacity to adapt to this changing threat, particularly as many face continual budget restrictions.

    That is why, today, we are uniting as a new group, Emergency Leaders for Climate Action, to make an important statement.”

  8. Harry Clarke,

    You say, “In standard economics workers in competitive labour markets are paid the value of the marginal product of labour and this depends on the value of output and the worker’s productivity.”

    There is no objective way to resolve value theory in standard economics. There are only positive and normative statements in standard economics. This applies to value theory in spades. You can make a positive (descriptive) economic statement as in “This is what an unskilled worker is paid in this particular work in this particular jurisdiction today.” You can also do normative economics as in: “This is a model of how perfect markets ought to behave in a world where there are no oligopolies and all the participants are rational actors and always behave in accordance with expected utility theory.” However, markets in the real world never behave as markets do in these highly abstracted and unrealistic models. You thence import, into the real world, the simplified model as a normative belief, asserting: “This is how markets ought to behave, according to our simple idealized model, in the messy non-ideal real world”. A belief becomes a prescription.

    There is no way to objectively assess how much of the value of a finished product or service owes to labor, to fixed capital, to the free gifts of nature, to the ignoring of negative externalities, to the facilitating of production by existing infrastructure or culture and so on. There are only normative ways to define these values and even normative ways to ignore some.

    In classical and Marxist economics, all of the theories of value fail to make their case, meaning;

    (a) the intrinsic theory of value;
    (b) the utility theory of value; and
    (c) the labor theory of value;

    In addition, the developments of utility theory into subjective theory and marginal theory also fail to make their case.

    I assume you would be happy to agree with me that the intrinsic theory of value and the labor theory of value fail to make their case. This leaves the utility theory of value and/or its offspring. We can argue about these at length if you wish. I would defend a power theory of value; namely that sociopolitical power defines value and allocates it. This is the CasP (Capital as Power) theory by Jonathan Nitzan and Shimshon Bichler. Rather than getting their theory second hand from me, you would be better off reading their monograph:

    “Capital as Power. A Study of Order and Creorder”

    Click to access 20090522_nb_casp_full_indexed.pdf

    Of particular interest of course, in relation to this discussion is their refutation of utility theory, subjective theory and marginal theory.

  9. …”it was enough for Ms Price” !!!
    …”Adani’s responses should satisfy”… a 14yr old in a persuasive writing test is able to be more definitive. This from the Head of CSIRO Land & Water Jane Coram! which provides weight to agree with “a crisis of science integrity and maladministration at the highest levels in CSIRO”.

    JQ, this is how adani will be approved. Dreadful sloppy ill-defined ambiguous letter from the Head of CSIRO Land & Water. Poor modelling AND “amended plans were not directly evaluated by the CSIRO or Geoscience Australia”, and lack of long term effects taken into account. Grrrr…

    All your work, evaluations and many others who are gagged are just swept aside by Melissa Price aided by Jane Coram’s exceptionally poorly phrased “letter” which was “it was enough for Ms Price”.

    Today in abc news…
    “The department revealed in Senate estimates that the amended plans were not directly evaluated by the CSIRO or Geoscience Australia. Despite this, on April 1, the Environment Department briefed the Minister and recommended approval for the revised scheme.

    “Four days after the department gave their recommendation, a deputy secretary of the Environment Department, Dean Knudson, met the CSIRO’s land and water director, Jane Coram, to brief her on Adani’s concessions and sought CSIRO’s blessing.

    “Later that day, Ms Coram delivered the response in writing.

    “In Ms Coram’s letter to the department, she said: “CSIRO is of the view that Adani’s responses should satisfy the recommendations to update the groundwater models, and are directed to address the modelling related issues and concerns in our advice, noting that there are still components of that advice that will need to be addressed through approval of [a] research plan”.

    “It hardly appeared to be a ringing endorsement, but it was enough for Ms Price.”

    Here is the “How to create a crisis of integrity – CSIRO and the Murray-Darling”

    “CSIRO Executive in damage control

    . ..”CSIRO’s leadership is now in damage control of a crisis that it substantially created as a result of its own management actions. Land and Water Director Dr Jane Coram has been quick to remind staff to ‘not provide public commentary or make statements about the Royal Commission or the Murray-Darling Basin Plan.’ CSIRO Executive Peter Mayfield is now leading a ‘situation management team’ to inform an ‘appropriate response.’

    “Sadly, the Staff Association is not surprised by either the circumstance or CSIRO’s response. Science integrity is an enormous challenge with a leadership that has proven either incapable or unwilling to push back against political interference. This has been coupled with the increasing pressure from the Executive to preferentially perform research that is funded by industry and vested interests.
    This week’s release of the report of the Murray-Darling Basin Royal Commission has exposed a crisis of science integrity and maladministration at the highest levels in CSIRO, writes Sam Popovski. 

    “THE DAMNING report didn’t hold back in revealing how CSIRO science has been ignored or used in a misleading way on multiple occasions by the Murray-Darling Basin Authority (MDBA).

  10. Comments please on such an important matter. Instead of splitting hairs with each other please focus on this for a minute. I am considering a complaint and foi request.

    Does the letter by the head of csiro Land and Water Dr Jane Coram, to Melissa Price “Provide frank, honest, comprehensive, accurate and timely advice” please…

    “In Ms Coram’s letter to the department, she said: “CSIRO is of the view that Adani’s responses should satisfy the recommendations to update the groundwater models, and are directed to address the modelling related issues and concerns in our advice, noting that there are still components of that advice that will need to be addressed through approval of [a] research plan”.

