Renationalise the electricity grid

Despite yet another round of policy announcements from the Morrison government, energy policy in Australia is still stuck in the morass created by a combination of climate denialism and the failed reforms of the 1990s, of which privatisation was a critical element.

I’ve argued for some time that the grid should be renationalised, and the case is even more urgent now.

The case for renationalisation has been massively strengthened by the fact that real interest rates on government debt have fallen below zero, and seem likely to remain there indefinitely. That makes renationalisation of monopoly infrastructure assets a bargain at any plausible price. Let’s look at the numbers

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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.

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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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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So last millennium (repost from 2004, linking article from 1995)

I’m busy working on my book on the Economic Consequences of the Pandemic, and thinking about implications for the information economy. In the process, I dug up a blog post from 2004, which reproduces an article I wrote in 1995 (I can’t remember if I managed to get it published). An interesting aside is a reference to Camille Paglia, a big name back then, who did the whole Jordan Peterson thing earlier and better, though I’m obviously not a fan of either.

With 25 years of hindsight, I was quite pleased with how my 1995 piece stood up. But it would be interesting to see how others respond.

h.3 From 2004

Following up on a discussion at Crooked Timber, I looked at this much-linked piece by Camille Paglia, and was struck by its dated references to television and the 60s[1]. She goes on to talk about computers, but apparently sees the computer as nothing more than a turbocharged TV set. This impelled me to dig out a piece I wrote nearly ten years ago, making the point that far from privileging visual media, the computer, and particularly the Internet are contributing to a new golden age of text. Blogs weren’t thought of when I wrote this piece, but the argument anticipates them, I think.

fn1. Oddly enough, although the main argument is a restatement of positions that were familiar 50 years ago, the piece is full of references to the young, as though the current generation of young adults has been, in some way, more saturated in TV than were the baby booomers.

h3. The Coming Golden Age of Text

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Why a Job Guarantee will require higher taxation

Ever since I wrote Work for All with John Langmore back in 1994, I’ve been pushing the idea that a path to full employment requires an expansion of publicly provided services. For about the same length of time, Bill Mitchell has been putting forward similar (but not identical) proposals. At some point in this process, Bill became one of the advocates of what’s called Modern Monetary Theory, which makes the point that taxes don’t (directly) “fund” public expenditure. Rather, they ensure that the total demand for goods and services (for consumption and investment) don’t exceed the productive capacity of the economy, thereby generating inflation.

This reframing raises the question: does a Job Guarantee require higher taxation? The answer, using MMT reasoning, is “Almost certainly, yes”.

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The end of capitalism

Amid all the strange, alarming and exciting things that have happened lately, the fact that real long-term (30-year) interest rates have fallen to zero has been largely overlooked. Yet this is the end of capitalism, at least as it has traditionally been understood. Interest is the pure form of return to capital, excluding any return to monopoly power, corporate control, managerial skills or compensation for risk. If there is no real return to capital, then then there is no capitalism. Not just a result of the pandemic. A trend that goes back to the GFC.