Monday Message Board

Back again with 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

36 thoughts on “Monday Message Board

  1. Interested in responses to Stephanie Kelton’s new book The Deficit Myth, and on conversation between her and Richard Deniss For Australia Institute.

  2. All reasoning is motivated reasoning. The empirical puts our motivations to trial.

  3. So, how about that Dyson Heydon ?

    LIke a lot of similar stories, it’s appalling without being surprising.

  4. Solar energy update
    (Idée fixe for the sandpit? If so, it’s one of JQ’s; also I stick largely to facts not theories, so here goes, here)

    An age ago, before the Deluge – maybe February – I posted the good news that the average wholesale fob price of benchmark monocrystalline/PERC PV panels – not the cheapest stuff – had dropped to 20c/watt. Well, now it’s dropped another 10% to under 18c/watt.

    Unlike the earlier number, the new price should be taken with a lot of caution, as this market like many others has been disrupted. It does suggest that producers have been less affected by the pandemic than developers and installers; fair enough, as the Chinese factories are highly automated and the few workers often work in clean room conditions presenting low infection risk. Distancing is difficult for installers.

    Leading manufacturer Jinko for one, and I don’t think they are outliers, are sanguine about prospects. Jinko think global demand will shrink by 25% this year, more than other prognosticators – but they will increase their own shipments by at least 25%. crushing smaller competitors in their wake.
    The scale of the manufacturing is now impressive. Jinko alone shipped 14.3 GW of panels in 2019, the equivalent of about 5 problem-free unicorn nuclear reactors; and unlike reactors, the panels are presumably operational within a year of shipment.

    In other news, there are intriguing reports of progress in direct photochemical production of hydrogen. As with other aspects of the renewable revolution, such radical innovations are not a precondition: simple electrolysers (invented in 1800!) work fine and are steadily getting cheaper. But it’s nice to have a potentially cheaper and grid-free backup technology.

    For the record, the expected uses of green hydrogen do not include fuel cell cars, which have clearly failed (Google MIrai sales). They do include ironmaking, seasonal storage in salt caverns, peak electricity generation in legacy gas turbines, and shipping.

  5. Our next bigger municipality has a new finance guy, a former econ Prof. This is a social democratic government there and the first thing he does is give an interview where he tells everyone how he has to cut spending. So ridiculous. It´s a rich city, which could easily afford anticylical behaviour, even without support from the central government which will arrive in all likelyhood. I´m mighty anoyed. Still looking for a job, and the jobs i tend to apply for are in the public sector, they all should have more not less demand for staff now but still i get nice mails like “due to corona we reevaluated and decided to not hire anyone for the position anymore for the forseable future” , or “due to corona, the application process will take longer, than usual, please dont contact us in the meantime”. To some extend, public sector bureaucracy is the only thing that gives me any chance to get hired at all, since my cv is one huge gap for health reasons and that is something that is not accept at the private sector at all, but man that bureaucracy can also be annoying. Even when they don´t cut the jobs (which never makes any sense) they just can´t get over themself to do video interviews. They just wait, and wait and wait till whatever….

  6. The biggest loss position in that municipality is by far the local theatre – at a least 100€ deficit for every visit, about the same sum for every inhabitant a year. Typical German embarassment those subsidies, upper class decadence financed by taxpayers. Since theatres are largely closed and the employees (hopefully*) either fired or on short term work, there shouldn´t even be much of a short run issue despite lower taxes.
    *Since theatres always get special threatment, i would not put it beyond them to pay them in full for doing rehersals a couple of month or that some have beamte status. If this were a German blog, i´d also be sure to get lots of angry response about how important “culture” which equals weird expensive theatre no one, including those defending the subsidies wants to see is and that everybody with a degree in that kind of upper class decadence deserves a taxpayer financed middle class status. Then a long complaint about how hard they already got it now because not all have high paying permanent contracts. Universal not so basic income, but just for the special people.

