Livable income guarantee

I’ve been working on the idea of a Livable Income Guarantee for some time. This is a version of the participation income idea put forward by the late Tony Atkinson. ANU has just published a policy brief on the idea, written jointly with Tim Dunlop, Jane Goodall, Troy Henderson and Elise Klein.

It’s not the ultimate theoretical ideal for ideas like Universal Basic Income or a Job Guarantee. Rather, it’s a policy that could be introduced now, within the existing fiscal framework. The key elements are

  • permanently setting the unemployment benefit (whatever it’s called after Jobseeker) equal to the age pension, and subject to the same income and asset tests
  • expanding eligibility to encompass a wide range of contributions including
    • voluntary work
    • child care
    • full-time study
    • artistic and cultural activity
    • starting a small business
  • replacing current compliance enforcement with an approach similar to that used in the tax system, with self-assessment backed by auditing

The estimated cost is $18 billion a year, and a range of financing options are included.

Sandpit

A new sandpit for long side discussions, conspiracy theories, idees fixes and so on.

To be clear, the sandpit is for regular commenters to pursue points that distract from regular discussion, including conspiracy-theoretic takes on the issues at hand. It’s not meant as a forum for visiting conspiracy theorists, or trolls posing as such.

Choose your own 538 adventure

Like lots of others, I’m anxiously watching forecasts of the US election outcome. But it’s hard to figure out what’s going on, with Biden way ahead in the polls, behind in the betting markets and rated a 70 per cent chance by the model at 538.com. Inspired by this post from Andrew Gelman, who is working on the Economist model (Biden currently a bit over 80 per cent), and an informative tweet from Nate Silver, I’ve managed to improve my own understanding a bit. At least I think so.

Silver’s tweet confirms that the Electoral College system gives Trump a significant advantage relative to an election by popular vote. He syas
Chance of a Biden Electoral college win if he wins the popular vote by X points:

0-1 points: just 6%!
1-2 points: 22%
2-3 points: 46%
3-4 points: 74%
4-5 points: 89%
5-6 points: 98%
6-7 points: 99%

With that information, it’s easy enough to fit a normal distribution to the margin, and get an estimate probability of winning. By fiddling with the numbers, it’s easy to replicate the 538 probability estimate and also to get a probability distribution looking fairly similar to those displayed on te site. My best estimate is N(5,4), that is, the mean value for the margin is 5 points and the standard deviation is 4. The mean value is consistent with the description of the state level estimates on the 538 site, which (very roughly speaking) take the existing polls (which currently have Biden ahead by 7.4 nationally) and then give Trump 1 point for an incumbency advantage (reducing the margin by 2 points).

Looking at the Economist model (which doesn’t necessarily agree with 538 on the exact distribution of the Electoral College advantage) it fits pretty well with N(6,3)

The standard deviation is a big deal here. N(5,4) implies a 95 cent range of, roughly, -3 to 13. I can’t say I find this plausible, at least assuming the election proceeds without armed intervention. Short of personally inventing a vaccine and hand-delivering it to the entire US population, I can’t imagine anything that would give Trump a 2.5 per cent chance of winning the popular vote. And it’s equally hard to see what would push him much lower than he is now.

If you would like a more optimistic story, you can get one by focusing exclusively on the polls where Biden’s lead has been consistently between 7 and 9 points, consistent with a distribution like N(8, 0.5), which puts Biden at 99 per cent.

I should alert readers that I don’t always get this kind of calculation correct, so feel free to check it out and correct it if necessary.

The Economic Consequences of the Pandemic

That’s the title of the book I’m working on for Yale University Press, and also the theme of two articles I published yesterday.

One, in The Conversation, looked at the potential benefits of remote work and the likely struggle over who will get those benefits. Key paras

For the most part, disputes over sharing the benefits of remote office work will be hashed out between employers, workers and unions, in the ordinary workings of the labour market.

But what about the other half of the workforce, who don’t have the option of working from home? In particular, what about the mostly low-paid service workers who depend on people coming into offices?

If the productivity gains made possible through remote work are to be shared by the entire community, substantial government action will be needed to make sure it happens.

