Here’s my email update. Sign up if you’d like to get it delivered to your mailbox Hi all, It’s been quite a while since my last email news, which I sent out before the May election.  Following Labor’s loss, I resolved to avoid commentary on political strategy or day-to-day politics, and to spend more time thinking about global and long term issues, such as climate change and the global choice between socialist and Trumpist futures. I’ve mostly stuck to that resolve discussed the topic. I did a radio debate with conservative US commentator Joshua Muravchik, on the topic Is socialism still relevant in 2019?  and wrote articles about the need to face up to climate change sooner or later and Libra, the new Facebook cryptocurrency The Brisbane launch for Economics in Two Lessons was at Avid Reader on 25 June and the Sydney launch at Gleebooks on 27 June. On my blog,  I discussed A new two-party system? and whether globalisaton can be reversed looking at trade and migration. Inevitably, though, I’ve felt the need to say something about current Australian policy issues including The Murray-Darling Basin scandal: (economists have seen it coming for decades),  Adani (I remain sceptical that the project will go ahead without public money)  and of course Israel Folau (where I focus mainly on protecting workers’ rights) Coming events Melbourne launch for Economics in Two Lessons at Readings, Hawthorn Wednesday 17 July and also at University House, Melbourne Uni, 4-6 pm Friday 19 July What Should Our Economy Look Like in 2030? Brisbane Seminar 6 August How to follow what I’m doing (if you want to!) Signup for this list is here. I also have a mailing list focused on Adani and related issues, to which you can sign up here My johnquiggin.com blog   Facebook Public Page Economics in Two Lessons Facebook Page: Twitter feed  @johnquiggin Signup for this list is here. I also have a mailing list focused on Adani and related issues, to which you can sign up here Comments, bouquets and constructive criticism always welcome at j.quiggin@uq.edu.au Best wishes John

My central claim, in writing Economics in Two Lessons, is that most economic policy issues can be understood in terms of opportunity costs and their relationship to prices. I was talking about 21st century (electric and self-driving) cars, and several of the issues that came up illustrated this point very neatly. Among the objections to 21st century cars are the following

• Since 21st century cars don’t use petrol, governments will lose the revenue needed to fund the road network
• Self-driving cars will cruise around cities to avoid paying for parking, thereby increasing congestion
• Because of the limits of AI, self-driving cars will inevitably kill people

The answer to the first two questions is the same. These problems arise because prices don’t reflect opportunity costs. Opportunity costs arise from cars using the road network, reducing access to others, and from the initial construction of the network, consuming land and resources that could be used for other purposes.

Under current conditions, petrol consumption provides a rough proxy for general road use, while parking charges provide a rough proxy for road use in urban areas, shopping precincts and so on. That relationship breaks down with 21st century cars.

But, this is a self-resolving problem. The reason we used petrol taxes and parking charges was because charging for road use was too hard. With 21st century cars, it’s trivially easy. We can set prices exactly equal to opportunity costs, taking account of time-varying congestion and any other factors we want to.

The dangers of 21st century cars can also be understood in terms of opportunity costs. The question isn’t whether they are perfectly safe, but whether they are safer than the next best alternative – the current mix of human drivers, including the large proportion of incompetents, drunk and drugged drivers.

A side issue that has just occurred to me: is it possible to steal a self-driving car with no manual override? It seems a bit like stealing a train.

Launch of Economics in Two Lessons ANU today (6pm Thursday 16th May) at Fred Gruen Seminar Room, HW Arndt Building ANU

The trade war between the US (or rather the Trump Administration) and China (or rather Xi Jinping) is heating up again. The standard view seems to be that, because of the massive imbalance in merchandise trade between the two countries, Trump has the advantage. China could retaliate by dumping US bonds, but this is seen as a weapon too dangerous to use.

I don’t think this exhausts the options. As we’ve seen in Australia, the Chinese government can do all sorts of things to retaliate against nationals of a country that has offended them. That might, however, be an option confined to bit players like Australia.