  7. Sry, another one: Let me not oversell the impact of theatre subsidies on the budget. Overall expenditures last year were 870 million. The overall surplus was 7,5 million. The theatre loses attributed to the municipality – there are costs carried by other levels of government amount to about about 14 million. So it´s not that big in percentage of overall expenditure terms, it is however quite the sum compared to say welfare spending – just 75 million, or all the other voluntary budget items, since a lot is just pretty much mandated by law stuff, things like schools or repairing roads, general adminstration and the like. Note that ticket sales hardly matter in the theatre budget, the only important other position are the other government level subsidies about 5 million, ticket revenue is just 2,5 million….

    Could open a regular category about the upper class decadence of huge theatre susidies in the sandbox, but that would be bad for my blood pressure and high blood pressure a particular risk these days.

  8. Really sorry, another correction: This reads like welfare is voluntary spending, it´s not, that position should be almost only the mandated by law spending to keep people from starving type, which counterintuitivly is a municipality level expenditure.

  9. JQ, Ernestine & others – have you ever used ‘fear’ as a variable or seen it used please? Only time I have seen fear was in a model re ‘busting heoin addicts’.

    Metabiota & Mucich RE used ‘fear’ via a new “Sentiment Index”, allowing them to offer ‘pandemic insurance’ – a 1 in 100 yr risk policy. And hints of climate insurance and 1 in 500yr event insurance. 

    I believe your “Epistemically Feasible Choice” project, may find ‘fear’ and the Sentiment Index, and the methods used by Munich RE to quantify it, to be worthy of investigation.

    ——- long article…
    We Can Protect the Economy From Pandemics. Why Didn’t We?

    A virologist helped crack an impossible problem: how to insure against the economic fallout from devastating viral outbreaks. The plan was ingenious. Yet we’re still in this mess.

    “The model would need to capture something much more difficult to quantify than historical deaths and medical stockpiles: fear. The economic consequences of a scourge, the historical data showed, were as much a result of society’s response as they were to the virus itself.

    The group started building what became known as the Sentiment Index. Ben Oppenheim, head of the product team and a political scientist, had studied the work of Paul Slovic, a University of Oregon psychology professor who studied how human beings perceive and respond to risk. Inspired by Slovic’s data-driven approach, they gathered their own information from around the world on how much various symptoms frightened people. To validate their measures, they also began tracking and studying how media coverage evolved around different types of outbreaks. Scarier diseases tended to generate more news stories.

    “Right now, taxpayers are going to soak up 100 percent of the risk,” Wolfe said of the coronavirus impacts. As of late May, the US economic bailout alone amounted to $2 trillion and counting. Pandemic insurance would shift at least some of that burden onto investors who’d willingly taken on the risk. “How much risk will the private sector be able to take? I’m an optimist on that. More than it’s currently taking. I don’t think anybody would say it’s not at least 5 to 10 percent,” Wolfe said. Five percent of the bailout would amount to $100 billion lifted off the books of the taxpayers and onto investors who had gambled on the risk.

    And even as late as February, when the virus was already worldwide news, hedge fund manager Bill Ackman managed to find a taker on a $27 million investment bet that the virus could crash the stock market. It was essentially an insurance policy for his portfolio. When he cashed it in to the tune of $2.6 billion in March, after going on TV and warning of the potential devastation the virus could cause, he felt the need to take to Twitter and defend himself against accusations of profiting off human misery.

    But the existence of a few prescient exceptions only served to underscore the question of why no one else had heeded the warnings.”

    And so the 1 in 500 – a cliamte catastrophe – may cost 10x – and we get back 5 or 10% from the market, and have paid for it? Hmmm… I still have a problem understanding how anything from equity / equality perspective will ever change. 

  10. And serendipity intervenes…
    ” working group that meets bi-monthly to discuss ‘Decision Making Under Uncertainty'”

    Title: Note to Steve
    JUN 22, 2020
    BY R Passov

    …” Many years later, Steve invited me to join a working group that meets bi-monthly to discuss ‘Decision Making Under Uncertainty.’ For the most part, we are a collection of former students who teach or practice somewhere between data science, economics and computer science.

    … If this is true or even partly true then it seems economics will have to go down a level, closer to the granularity of thought, finally mixing psychology with computer science, perhaps forever subjugating itself.”

