Author: John Quiggin

Do the math, Tony

John Quiggin70 Comments

Unimpressed as I am by Labor Julia Gillard’s Prime Ministership, they (and she) remain far preferable to the alternative. For an illustration of what’s on offer, let’s look at Tony Abbott’s claim (repated on quite a number of occasions) that a $40/tonne carbon tax will double the price of electricity. For coal-fired electricity, CO2 emissions are around 1 tonne/MWh for black coal (a tonne of coal generates about 2.5 tonnes of CO2, and also about 2.5 MWh of electricity), and a little more for brown coal. So, a $40/tonne tax implies an additional cost of 4c/kwh. Electricity prices vary a lot, but currently the standard retail rate in Queensland is around 20c/kWh, so the price increase would be around 20 per cent for households. Businesses that use large amounts of electricity pay lower prices and would therefore face a higher price increase, but since the generator cost of electricity is typically more than $40/MWh, no one paying a market-determined price would face a doubling[1].

What’s really striking about this is that it occurs in a context where Laurie Oakes is questioning Abbott about his credibility. The next question, referring to previous inconsistencies is “But, isn’t it important if you become Prime Minister, that Australians can believe what their Prime Minister says?”. Oakes is pretty good on who said what and when, but he lacks the basic arithmetic skills and policy background to call Abbott out on an obvious lie. And if Oakes doesn’t think it’s important to understand basic facts about the policy issues, you can bet the same is true of the rest of the Canberra Press Gallery, who hang on his every word.

fn1. Probably there are some aluminium smelters on cosy deals from the 1980s and 1990s paying prices below generator cost, but the odds are they would have tobe compensated in any case, whether or not this is justified economically or socially.

Creationists hijack lessons and teach schoolkids man and dinosaurs walked together

John Quiggin31 Comments
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via news.com.au

It’s hard to know what is most deplorable about this story, so I’ll leave it to readers to choose what they deplore most. For me, I think the comments from an Education Queensland[1] official supporting the teaching of creationism

Posted via email from John’s posterous

fn1. BTW, what’s with the reversal of English word order that has become the norm in bureaucracies these days? Not a good example for an education department (or Department Education I guess) to set.

Splitting the progressive vote

John Quiggin20 Comments

Whenever the topic of voting for the Greens comes up, the question arises of whether this involves “splitting the progressive vote” or “wasting your vote”. In large measure, this suggests results from confusing the Australian system with the “first past the post” (plurality of first preference) system that prevails in the US and Britain. In all Australian voting systems it is possible to vote Green with a second preference for Labor. Obviously, if you don’t do this (by preferencing the Lib/Nats or by exhausting your ballot where this is an option) the result will be to reduce the chances of a Labor candidate being elected. But are there any other cases where this is a risk?

For single-member constituencies, the most common case is where the Greens are sure to run third. In this case, their preferences are distributed, and a Green vote with a Labor second preference is functionally equivalent to a Labor first preference, although the views they express are different. In the rare cases where Labor is sure to run third, the opposite is true. The only interesting case is where the order in which Greens and Labor are going to finish is unsure. In this case, the outcome that gives the best combined Labor-Green chance is that the candidate with tighter preference flows should finish third. That way, there is less leakage of preferences to the conservatives. In practice, I don’t think this is a big deal, but to the extent it is at all relevant, it usually suggests that progressives should vote Green. But there is a problem with this, in that, if people really acted on this analysis, there would be a reward to the party whose voters were more likely to split their preferences.

Broadly speaking, the same analysis applies in the Senate. Most of the time, the total number of Green and Labor Senators elected will be the same regardless of how preferences are arranged between them. Given the complexities of the system, especially with voting both above and below the line, anything can happen, but since these complexities are almost impossible to predict in advance, they can’t really influence a decision on how to vote.

Race to the bottom

John Quiggin84 Comments

I restarted the blog so I could comment on the election, but I’ve found it too depressing to do much. The major parties are engaged in a race to the bottom in every respect, announcing silly focus-group-driven policies and appealing to the worst instincts of the electorate. The mass media have encouraged this, obsessing over trivial scandals and personality issues and disregarding our real economic and social problems. The only serious hope for progress on policy is the Greens but they remain marginalised. I’ll try to offer some discussion of the Greens policies on various issues but at this point, I think, there is little reason to follow the main campaign.

Who has gained from the inequality boom? — Crooked Timber

John Quiggin50 Comments

A question that comes up at CT quite a bit is: who has benefited from the massive increase in US income inequality over recent decades. I finally got around to chasing down Congressional Budget Office data (derived from tax records for the period 1979 to 2005), and the answer, in short is:

  • The top 1 per cent roughly doubled their share of both pre-tax income (9 per cent to 18 percent) and after-tax income (7.5 per cent to 15 per cent)
  • The rest of the top 10 per cent slightly increased their share (from about 20 to about 22 per cent)
  • The next 10 per cent held their share (about 15 percent)
  • The remaining 80 per cent of households saw their share drop (from 58 per cent to 48 per cent of post-tax income, with the biggest drops coming at the bottom. The bottom 40 per cent of households now get a smaller share of post tax income (14 per cent, down from 19) than the top 1 per cent.

    A couple of observations on this.

First, to answer the question “who gained from the inequality boom” we need a counterfactual. If, as is commonly claimed, pro-rich policies raised the average rate of growth of income, people in the top 20 per cent of the income distribution were better off, since they had a constant share of a bigger cake. The effects are ambiguous for everyone else, and, on any plausible numbers, everyone below the median is worse off than they would have been with moderately slower, but equitably distributed growth. On the other hand, if pro-rich policies contributed to the slowdown in economic growth for the period since the 1970s, compared to the postwar boom, then the only net beneficiaries are those in the top 1 per cent of the income distribution.

Second, the picture would probably change a bit if benefits (particularly employment-related health benefits) were taken into account. My guess is that this would probably improve the outcome for the top quintile (since this group mostly held on to benefits which increased faster than wages) and worsen it for those below the median (who have lost access to benefits over time).

Finally, it’s striking that, on the CBO figures, the tax system is almost exactly proportional: that is, it has no net redistributive effect at all. The top 1 per cent have a somewhat smaller share of post-tax income than of (measured) pre-tax income, but that almost certainly reflects their capacity to hide income from the tax system.

via crookedtimber.org

Posted via email from John’s posterous

Votes for clunkers

John Quiggin19 Comments

Julia Gillard has announced an Australian version of the cash for clunkers program of the Obama Administration. Reader Ben Elliston writes

read an article some months ago by Jeffrey Sachs evaluating a
similar policy from the Obama administration:
http://www.scientificamerican.com/article.cfm?id=a-clunker-of-a-climate-policy

It turns out that the Gillard proposal is even worse than Obama’s.
Sachs calculated the greenhouse gas abatement value of Obama’s scheme
at US$140 per metric tonne. Gillard’s policy will reduce emissions by
1 million tonnes at a cost of $394 million dollars ($394/tonne).

My only observation is that Ben’s estimate is taken directly from the government’s press release, which is almost certainly overoptimistic. For comparison, at about $25/tonne, brown-coal electricity generation becomes uneconomic compared to gas and black coal. At $100/tonne, just about all the alternatives (including wind, nuclear, CCS, and solar) look pretty good. Cash for clunkers is, as Sachs concludes, a clunker of a policy.

And just in case anyone has forgotten, Abbott’s anti-policies are even more focused on this kind of nonsense/