Author: John Quiggin

Q&A on mandates

John Quiggin25 Comments

The culture wars must really be over when I’m getting my ideas favorably cited by Janet Albrechtsen. Admittedly it’s prefaced by “even leftwing academics like John Quiggin …”, but her opening para follows my analysis almost exactly, and I agree with her on the point of principle.

Albrechtsen is quoting this Online Opinion piece on mandates, in which I argue that the idea that a government with a majority in the House of Representatives has a mandate obliging the Senate to pass legislation implementing its election policies is misconceived. Since both houses are elected, and since no party in recent decades has received a majority of first-preference votes for the Lower House, there’s no general reason why the views of a majority of Senators should be regarded as less legitimate than those of a majority in the Lower House.

Albrechtsen applies this argument to defend the decision of the Senate to delay, or maybe block altogether, the government’s legislation repealing WorkChoices. While she’s right in rejecting the mandate idea, there are still some good reasons why the Senate should not block this legislation.

The first relates to the lame-duck nature of the current Senate, half of which will be replaced in July with the senators we elected in November. If we had fixed terms for both houses, this kind of nonsense would be avoided, but as it is, I think there’s a case that the outgoing Senate would be wise to take some account of the results of the election, in which the Coalition lost its Senate majority in an election where WorkChoices was a key issue. It doesn’t make much sense to hold up transitional legislation preparing for changes that can be shown to have majority support in the new Senate.

The more relevant point though is political. You don’t need to count seats in the House of Representatives, or parse the text of Labor’s policy statement, to know that the Australian electorate rejected WorkChoices at the last election, and that they haven’t changed their minds since then. If the Coalition parties choose to ignore that fact, they’ll pay a steep political price, as they should, in future elections for both House and Senate. That’s how the mandate of the people is delivered in modern Australian democracy.

One-percenters underbid by McKinsey

John Quiggin89 Comments

I’ve put up quite a few posts supporting the conclusion of the Stern review that large cuts in C02 emissions could be achieved at very modest economic cost. Mostly, the analysis has focused on policies aimed at reducing developed country emissions by 30 per cent by 2020 and 60 per cent by 2050, and the typical conclusion is that the cost would be around 1 per cent of national income. For Australia, at current income levels that would be about $10 billion per year. Today’s news reports a study by McKinsey estimating a much smaller cost, around $3 billion per year. I haven’t seen the report yet but a quick Google found a similar study for the US.

I suspect the report is over-optimistic in the sense that it estimates the cost of doing the job in the most technically efficient fashion, whereas any feasible policy to induce adoption of the necessary measures will have higher costs. But it’s easy to show that the order of magnitude estimate must be approximately right. You can see this by looking at an absolute upper bound assuming we just replace all energy generation by expensive but feasible sources like solar (given the costs of generation, the extra cost required for large grids and pumped storage to smooth out supply variability is a rounding error here). That cost is no more than 10 per cent of income. Taking account of the obvious adjustment responses such reduced consumption in response to higher energy prices implies an even tighter bound, maybe 5 per cent of income.

The most important criticism to be made here is that it is increasingly evident that a 60 per cent reduction in emissions by 2050 may well not be enough. That suggests that, after exhausting the easy options to improve energy efficiency, substitute away from energy intensive activities and so on, there will be a residual 40 per cent of energy demand, almost entirely electricity, that has to be delivered with less than half the emissions of current best practice. Taking Australia’s current consumption of around 250 Twh/year, that’s 100 TwH at a cost of maybe $25 billion a year (=25c/Kwh) or 2.5 per cent of GDP.
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Sorry

John Quiggin52 Comments

I watched the opening of Parliament this morning, and the speeches by Rudd and Nelson. Like lots of others I was moved by the occasion, and hopeful that we as a nation can finally make good on the spirit of reconciliation. Rudd’s speech was the best I’ve seen from him, and the promise of co-operation on this issue was inspiring. Nelson was rather defensive, but much of this was probably necessary to secure the unanimous vote in favour of the motion, and his willingness to participate in a joint effort with the government is welcome. Bob Hawke, Gough Whitlam, Malcolm Fraser and Paul Keating were all present.

Hard though it was to get to this point, that was the easy bit. It’s going to take a lot of resources, and a willingness to ignore ideological shibboleths of all kinds, if we are to achieve the kinds of improvements in health, education and general living standards promised today by Rudd and Nelson.

Sir Sir Sir Sir Sir Ninian

John Quiggin18 Comments

Following up on the silly idea being floated in the Murdoch press that John Howard might be made a Knight of the Garter (surely Alexander Downer would be a more appropriate choice!), I discovered the interesting fact that Ninian Stephen is a knight five times over (KG, AK, GCMG, GCVO, KBE)[1].