    How is ‘Epistemically Feasible Choice project’ going please JQ?

  11. Why would we want for profit virus outbreak insurance? Some of that already exist, and Munich RE is sure to be among those who have written them. For example against closure of Restaurants due to virus outbreaks. Now they “decided” to pay out only 25% of the promised amount in Bavaria, because well just because, there isnt even any serious wiggle room in the contract and the economics minister encourages restaurants to take the 25% percent payment instead of sueing. A business model that is built on more or less legal denial of coverage and fearselling crap no one needs can´t possibly have any positive impact on society. Adminstratative costs of for profit insurance for risk assesment and the like are higher than any public sector solution even in the best possible world.

  12. Hypothesis: prominent right wing men are more likely to be sexual harassers than prominent left wing men.

    Question: On the evidence, is this true?

  13. Hypothesis: prominent right wing men are more likely to be sexual harassers than prominent left wing men.

    Question: On the evidence, is this true?

    It would be extremely difficult to test this hypothesis with evidence, and I am cautious about accepting it.

    However, there is at least a possible explanation, on first principles, for why this might be true (if it is true).

  14. Smith9 – the word prominent in your commet lets the cat out if the bag – piwer not politics defining imo. Power – makes your groups – left / right redundant.

  15. As if writing Economics in Two Lessons wasn’t enough, to beat Friedman and the neocons, you need a series of hugely readable adventure books. The adventure book for Ein2L would need to be a multi generation saga! I assume the publishers below would want an alternative for say, Sanders supporters. And versions in this article and paper below are being promoted to our schools by Scholastic.

    JQ’s next gig – adventure books.

    “Oh My God, It’s Milton Friedman for Kids”
    A historian of capitalism exposes how Choose Your Own Adventure books indoctrinated ‘80s children with the idea that success is simply the result of individual “good choices.”

    …” a teacher wrote: “In 20 years of teaching, I have never seen 12-year-olds so excited about anything as they are about Choose Your Own Adventure.” Now, as a grown-up who never has a fav she doesn’t want to see problematized, I was excited to see that Eli Cook, historian of capitalism and author of ‘The Pricing of Progress: Economic Indicators and the Capitalization of American Life’, had written an article for the Journal of American Studies putting this series in its historical place.”

    Rearing Children of the Market in the “You” Decade: Choose Your Own Adventure Books and the Ascent of Free Choice in 1980s America
    – By E Cook

    …” this article demonstrates how the incredible success of solely text-based CYOA books stemmed largely from the cultural ascent of individual market choice to the heart of American notions of agency, liberty, subjectivity and selfhood in the 1970s and 1980s.”

    CYOA books being promoted in Australia by Scholastic…
    “Chooseco currently partners on foreign editions with the following publishers:
    – Scholastic Australia (English language, Australia & New Zealand)”…

  16. Smith – I read Johnathan Haidt saying that the general predispositions and characteristics of Left and Right leaning people are well researched and are not hard to determine with confidence .They are in line with common stereotypes and easy to guess correctly . I would say that ‘Rightists are more prone to be abusers ‘ is a reasonable working hypothesis ,them being lower on empathy etc and higher on aggression, etc.

  17. I read Johnathan Haidt saying that the general predispositions and characteristics of Left and Right leaning people are well researched and are not hard to determine with confidence

    Jonathan Haidt’s methodology is based on assumptions which have not been validated.

  18. > ‘Rightists are more prone to be abusers ‘ is a reasonable working hypothesis

    But is it true? It’s easy to think of examples, but there’s plenty of examples that go the other way.

  19. Here is a Washington Post article that may help ,although there is no data on real world offenders and their political leanings .It might depend somewhat on how you define ‘abuse’ but its hard to imagine that Leftists would be anywhere as bad. The research on personality traits and political leanings wasnt done by Haidt ,it was, and is still, done by others .–>>

  20. For the first time, the world’s most powerful computer is based on ARM processors. The Fugaku supercomputer in Japan has 7.6 million of them. It cost $1 bn, so price was probably not the driving consideration in the design. Nevertheless you get more petaflops for the buck with an ARM licence. Intel is fighting its corner in supercomputing, and still dominates the much bigger server market, but one model of monopoly is steadily giving way to a more efficient one that fosters competition between licensees. Arm is a Global Treasure and it would be an epic disaster if it were taken over by a price-gouging predator.