The other article, in Inside Story, looks at the end of the goods economy and its replacement by an information and services economy, a transformation that’s been highlighted by the pandemic. An important implication is that investment demand by private firms is likely to stay low, even as greater public investment is desperately needed.

Tech firms like Microsoft, which now determine stock market values, don’t need much capital. The book value of Microsoft’s capital stock is less then 10 per cent of its market value. The rest is made up of intangibles, a polite word for monopoly-power network effects, intellectual property, and good old-fashioned predatory conduct.

Without any need for private sector investment, interest rates will remain low unless public investment picks up the slack. With the physical goods economy fading into the past, though, we don’t need more of the transport infrastructure projects governments automatically turn to at times like these. Rather, we need to invest in human services like health (mental and physical), education and childcare, and in information platforms that break the monopoly power of the tech giants.

These are the investments that will allow Australia to flourish in an economy dominated by information and services rather than industrial production.

Continuing on the monopoly theme, I did an interview with ABC’s Future Tense, which is now online

Assessing the lockdown policy: a baseline comparison

Various people, mainly but not exclusively in the Murdoch Press, are still complaining about the cost of the lockdowns and other restrictions imposed to control the Covid-19 pandemic. But most of these people seem to think that, in the absence of the controls, we would have avoided the economic costs, without any additional deaths (or, for the more hard-nosed, with only some expendable old people who would have died soon anyway). So, I thought I’d fill the gap by doing a comparison of the actual outcome with a baseline case: no government-imposed restrictions and no economic policy response.

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Hydrogen

It’s now clear that we have the technology we need to run a completely decarbonized electricity generation system. South Australia is the world leader[1] generating more than 50 per cent of its energy from renewable sources, and aiming for 100 per cent renewables by 2030.

The unit cost of renewables is now well below that of carbon-based generation (and nuclear). The remaining big question regarding the economics of the transition is the cost of storage, taking account of the variable nature of solar PV and wind.

As I’ve pointed out before, any reversible process that uses energy is a potential storage technology – that’s true of batteries, pumped hydro, flywheels, stored heat and many more. But hydrogen is a particularly appealing storage technology, because it offers the potential to decarbonize major industrial processes.

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Where do you get your ideas?

The most memorable answer to this question came from science fiction writer Harlan Ellison, who said “Poughkeepsie” (on checking Wikipedia, I learn that he died a couple of years ago).

But in the context of discussions about remote work, I’m interested in the claim that random physical meetings (the archetypal example being corridor or water-cooler encounters with colleagues) are an important source of ideas, and therefore a reason for not working remotely.

This seems to be the kind of topic for which the data will consist mostly of anecdotes and introspection. A marginal improvement is too look over my own list of publications to see if I can identify any where the source arose from some particular interaction.

Looking at my 100 most-cited papers in Google Scholar, most collaborations are the result of planning rather than chance. In pre-Internet days, most of my collaborations started from seminars and conferences I spoke at or attended because the topic was of interest, or else from direct approaches by a colleague, usually in the same department. From the early 1990s onwards, direct approaches mostly came by email, and work has been done the same way. In several cases, I have written joint papers before ever meeting my co-author(s), though in other cases in-person collaboration with one or two co-authors works better.

More interesting to me, are the cases where the idea has come from blogging. Some notable examples

  • My Zombie Economics book. Starting with blog discussions, the idea for a book came from blog commenter Max Sawicky, and was picked up by Seth Ditchik at Princeton UP, who also commissioned Economics in Two Lessons and my current book-in-progress Economic Consequences of the Pandemic
  • Cross-disciplinary collaborations with Henry Farrell and LA Paul both arising from my involvement with Crooked Timber
  • This paper, which started with a comment on a blog post to the effect that “future generations” are in fact already alive (At least I think that’s how it happened. I could never locate the comment to acknowledge the source.)

It seems to me that that these are much more like the kind of serendipitous links that are supposed to be generated by water coolers.

Of course, academic research is a special kind of work, and I’m much more involved with the Internet than most of my colleagues (or, at least, a few years ahead of the general adoption trend). So, I’d be interested in anecdotes from others and links to actual research, if there is any.