If I were advising Xi on retaliation against Trump, I’d suggest looking at services where the balance is strongly in favor of the US. An obvious starting point would be tourism. A travel advisory, suggesting that the US is a dangerous place for Chinese tourists to visit, and implying that such visitors might face adverse consequences on their return would be an obvious choice. It would cause instant economic pain, be easily reversible and could be justified by pointing to the example of the US embargo on Cuba.

A more hopeful, and probably more likely, outcome is that China will play for time until 2020, when Trump will come under pressure in US farm states, or until 2021 when (more likely than not) he will be gone altogether.

Trade wars aren’t, as Trump suggests, easy to win. But they are nowhere near as destructive as real wars. We should be more concerned about the hawks in the foreign policy establishment, spoiling for a fight over the South China Sea, than about tariffs on TVs and soybeans.

I’ve been looking over some posts from the bright dawn days of blogging in the early 2000s. One thing that struck me is that some ideas I put forward as unconventional but evidence based, are now fairly widely accepted. In view of the widespread, and justified, concern about a post-truth era, this seems encouraging, and worth investigating. A few examples

• In this post on equality of opportunity from 2003, I noted that “contrary to popular belief, there is less mobility between income classes in the United States than in European social democracies.” I was drawing on a 1999 book, The Real Worlds of Welfare Capitalism by Goodin, Headey Muffels and Dirven, which I’d reviewed a couple of years previously. In 2009, when I started work on Zombie Economics, I wrote about this again. However, I soon realised I was pushing at an open door. The decline of social mobility in the US had become part of the conventional wisdom.
• In 2004, some of the first studies of charter schools were coming out, showing that, contrary to the widely-shared expectations of education reformers, they weren’t showing any clear gains in student performance. I wrote about this fairly cautiously, noting that studies of this kind often fail to find any effect. As it turned out, however, the findings were replicated, particularly in the case of for-profit schools. This piece in the Washington Post (which used to be associated in some way with the for-profit testing industry, IIRC) shows how much the tide has turned against charters, and even more against for-profits.
• Here’s a post on minimum wages, drawing on the work of David Card and Alan Krueger (whose tragic death recently was a big loss to the economics profession). from the early 1990s. By then, the formerly orthodox view that minimum wages had big negative effects on employment was sufficiently out of favour to be revived in Slate (then famous, or notorious, for “contrarian” views that generally tended to support the establishment).
• Finally, I wrote a couple of mildly snarky pieces about the “Reading Wars” between phonics and whole language. This was one of the relatively rare cases in which the emerging evidence supported the cultural right. It’s pretty hard nowadays to find unequivocal supporters of whole language.

Looking at these examples, there’s a gap of about 10 years between the time the evidence emerged (or at least, emerged prominently enough for me to take notice) and the time the conventional wisdom adjusted. That doesn’t seem too bad. As the great replication crisis has shown, it’s unwise to take too much notice of an individual study on any social science topic.

Unsurprisingly, most of the examples above are cases where the emerging evidence was consistent with my broad political principles (I was never engaged in the Reading Wars, though I mostly lined up against the phonics advocates on other issues). I’d say that’s because most of the evidence we’ve had in the past twenty-five years or so has gone against the beliefs of the political right, who have had to retreat from the triumphalism of the early 1990s. But it’s obviously possible that there is confirmation bias at work. I’d be interested to see suggested examples of evidence shifting the conventional wisdom to the right in this period.

That’s the headline on my latest piece in the Guardian, and sums up the content pretty accurately. A couple of key paras over the fold

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I got some questions about Adani from a friend, which I answered by email. I thought it might be useful to share the exchange

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Both my grandfathers fought in the Great War, one in the Middle East and one in France. They survived (or I wouldn’t be here), but one was badly wounded in a gas attack. I’ve thought about this on Anzac Day for most of my 60+ years, but last year I learned something I hadn’t thought about and, as far as I can tell, hardly anyone else in Australia knows. We were only fighting Turkey because the British government refused their request for an alliance. I wrote about this last year, and I’m reposting it now.

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