  21. Here is a Washington Post article …

    It’s paywalled, so I haven’t read it, but solely from the headline I can see that it depends on a key methodological assumption which hasn’t been validated.

  22. For me it’s not paywalled but anyway;

    Conservatives and liberals may rely on different ‘moral foundations’

    What explains these differences? One possibility is that liberals and conservatives rely on what scholars refer to as different “moral foundations.”

    Moral-foundations theory argues that conservatives and liberals differ in the way they think about “individualizing” values — such as concerns about equality, justice, fairness and harm — and “binding” foundations, which include in-group loyalty, authority and purity. In particular, conservatives are more likely to value strong loyalty to their “tribe,” justify the status quo and resist social change. In contrast, liberals tend to prioritize concerns about social justice, fairness and avoiding harm to others.

    In other words, the polarized reactions to sexual misconduct allegations against powerful people may not only be partisan. Rather, they may emerge from more-enduring ideological differences in the way that conservatives and liberals view the world.”

  23. From the Washington Post –
    ” Numerous polls show Republicans and Democrats have diverging views about sexual misconduct ….. For instance, a 2017 YouGov poll revealed that Republicans are much less likely (31 percent) than Democrats (65 percent) to view sexual harassment as a very serious societal issue.”

    Regardless of whether traits cause politics or vice versa what conservatives say about themselves strongly implies they would be more prone to all types of violence – they say so themselves, they are not embarrassed about it.

  24. Conservatives and liberals may rely on different ‘moral foundations’

    I got that much, and there’s the problem: it is assumed, not demonstrated, that ‘conservatives’ and ‘liberals’ form a meaningful classification. If that methodological assumption hasn’t been validated, then there’s no adequate basis for the conclusions.

  25. Sunshine is in Brimbank council area (Melbourne ) which is an officially designated Covid hot spot now – one of 6 here. We also are the most multicultural council area in Melbourne, more than 50 % borne O/S . People looking to explain the spike have suggested those of non English speaking backgrounds were neglected as far as safety instruction goes. A nice way of blaming immigrants. I think its got more to do with dumb luck and the fact that lower socio economic areas could not work from home as much . This has been the only news story world wide for 6 months ,nobody could be unaware. To me it seems non whites are generally more careful , I do a bit of work in Brighton ,one of the wealthiest and whitest suburbs. Also at least 3 of the other hot spots are pure middle class vanilla – especially if you follow the now standard practice of counting Greeks , Italians and other Europeans as honorary whites. People are also wanting to blame the spike on the BLM rally too, but so far there is no connection ,shopping centers may have more to do with it.

    As an aside – Chas on Planet America has pointed out several times that a higher proportion of white Democrats think being black is some impediment to success than do black Democrats.

  26. Smith9, J-D. I rekon the word ‘prominent ‘ overrides left or right.
    Power more than affiliations.

    Are any of these traits left or right wing?

    “Four Psychological Traits of Sexual Harassers
    What traits make someone prone to sexually harassing others?

    “Characteristic #1: The Dark Triad
    With a name like “the Dark Triad,” you can bet this is a doozy of a personality trait. Actually, it’s three in one: narcissism, psychopathy, and Machiavellianism.

    “Characteristic #2: Moral disengagement
    This is another whopper of a characteristic. Moral disengagement is a slippery slope; a cognitive process by which individuals justify their own corruption and create their own version of reality where moral principles don’t apply to them.

    “Characteristic #3: Employment in a male-dominated field

    “Characteristic #4: Hostile attitudes towards women

    “To sum it all up, harassment indicates a willingness to exploit and manipulate as a way to maintain or gain power. It demonstrates carelessness toward the victims and aims to “keep them in their place.”