    “It hardly appeared to be a ringing endorsement, but it was enough for Ms Price.

    “Only the weekend came between the CSIRO’s letter and her announcement that Adani’s key water management plan had Federal Government assent.”

    CSIRO relevant Code of Conduct.
    “4.2 Working with Government and the Parliament

    “In addition to the above, when dealing with Government and Parliament, our people will:

    “Provide frank, honest, comprehensive, accurate and timely advice; ”

  11. Said the judge about the Daily Telegraph’s reporting in the Geoffrey Rush defamation case

    “This was in all the circumstances a recklessly irresponsible piece of sensationalist journalism of the very worst kind.”

    Well, sure, but it is the Daily Telegraph, which is all of those things, and more, by definition. What did he expect?

  12. The EV boom continues. Q1 sales of EVs in China were 118% up on Q1 of last year (**** What is striking is that sales of fossil-fuelled cars fell by 13% or 731,000, far more than the EV increase of 137,000. The same trends hold globally; a rapid increase in EV sales, and a larger numerical fall in gasoline and diesel ones.

    The Occam’s Razor explanation for the latter is that it has the same cause as the former. In addition to actual EV car buyers, there are a much larger number who expect to buy an electric car and are waiting for prices to drop. It’s unlikely, with 200-mile ranges becoming standard, that range anxiety now plays much of a role, but YMMV (literally). On the other side, possible future usage restrictions on fossil-fueled vehicles is likely to be a growing concern. There’s surely a fair risk Sydney or Brisbane will have ULEZes in the next five years, or a national carbon pricing policy will come in in Australia, either of which will hit the second-hand value of a new gasoline car.

    If you don’t like this explanation, what’s the alternative? There is no global or major regional recession; interest rates have not spiked; gasoline cars have not suddenly got more expensive or acquired lower performance. The fall could just be a blip, but why should Chinese, American and European consumers all have been hit by the same noise factor simultaneously?

  13. Carbon emissions from steelmaking are a technically difficult problem, as the carbon is integral to current blast furnaces. One promising pathway is direct reduction of iron ore. This is done already on a fair scale (84 mt in 2018 worldwide) using natural gas. In future it is hoped to replace the natural gas with catalysed hydrogen. Pilot projects are under way with EU backing at two small but competent steelmakers in Sweden (SSAB) and Austria (Voestalpine). Voest developed the now universal direct oxygen steel process in the 1940s. Now these have been joined by the world’s largest steelmaker. ArcelorMittal (97 mt/year) is spending €65m of its own money on a demonstration hydrogen DRI plant in Hamburg. (****

    With backers like these, hydrogen DRI looks very much a feasible technology. What we don’t know, and ArcelorMittal are paying to find out, is how much it will cost. We cannot just assume that technical progress will make the pathway cheaper than coal-fuelled blast furnaces, by analogy with wind and solar electricity. The process may require a carbon price or equivalent incentive to make it work. Hamburg is of course in the ETS area, where there already is a low price.

    Australia is a minnow in steel production – under 6 mt a year – but a major exporter of both metallurgical coal and iron ore. The former is doomed: well after coal for electricity, but eventually. The former suggests possible downstream integration, as Western Australia offers limitless cheap solar and wind energy. DRI sponge iron is tricky to ship as it readily reoxidises, an exothermic reaction, and special precautions are needed. So going all the way into steelmaking may be the better option. However, primary steelmaking is a shrinking industry and it may not make sense to move rolling mills to another continent.

  14. James, using hydrogen from electrolysis to reduce iron ore would have to compete with natural gas + sequestering the CO2 released or using charcoal.

    CO2 released from using natural gas could be captured from the atmosphere agriculturally or it could be captured directly on site. Capturing it directly as a gas leaves the problem of sequestering the gas, but direct capture is at least more feasible than from a coal power station as the CO2 stream is very pure. This is already done with a DRI facility in the Arab Emirates although the CO2 is pumped into the ground to increase oil extraction.

    If the cost of renewably produced hydrogen really comes down it might make sense to use it but currently that stuff is really pricey.

  15. Ronald: the steelmakers spending good money on this are not looking at today’s hydrogen prices but possible future ones. Assume offpeak wind and solar electricity at 1c/kwh and catalysis technology that focuses on low capital costs rather than conversion efficiency. Together, that would give really cheap hydrogen near the point of production. The big unavoidable cost is transporting the stuff, which can be mimimised with big coastal ironworks.

    The main competitive use for P2G is burning in gas turbine peaker power plants. Germany has a dozen P2G pilot plants up and running: they are serious about this, as success would end dependence on Russian gas. IIRC Japan is also spending in the same area. I would not bet on their failure if I were Putin.

  16. Hydrogen produced from electrolysis at 80% efficiency and an average electricity price of 1 cent per kilowatt-hour has a marginal cost of around 50 cents per kilogram.

    It would take about 3 kilograms of charcoal to reduce the same amount of iron ore as 1 kilogram of hydrogen. A good price for charcoal would be $100 a tonne so 30 cents worth of charcoal would be required. If charcoal is $150 a tonne that’s 45 cents.

    So if hydrogen is going to beat charcoal it would have to be pretty cheap.

    But this is just looking at the quantity of ore that could be reduced. There may be other considerations that favors one or the other.

  17. Ronald: ArcelorMittal and BHP would presumably have to cut down the lush forests of Pilbara to get the megatonnes of charcoal.

  18. James, charcoal is an agricultural product like any other. All that would be required is a rise in agricultural prices that would starve millions.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s