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.
I’m now using Substack as a blogging platform, and for my monthly email newsletter. For the moment, I’ll post both at this blog and on Substack. You can also follow me on Mastodon here.
John Quiggin 
Housing matters.
The economics of housing is very much in the news. But the disconnect between affordable housing and average weekly incomes is the real problem. If housing is seen as a basic need, then its affordability is a key part of our standard of living. Think back to the period before every couple wanted their own home. The lack of affordable homes saw many couples stay in extended family homes. Today the first home buyer has more government assistance than at any other time in recent history. Yet affordability remains a sticking point for those couples now renting. With average rents so high, renting couples find it hard to save up to buy a home. They may get rental assistance but this does not mean they can save enough to purchase a home.
The answer to housing affordability is not apparent at the moment. There may be a need for structural reform of the whole housing industry. This will take time and provide no easy fix.
State, local and federal governments need to coordinate their housing policies. It’s not enough to have a policy that aims to build more homes. If those homes remain unaffordable, or if rents remain too high for savings to occur, then building more homes will not solve any social problems.
Another cheering update on the solar revolution (duplicate on the new site)
BNEF have updated their running forecast of global PV installations in 2024 to 592 GWdc, in the middle of their previous range estimate of 520 GWdc to 655 GWdc.
https://about.bnef.com/blog/3q-2024-global-pv-market-outlook/
They have added remarkable guesstimates of total solar production capacity: 1.2 TW/yr for modules, 0.9 TW/yr for polysilicon. The current wholesale price for modules is a jaw-dropping $0.096 per watt. They do not opine whether 10c/watt is sustainable, though it doesn’t seem likely. BNEF do say that polysilicon is selling at a loss.
To get some perspective on these numbers, world electricity consumption was ca. 26,000 Twh in 2023, growing steadily at 2.7% – a trend that already includes a significant switch to electric vehicles, offset by heat pumps, smart controls and other efficiency gains. https://yearbook.enerdata.net/electricity/electricity-domestic-consumption-data.html That’s an annual increase of ca. 700 Twh or 700,000 Gwh. With 8760 hours in the year, the increase equates to an artificial continuous equivalent output of 80 GW. 592 nominal GW of solar at a 20% capacity factor equates to 118 GW continuous equivalent, ignoring storage and distribution losses which must be much lower than 47%. Solar PV alone will more than meet all the increased demand, and fossil electricity production will enter its sunset years in 2025 at latest.
This prediction is not in the least surprising. It is consistent with, and tends to confirm, the IEA’s claim (using different methods) that energy-related global GHG emissions – basically electricity plus transport, process heat, ironmaking and cement – may have already peaked in 2023: https://www.carbonbrief.org/analysis-global-co2-emissions-could-peak-as-soon-as-2023-iea-data-reveals/ I know, I know, it should have been 20 years ago. We can still celebrate passing a milestone in our wheelchair marathon.
We have got into the habit of writing wind-and-solar as if they were equal partners in the transition, but this is no longer true. A comparable estimate of world wind installations in 2024 is 131 GW, up modestly from 117 GW in 2023. https://www.renewableenergyworld.com/wind-power/2023-was-a-record-year-for-wind-installations-as-world-ramps-up-clean-energy-report-says/
At a higher capacity factor of 40%, the new wind will produce 52 GW continuous equivalent; handy but under half as much as the new solar.
Wind power cannot match solar’s advantages in innovation, economies of factory mass production, modularity, simple installation, no-moving-parts reliability, and lower storage requirements for firming (overnight against weekly or fortnightly). It will retain large competitive niches at high latitudes and in winter, but it has clearly already become the junior partner. The gap will inevitably widen.
BNEF’s medium-term forecast is conservative. They predict solar installations will grow more slowly after 2024, and will actually fall in China from 2030. I don’t buy this. It’s a revolution. With solar panels at 10c/watt, coal generating plants like Eskom’s or Origin’s are actuarially worthless scrap metal. All over Africa, I expect village mechanics are learning how to instal $50 full-size solar panels without getting electrocuted – a lesser challenge than supplying mobile phone services every day in places like Somalia without a functioning government. We ain’t seen nothing yet.