  27. A  theoretical computer scientist trys to convince economists and others of computational complexity.

    …”But the usual situation is that there are multiple equilibria, and then there is no general principle to predict which equilibrium will prevail, even though the choice might mean the difference between war and peace. Computational complexity theory can contribute to debates about the foundations of economics”…

    Why Philosophers Should Care About Computational Complexity 
    By Scott Aaronson 

    One might think that, once we know something is computable, how efficiently it can be computed is a practical question with little further philosophical importance. In this essay, I offer a detailed case that one would be wrong. In particular, I argue that computational complexity theory—the field that studies the resources (such as time, space, and randomness) needed to solve computational problems—leads to new perspectives on the nature of mathematical knowledge, the strong AI debate, computationalism, the problem of logical omniscience, Hume’s problem of induction, Goodman’s grue riddle, the foundations of quantum mechanics, economic rationality, closed timelike curves, and several other topics of philosophical interest. I end by discussing aspects of complexity theory itself that could benefit from philosophical analysis.

    11 Economics
    In classical economics, agents are modeled as rational, Bayesian agents who take whatever actions will maximize their expected utility Eω∈Ω [U (ω)], given their subjective probabilities {pω}ω∈Ω over all possible states ω of the world.75 This, of course, is a caricature that seems almost designed to be attacked, and it has been attacked from almost every angle. For example, humans are not even close to rational Bayesian agents, but suffer from well-known cognitive biases, as explored by Kahneman and Tversky [81] among others. Furthermore, the classical view seems to leave no room for critiquing people’s beliefs (i.e., their prior probabilities) or their utility functions as irrational— yet it is easy to cook up prior probabilities or utility functions that would lead to behavior that almost anyone would consider insane. A third problem is that, in games with several cooperating or competing agents who act simultaneously, classical economics guarantees the existence of at least one Nash equilibrium among the agents’ strategies. But the usual situation is that there are multiple equilibria, and then there is no general principle to predict which equilibrium will prevail, even though the choice might mean the difference between war and peace. Computational complexity theory can contribute to debates about the foundations of economics
    by showing that, even in the idealized situation of rational agents who all have perfect information about the state of the world, it will often be computationally intractable for those agents to act in accordance with classical economics. Of course, some version of this observation has been recognized in economics for a long time. There is a large literature on bounded rationality (going back to the work of Herbert Simon [122]), which studies the behavior of economic agents whose decision-making abilities are limited in one way or another.”

  28. KT2,

    Re: “Why Philosophers Should Care About Computational Complexity”

    I don’t understand the mathematics or references in that paper, yet I will say this in general terms.

    So far as I can tell “computational problems” (as tasks solvable by computers, at least theoretically) can only refer to finite problems (no matter how large) and by extension only to simulation problems which can be modeled or simulated accurately by computed finite state machines. There is no certainty that the cosmos is a finite state machine. There is also no certainty that the cosmos is deterministic. Apply both of these statements to a consideration of evolution (for example).

    If the cosmos is not a deterministic, finite state machine, then there will be aspects to real states (especially as cosmological open-endedness or novelty emergence) which would never be computable or predictable, even with infinite computation power. Whether these considerations would affect the thesis of that paper, I don’t know. But I guess I am saying that paper might not help political economy much. I think applying democracy, moral philosophy (ethics) and the empirical sciences would be a lot more useful. That’s just by bias of course.

  29. A tale of regulatory failure
    This would make a nice dissertation topic for a masters in public policy.

    The problem: When a gas turbine is switched off by the grid, the operator knows precisely the opportunity cost of the new silent state, not only price but availability (say 25 MW in 30 seconds). The information is not so good for a solar farm, but a clock tells the operator most of what they need to know. But for wind, it’s a mess. The conditions change all the time, so the opportunity cost is unknown. This preludes wind farms from taking part in markets for ancillary services. Don’t ask me to explain how current, voltage, frequency and inertia can be unbundled and traded on separate markets, but there it is apparently.

    The solution: the UK grid regulators have just introduced a standard power availability signal, that generators will send National Grid in real time. This unlocks the ancillary services markets, an earning opportunity for wind farms.

