Author: John Quiggin

Garnaut draft report released

John Quiggin68 Comments

The Garnaut Review draft report has just come out. The site is clogged, but I’ve managed to get a copy of the report and press release (I’ve attached the latter here.

There’s a lot of discussion of the Murray Darling Basin where the worst-case projections are about as grim as they can possibly be. My UQ research group (Risk and Sustainable Management Group) did the economic modelling that translated the climatic projections into predicted changes in land and water use. There are big adverse impacts under most of the ‘business as usual’ scenarios. On the other hand, in the projections where CO2 concentrations are held to 450 ppm things aren’t bad, and even 550 ppm would still allow irrigation to continue.

More soon on the policy recommendations. Whether or not the government ultimately follows Garnaut’s proposed model, there’s no doubt that the Review has shifted the terms of debate substantially. Those (like the Federal Opposition) who are tempted to play the issue for short-term political gain will pay a big price in the end if they succumb to that temptation.

Radical scepticism

John Quiggin80 Comments

For a long time, I’ve used the term “delusionist” rather than “sceptic” to describe those who reject mainstream science on global warming. In general, the term “sceptic” is inappropriate for the vast majority of this group, since their position is hardly ever based on a willingness to look sceptically at evidence without reliance on a preconceived views. The gullibility with which so many delusionists parrot the latest talking points (“Hockey stick broken!”, “Global warming on Mars”, Warming stopped in 1998″ and so on) is clearly incompatible with any kind of scepticism. And, given the volume of evidence that has accumulated on the issue, only an adherent of some very strong form of scepticism could reasonably remain undecided. Such a sceptic has now appeared in the form of Adam Shand, a Channel 9 journalist who said, in a recent Sunday program on global warming “it’s only an assumption” that summer is warmer than winter. I imagine he gets great prices on ski holidays, by going in January!

Of course, once you’ve gone this far in scepticism, why not go the whole hog? Radical scepticism provides the perfect argument for rejecting action to mitigate global warming – if we have no reason to believe in the existence of the external world, then trashing it can’t be a problem, can it?
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The unsustainable has run its course

John Quiggin30 Comments

Unlike national central banks, the Bank for International Settlements doesn’t have to worry too much about the effect of its statements on business and consumer confidence or on the possibility of political flak. Hence, it has usually tended to give a less rosy view of the economic outlook than other official and quasi-official institutions. The latest assessment is particularly gloomy .

The full annual report has the cheery title “The unsustainable has run its course and policymakers face the difficult task of damage control” (Overview here).

The money quote:

Perhaps the principal conclusion to be drawn from today’s policy challenges is that it would have been better to avoid the build-up of credit excesses in the first place. In future, this could be done through the establishment of a new macrofinancial stability framework, which would call for both monetary and macroprudential policies to “lean against the wind” of the credit cycle

It’s hard to disagree with this, but equally hard to imagine such a framework (reminiscent of the “new global financial architecture” proposed in the late 90s) being introduced without the stimulus of a truly dire financial crisis.

Cromulent

John Quiggin9 Comments
.!.

Working in a Faculty of Business and Economics, I get exposed to lots of business magazines I wouldn’t read otherwise. I saw one today with a cover which urged me to “empassion my sales!”.

Being a prosaic economist, I would have thought that, as long as a business can embiggen its sales and profit margins, empassionment is beside the point.

Farewell to the Bullets

John Quiggin7 Comments

For quite a few years now, I’ve been following both the fortunes of the Brisbane Bullets and those of an economic system centred on high levels of debt, validated by capital gains. These two interests have collided in an unfortunate fashion with the announcement that the Bullets license has been returned to the National Basketball League. This has been more-or-less inevitable since the owner, Eddy Groves, ran into financial difficulties arising from the impact of the credit crisis on his childcare group, ABC Learning.

I’ll doubtless have more to say on the credit crisis, and perhaps on whether private ownership of sporting teams is a sustainable model for Australia. But for now I’d just like to say thanks to the players and staff of the Bullets for providing me and my family with lots of fun and excitement over the years I’ve lived here in Brisbane, particularly in their last championship season 2006-07.

The nuclear option

John Quiggin74 Comments

Unsurprisingly, evidence that the Rudd government is serious about emissions trading has produced a new round of calls for the development of nuclear power in Australia. There is certainly a case to be made that an expansion of nuclear power should be part of the global response to climate change. But the latest chatter isn’t part of a serious response to the problem of climate change; rather it’s an attempt to duck the issues raised by an emissions trading scheme.

The crucial points to bear in mind are these

* Nuclear power will never be viable in Australia without a high price on carbon and a clear commitment that the price is going to remain high. So, there is no point in raising the nuclear option as a cover for opposing emissions trading

* There is no way that Australia is going to lead the rest of the developed world (in particular the US, but the same points apply to most of Europe and Japan) on this. The US is attempting to restart its nuclear industry on existing brownfield sites. This process started with the passage of new legislation in 2002 and, if all goes well, construction on the first plants might begin in 2010 and (very optimistically) be completed by 2014. Given our lack of any regulatory capacity, construction and management expertise and so on, we won’t even be able to get started before the US industry shows the way on new greenfield sites and produces a significant number of operating plants, say by 2020. With a fast paced program, we might get plants on line by 2030

* It follows that whether or not the Rudd government (or whoever is in government for the next 5 to 10 years) changes its policy on nuclear power will make no difference to anything of substance

Back on air

John Quiggin5 Comments

My hosting service had a major hard drive failure which has kept me off air for several days. Of course that meant I couldn’t post an explanation, but I belatedly realised (thanks to a reader getting in contact there) that I could have put up an announcement on my Facebook page. Anyway I’m back on air and I’ll make up for some of the lost time with some quick points

* Joshua Gans is selling the first copy of his book Parentonomics here on eBay to raise money for a cure for MS. Go and bid – it should be a fun read

* Ken Henry is using his annual leave to help save the endangered hairy-nosed wombat, but I’m expected a new round of extinctions among the endangered species of Opposition leaders.

* After equivocating for months, the Rudd government seems finally to have bitten the bullet, saying, correctly “We’ll make petrol dearer“. Meanwhile, looking at the international news, I’ve been struck with the failure of demagogic attempts like the Liberals’ proposed cut in fuel excise. The McCain-Clinton gas tax holiday seems to have sunk without trace, the EU has held the line against protests, and lots of countries (Indonesia and China among others) are cutting existing subsidies as the futility of a cheap energy policy becomes evident

* The news from the credit crisis in the US has been more alarming than ever. The collapse of the (largely bogus) bond insurance business of firms like MBIA and Ambac has generated a new crisis in markets for associated credit default derivatives. And it turns out the the infusions of equity received by most banks late last year, which ended the first round of the credit crunch had conditions attached which make any further resort to this rescue method highly appealing (essentially, those who made the first injection have to get free shares to offset any subsequent dilution). All of this is mindnumbingly complex. But whereas the inference from complexity used to be “this is much too hard to understand, and the experts have it all under control” it’s now more like “who knows where the next time bomb is hidden>”.