“Think back to the period before every couple wanted their own home. The lack of affordable homes saw many couples stay in extended family homes.” – Gregory J McKenzie.
This period is before my ancestral memories, such as they are. That is to say I cannot remember myself, my parents or my grandparents as ever living in extended family homes. I cannot remember my parents or my grandparents ever telling stories of themselves living in extended family homes. My maternal grandparents lived in their own basic Queenslander house on their cane farm near to Bundaberg, when my mother was a girl who rode a horse to school. When this house was burnt down by the smoking worker dossing on their verandah, another home was built on the property.
My parents lived in a flat at Stones Corner before getting their Qld Housing Commission house in the (then) outer northern suburbs of Brisbane. My paternal grandfather had a farm in the Mildura or Sunraysia district. He later sold up and moved his family to Melbourne. My wife’s maternal grandfather had a farm near Boonah, Qld. Her father grew up in a cottage in Ithaca, Brisbane, owned or rented, I am not sure. All of this is to say they all, or almost all, had their own homes or cottages even through the Great Depression and WW2 where those are applicable.
I doubt that this is an uncommon family history in Australia, for white settler descendants let it be admitted. All this is to say that for three generations of my family, ordinary farmers, returned soldiers (my father’s father WW1 and my father WW2) and ordinary workers could most often afford to acquire and pay off their own homes when or very soon after they married.
Now, in our modern, wondrously advanced, claimed much-richer neoliberal nation, that is no longer possible. Something has gone seriously wrong. My adult children (born when I was 40 as I was a late bloomer let us say) are now 30 and cannot afford homes. They both have good jobs (professional and semi-professional) as does my daughter’s partner too but saving for and affording a house and home for themselves is so far impossible. Rents are sky high and house prices are sky high. There is that huge disconnect between worker wagers, professional salaries and house prices.
The real problem is neoliberal capitalism in total and Australia’s absurd negative gearing policies in particular which assist the relatively rich to own multiple investment properties. This subsidised investment regime boosts house prices to absurd levels. The other problem is not having state Housing Commissions dedicated to putting every formed couple into their own home. This all leads to the current situation. It won’t be remedied until if and when neoliberalism is wholly disbanded. Of course, that won’t happen. The rich are too powerful now and will never permit the social and economic change necessary to remedy the crisis. Expect intensified crises leading towards national social and economic collapse. No other destination is possible under a neoliberal regime.
“I know, I know, it should have been 20 years ago.” – James Wimberley.
Amen to that. Actually, we should have started 40 years ago. Solar tech was more in its infancy then but even so it could have been accelerated, in research and implementation, by government money and research from that time.
Climate change action delayed is opportunities foregone and runaway risks front loaded. We are now in a very parlous situation where we almost certainly face serious and even catastrophic outcomes.
It will not be enough to proceed with renewable energy, the fully electric economy, the phase out of all fossil fuels, energy savings, passive engineering solutions and “smart” solutions. We also need to implement, from *yesterday*, climate change environmental programs, amelioration, re-planning / re-situating of infrastructure, hardening of infrastructure, etc. etc. etc. as the fabled King of Siam would say. There is much to be done. There is no more time to waste and we have no spare resources to waste.
No spare resources to waste! That is a key takeaway. People obviously still think they and we can undertake all sorts of discretion spending and high cost discretionary social activities, and that we can afford all this and deal with climate change prevention, amelioration, remediation and recovery plus adaptation, support and hardening in all their forms including hardening infrastructure, institutions and making/ assisting people to more resilient economically, socially, educatively, psychologically and even physically in terms of health and robustness.
Without all these programs our people, our society, our institutions and our entire system will fail and collapse under the challenges we face. I see people everywhere totally unprepared for what is to come. I see governments, corporations and businesses totally unprepared and unwilling to assist the bedrock of society (workers, families, mothers, fathers, children, elders (oldies) to prepare. We are in for the greatest absolute and relative catastrophe in human history if we don’t get cracking on a “beyond-war-effort” effort to meet the coming crises.