    The failure: I’ve no reason to think the standard proposed is suboptimal – but it took them five years to agree on it, which is ridiculous. Eight from the initial proposal in 2012. The committee included all the stakeholders, presumably sending technically competent representatives. It can’t have taken more than two meetings to establish the knowledge base. What went wrong?

    My speculation, based on general principles not detailed knowledge : the process of putting all the stakeholders in a room and telling them to agree on something can easily fail. When the issue is highly technical and participants well informed, it does not take long to identify the Pareto solutions. But these can be more than one. When the topic is a technical standard, the Pareto surface is discontinuous and may not be well-behaved and convex: more a sea cucumber than a sea urchin. When the decision protocol is unanimity, every participant has a veto to defend its preferred spike and may well have a rational incentive to use it.

    The answer to such logjams is a political deus ex machina. Ministers can readily unblock the jam by using a standard political toolkit of deadlines, bribes and threats (taking the decision away from the committee, public obloquy or praise, flattery, arbitrary linkage to an external issue). It’s not that difficult but requires investment of time and effort. In the UK, politicians and top civil servants. have simply been distracted by 24/365 Brexit.

  30. Groups in which there is a relatively large proportion of feminist women and pro-feminist men will *tend* to have a lower tolerance of bad male behaviour towards women than groups in which there are fewer or no such people.

  31. The COVID-19 pandemic has now spread to 10,000,000 known cases globally and 500,000 known deaths. I see no reason why, short of an effective vaccine, it will not spread to 5 billion people. That is 500 times the number it is known to have spread to so far. 500 times 500,000 is 250 million people. I would expect COVID-19 to kill 250 million people globally, without a vaccine, in the first pandemic “long wave”. Without a vaccine it will continue to kill people indefinitely after that.

    Worldwide, I would suspect that the total number of infections is already ten times the known number. That would mean 100 million already infected. This proportion of total infections to known infections is already proposed by American authorities including the CDC.

    The true size of the spread is bad news. The potential excess deaths of 250 million people globally plus ongoing deaths is also bad news. The likely lethality is 10 times 10 million divided by 500,000 = 0.5%. The lethaliity of the last flu season in the USA was 0.1%. The R0 of seasonal flu is about 1.2. The R0 of COVID-19 is thought to be around about 2.4 without in an “average” city without limiting measures. These numbers would indicate that COVID-19 is about 10 times more effectively lethal than flu. This is in its current form(s) without significant mutations. Of course COVID-19 is much more dangerous to elderly people.

    Without an effective vaccine, the effects on the global economy will stretch into the order of years; several years or more. Without an effective vaccine, a nation like Australia will have to stay locked down from significant global people movements indefinitely. How should we approach that possibility? Whether it is better to near-eradicate or “let it rip” is now being tested in the “global laboratory”. My prediction is that near-eradicating or eradicating will be socially and economically more successful even after accepting the quasi-autarkic losses (if there are such losses) from national isolation. I am not totally certain about this and I await empirical outcomes which will take some time to arrive. There are counterfactuals which might suggest that (for example) the USA will far better long term than China.

    I am not confident these counterfactuals will “bear fruit” however. Some of the main counterfactuals might sound cruel to contemplate. We should still have the intellectual courage to contemplate them without advocating them. (I have from the first advocated the eradication approach as followed by New Zealand and Australia.) But let us pursue counterfactual thinking.

    Firstly, in natural selection and demographic terms, the USA might benefit from COVID-19 as a long term selection event. The elderly and those with pre-existing conditions will die more frequently thus reducing the number of unfit individuals in the populations. I can say this as I am elderly or at least approaching elderly. Secondly, nations which go through the epidemic floridly might be able to open up their economy domestically and globally before others.

    Overall, I strongly doubt there are economic advantages in the “let it rip” approach and the moral judgement must be for protecting life in any case. Time will tell.

  32. Germany for some arcane reason splits the management of its backbone electric grid between four operators (TSOs). One of these, 50Hertz, which supplies the former East Germany plus Berlin and Hamburg, has adopted a plan to transition to 100% renewable supply by 2032. It’s 60% today.

    The largest TSO in Germany, Tennet, is wholly owned by the Dutch government. Challenge: define a scenario in which this arrangement is optimal.

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