Fine judge and Governor-General as Ninian Stephen was, I find this a bit excessive, and something of a reductio ad absurdam on the whole business of knighthoods.

fn1 For those who don’t recall, AK was Malcolm Fraser’s shortlived notion of adding knighthoods to the Order of Australia, and the rest are British honours – he got the KBE in 1970, three more on becoming GG and the Garter in 1994. My guess is that, if he hadn’t had already had the handle “Sir Ninian”, the other awards would have been more controversial, and might not have happened.

fn2 I should note that academics like myself are not exactly innocent here, and some even string together multiple titles, particularly in Europe.

Quick links

John Quiggin9 Comments

I’ve been too busy to post on a lot of things so I thought I’d just post some quick links with minimal comment. Some very important, and some not.

* One measure of the death toll in the wars launched by Saddam and then by Bush is the number of Iraqi widows, estimated at between one and two million. Widows are largely excluded from paid work and many are in a desperate position.

* A while ago I pointed out that the paperless office is finally on the way to reality. Today’s NY Times takes the story a bit further.

* What have the unions ever done for us

* Finally, some real progress in the struggle against malaria.

AARES

John Quiggin74 Comments

I’ve been at the annual conference of the Australian Agricultural and Resource Economics Society for the last few days. I’ve been coming to these for nearly 30 years, and it’s always good to catch up with old friends and colleagues. For many, it’s the first time they’ve seen me without a beard, and quite a few failed to recognise me until I accosted them.

The big change in 30 years has been the rise of environmental and resource concerns at the expense of old-style agricultural economics. Most of my early papers dealt with now vanished policies like the wool price stabilisation scheme, and the analysis of production systems needed to inform such policies. Now the conference has continuous sessions on both water and climate change, and only a handful of papers on production economics.

Ross Garnaut spoke on Tuesday and his talk was pretty sobering. Short version – as regards the likely consequences of business as usual, Stern was an optimist. Unless the world acts decisively, and well before 2020, we’ll have emissions higher than the highest of the IPCC scenarios Stern looked at. What’s worse new information on feedbacks suggests that the models relating emissions to temperature change are also likely to be on the conservative side, as the capacity of sinks to absorb emissions declines.

The positive side of this, I guess, is that the problems arise from China (and to a lesser extent India) growing fast, and that means China has more resources to address the problem, if we can only get the politics right.

One aspect of the latter is the near-certainty that we won’t be able to get away much longer with the notion of historical rights for high-emission countries like the US and Australia. By 2050, under any plausible agreement, we’ll have uniform emission entitlements per person, for everyone in the world, at a level well below our current emissions.

Howard’s economic record

John Quiggin74 Comments

If there was one thing John Howard and Peter Costello could reasonably have expected as part of the historical judgement on their terms as PM and Treasurer, it was a positive assessment of their record as economic managers. But a game isn’t over until the final whistle, and the last few months have produced some unpleasant data. Howard and Costello have left higher inflation and (if you impute the whole of the current tightening phase to their policies) higher interest rates than they inherited from the Keating government. Given that the ratio of household indebtedness to income has grown massively, the effective burden of interest rates is far higher now than in 1996.

A judgement based on inflation and interest rates is unfair in some senses. The big achievement of the last 15 years has been to avoid a recession. While most of the credit for this outcome must go to the Reserve Bank (particularly for getting policy right in the Asian crisis of 1997) and some is down to luck, the government should at least be credited for not doing anything to muck things badly enough to derail the Bank’s economic management (I’m assuming here that the housing bubble, to which the government’s policies contributed greatly, will deflate gradually rather than popping us into a recession. That would be a really nasty legacy for Howard and Costello to leave).

Unemployment has also fallen quite a lot, though until quite recently, the improvement in headline figures masked a deterioration in broader measures of employment and unemployment, particularly for men.

The problem for Howard and Costello is that they chose the criteria on which they wanted to be assessed. They never cared much about unemployment, abandoned the whole idea of an unemployment target early on, and their occasional policy interventions were either focus-group driven exercises like “work for the deal” or ideological costcutting like the Jobs Network.

By contrast, they ran hard on “keeping interest rates at record lows” and now have to live with their failure.

A sorry business

John Quiggin129 Comments

Brendan Nelson’s career as Leader of the Opposition looks to be over before he has even faced the Rudd government in Parliament, thanks to his equivocation over the issue of an apology to the Stolen Generation. If Nelson was fair dinkum about supporting an apology, given the appropriate words, he could have made a positive virtue of it, saying something like “This apology needs to come from the Parliament, not just the government. I’m willing to work with Mr Rudd in preparing a statement that will have unanimous support”.

As it is, he will end up being forced through every possible position from outright opposition to conditional support to the final stage when he’ll be forced to deal with the hardline rejectionists in his own ranks.
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