Great news – thanks, James!!
“I see people everywhere totally unprepared for what is to come.” – Ikonoclast
I’ve seen Vonnegut’s much better take than I could express about those things always present and forthcoming. We are doomed.
“Those who believe in telekinetics, raise my hand.”
He said. So then, a brief few snips:
“Requiem:
The crucified planet Earth,
should it find a voice
and a sense of irony,
might now well say
of our abuse of it,
“Forgive them, Father,
They know not what they do.”
The irony would be
that we know what
we are doing.
When the last living thing
has died on account of us,
how poetical it would be
if Earth could say,
in a voice floating up
perhaps
from the floor
of the Grand Canyon,
“It is done.”
People did not like it here.”
Around 2000 Kurt Vonnegut said we’d missed the bus on apocalyptic climate change. He maintained we always were going to miss this bus, it’s in the nature of humans so situated to always fart around and miss the bus. His unique insight into human nature and notions of why humans miss such a bus occurs throughout his writing. Before he died he wrote some articles specifically dealing with how we had already back then missed this particular (survivable climate) bus.
“We could have saved the Earth but we were too damned lazy and cheap.”
“We talked on the phone for about 10 minutes, largely about the tenor of the book and the philosophies he’s been expounding on in interviews and lectures for the last 20 years: Mankind, he said, is doomed. We have no hope. There is no future. We’ve ruined our environment and ruined ourselves. We used to have a great country, and we crippled it. We used to have a great educational system, and now it’s disgraceful. And so forth and so on…”
avclub.com/kurt-vonnegut-doomed-interview-gloomed-worldview-1798211144
“We probably could have saved ourselves, but we were too damned lazy to try very hard, and too damned cheap.”
Kurt Vonnegut (2005) said: “I always hoped someone would rescue us from our stupidity…” “We have damaged the planet with our drunken binge on petroleum and fossil fuels and it cannot recover…”
“Time is liquid. One moment is no more important than any other and all moments quickly run away.”
“Here we are trapped in the amber of the moment. There is no why.”
“Every passing hour brings the Solar System forty-three thousand miles closer to Globular Cluster M13 in Hercules — and still there are some misfits who insist that there is no such thing as progress.”
Kurt Vonnegut – humanist, socialist, chrono-synclastic infundibularist extraordinaire.
Test post.
“The Optimum Settings of Sin Taxes”
No doubt there are lots of papers which would carry this or a related title. For “Sin Tax”, I argue we should define it as “a tax on attempts to self-harm, other-harm or cause ecological harm by the consumption of legal products/services and/or a tax on attempts to induce or tempt others into perpetrating such harms via such consumption”.
It seems clear that setting no “Sin Taxes” or Pigouvian taxes, for obvious harms including negative externalities, runs the clear risk (without direct regulated limits and compliance enforcement) of permitting unfettered excess consumption of harmful products and foregoing clear, obvious, available and beneficial government revenue streams.
On the other hand, it also seems clear and obvious that setting Sin Taxes or Pigouvian taxes too high generate perverse incentives and revenue streams for criminal activities such as smuggling, black market operations with lack of product compliance to any safety standards. This is what is happening today in Australia with black market cigarettes, e-cigs , vaping. This is to give one example.
Theoretical models and empirical data combined should permit the initial price setting of all Sin Taxes or Pigouvian taxes in an optimal band, all other parameters remaining the same. Cost benefit analysis would presumably consider all relevant positive and negative factors including collection and compliance costs, net revenues, reduction of all harms (medical and so on), reduction of costs of crime, policing and other negative externalities to persons, society and environment and so on. This would be true if accounted accurately, without any double counting which might be implicit or hidden in my rough list.
Of course, the entire socio-economy is a feedback system. On iterations of the system. following the initial changes, there would be feedback changes. This, I guess, is where theory would come in and judgements could be made to let the system find a kind of equilibrium (if it will at that setting) and to make tinkering adjustment at are the best advised intervals. Surely, this is not too hard for a democratic system with great calculative and modelling power, if we used it wisely?
Such a process over time could surely take into account hysteresis or lag effects and thus be used for waiting appropriate intervals before “tinkering” with settings. Such a system could also take into account sticky prices and perhaps even more important, in the long run “sticky habits” and addictive habits, with the intent here to refer to bad habits which remain “sticky” in people. Of course, “sticky habits” can sound a little off-putting as terminology but it is consistent (I think) with the idea of sticky prices.
I would not exclude the possibility that such tax pricing with other supporting policies could over time (perhaps in just a few generations) reduce our society’s tobacco habit to near eradication level. It could do also the same for alcohol plus other non-medical and strictly non-necessary (and always somewhat deleterious) psychoactive substances.
To say “humans can never give up x” is an unscientific claim and a claim purporting to be able to predict aspects of the future. This holds true unless “x” is strictly biologically necessary. I can agree that humans can never give up water, oxygen and nutritious food for example. I can also agree that humans can never survive and thrive without the nurture, companionship and society that individuals that mammals of a highly eusocial need.
I cannot agree that humans cannot survive without football, meat pies and Holden cars or beer and motorbikes or wine. You will notice that I left a few terms. We would be impoverished ecologically without kangaroos. We need birds of both the avian and human (slang) type but lets up drop the belittling “birds” and note that we (men and women) need women and song. Strictly speaking, society does not need wine, beer or spirits and IMHO would not be net impoverished for the lack of them. We also don’t need sugary drinks, junk food etc. etc.: not for our health and not for a sustainable economy. The list that is ripe for Pigouvian taxes is long indeed and levying them properly would go a considerable way to fixing a number of apparently wicked problems in the arenas of medical, social and environment ills.
My above attempt to comprehensively define “sin taxes” was a complete mess. Let us leave that aside. We already know what we mean by “sin taxes” in the modern context.
What’s more important is some of the analysis on setting sin taxes. This looks good and useful I think.
“”Optimal Sin Taxes” – Ted O’Donoghue, Department of Economics Cornell University
and Matthew Rabin, Department of Economics University of California, Berkeley –
September 11, 2003.
Abstract
Economists currently analyze optimal commodity taxation based on the assumption
that people’s choices fully reflect their own best interests. In this paper, we extend
optimal-tax theory by studying the welfare effects of “sin taxes” on unhealthy items,
such as fatty foods, that people may (by their own reckoning) consume too much of. We
use the same assumptions and tools traditionally used in public-finance theory, except
that we replace the assumption that 100% of consumers have 100% self control with
the assumption that some consumers may have some degree of self-control problems.
We derive “optimal” taxes that correspond to the traditional “Ramsey” taxes when
people have 100% self control, but differ when some people have self-control problems.
We illustrate the possibility that heavy sin taxes may be optimal even if we believe the
prevalence of self-control problems is relatively small. Intuitively, imposing large sin
taxes on unhealthy items while lowering taxes on other items may not hurt rational
consumers by much relative to the optimal Ramsey taxes, while the same change
can create significant benefits for those who over-consume unhealthy items due to self-
control problems. We also demonstrate that in some instances such sin taxes may create
Pareto improvements relative to the Ramsey taxes. Finally, we consider alternatives
to the usual linear taxes, and show that there may exist schemes that help people with
self-control problems while having little or no effect on people with full self control.”
I have not read the body of the essay and I doubt I have the technical knowledge to understand some of it anyway. But once again there is perhaps enough theory extant to help us make a better economy and solve certain wicked problems, except for the vested interests who oppose the patently clear solutions.
The Opium Settings of Sin Taxes
“The rise of China is one of the greatest success stories in the history of human civilization. So we could talk about China’s accomplishments all day. I’d like to highlight three.
We all know in 1949 when China stood up, liberating half a billion people, 10-20% of China’s population was still addicted to opium. In 4 years, the CPC eradicated opium addiction, liberating 90 million people from this colonial scourge. It’s also one of the greatest public health accomplishments of the 20th century. And I bet you’ve never heard of it…” – K.J. Noh. October 2nd, 2024
All good but falls well short of any optimum taxing of sin, eg., tobacco. 75 years on and it’s early days still, I suppose.