Adani’s moment of truth

John Quiggin45 Comments

The political campaign against Adani’s Carmichael mine has failed. That’s a big shift from the last Queensland state election, where the state government gained support in the south-east and held on to it in North Queensland. Obviously, Bob Brown’s convoy was counter-productive, perhaps disastrously so, and this failure will undermine any future direct action campaign in the region.

Given the election outcome, the approvals made by the Federal government will stay in place, and the Queensland state government is under immense (I would judge irresistible) pressure to expedite the remaining processes.

But we have been here before. Most of the approvals[1] needed to begin work were completed in 2016, at a time when both the Queensland and Federal governments were highly supportive (Anna Palaszczuk cut the ribbon at the opening of Adani’s Townsville regional HQ in 2017). At the time, I wrote

In summary, we appear likely to find out what happens when a dog catches the car it has been chasing. Adani and its backers have been denouncing green tape and “lawfare” as the only obstacles to the bonanza they have on offer. Now, the legal and administrative obstacles are gone, so they have only to line up the money, rehire the contractors and announce the starting date. My guess is that this will never happen.

That’s still my guess, three years later. The economics of the scaled down project still don’t stack up, and the problems with finance and contractors are even greater now than in 2016. However, there’s nothing more I can do to influence the outcome, so we will just have to wait and see.

Update: I meant to add that, if the project does go ahead, it will almost certainly involve a substantial injection of public money, which will not be recovered. Adani has plenty of form in this respect.

fn1. Obviously, not all of them. But if Adani had wanted to start work in 2016, they could have done so, and, given bipartisan political support, would certainly have found a way to deal with any remaining clearances. In fact, they announced they would be starting work then, and reannounced it in 2017.

The day after

John Quiggin166 Comments

Like everyone else, I expected a Labor victory in the election. I expected good things from that, and I see lots of bad consequences from the actual outcome.

Still, my personal disappointment is muted by the fact that I found the campaign so utterly depressing. The shift to positivity I noted a couple of weeks ago only lasted for a day. I saw the positive ad I wrote about only once. By election day, like the majority of the Australian public, I just wanted it to be over.

The lesson I draw from this election, and from Clinton’s failure in 2016, is that negative campaigning doesn’t work for the left. It hardens the resolve of the other side, and obscures the fact that most people agree with you on the issues.

But that’s not the lesson that the political class, (for whom the two sides are always interchangeable) and especially the hardheads who ran the campaign, will learn. They will conclude that the small target strategy has been vindicated once again.

Economics in Two Lessons, reviewed

John Quiggin4 Comments

The first proper[1] review of Economics in Two Lessons has appeared, in Inside Story. It’s by Richard Holden[2] and really gets the point of the book.

The final paras:

Chapters twelve to sixteen deal with what policymakers should do, and here Quiggin’s passion is evident. Moreover, what comes through perhaps more than anything is a sense of balance. There’s what we might want to do and then there’s what the immutable laws of economics — so neatly laid down in the preceding chapters — will let us do. Whether it’s the distribution of income, full employment, or protecting the environment, constraints exist.

But those constraints offer guidance. Quiggin notes, for instance, that “the best way to help poor people, at home and abroad, is to give them money to spend as they see fit, rather than tying assistance to particular goods and services. In other words, it is better to fix the inequitable allocation of property rights in the first place than to fix the resulting market outcome.” Whatever the topic, the framework disciplines and sharpens the policy thinking.

There is little doubt that Quiggin’s Economics in Two Lessons will be an instant classic and feature on university reading lists around the world. It should also be compulsory reading for policymakers and public commentators, who all too often lack a framework for thinking clearly about the costs and benefits of markets. The good news is that Quiggin has one — and he’s happy to share.

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Coming events

John Quiggin10 Comments

I’ve got quite a few events coming up in the next couple of weeks.

* On 13 and 14 May, I’m running a workshop at the University of Queensland on Epistemic & Personal Transformation:
Dealing with the Unknowable and Unimaginable. Details here.

* On Thursday 16 May, I’ll be at ANU for the official Australian launch of Economics in Two Lessons.  Details are here. If campaigning permits, Andrew Leigh will say a few words about the book. There will be a launch at Avid Reader in Brisbane in late June (date tbd), and in Sydney and Melbourne a bit later

* On Wednesday 22 May, I’ll be delivering the Keith Hancock lecture for the Academy of the Social Sciences in Australia, at the University of Queensland. Topic is The Future of Work. Details here.

* I’m doing a number of radio interviews related to Economics in Two Lessons. I talked to Radio SER in Sydney yesterday. On Saturday 18 May, at 7:45 am, I’ll talk to Geraldine Doogue on Saturday extra, then on Wednesday 15 May to Steve Austin on ABC Radio Brisbane Drive.

Trade wars: Easy to win?

John Quiggin24 Comments

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.

Was Hazlitt an Austrian economist?

John Quiggin33 Comments

Reviews of Economics in Two Lessons are starting to come in. Here’s one, favorable but not rapturous from Diane Coyle. Another, from David Gordon at the Mises Institute is, not surprisingly, more negative.

The main (though not the only) complaint is that I treat Hazlitt as a One Lesson neoclassical economist. More precisely, in relation to opportunity cost “[Quiggin] applies the concept as it is used in neoclassical economics, but Hazlitt was an Austrian and does not use the concept in this way.” In particular, Gordon complains that I invoke “neoclassical equilibrium” a concept rejected by Austrians.

I have a couple of responses to this.

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How much will it cost to deal with climate change? Not much at all

John Quiggin24 Comments

That’s the headline for my latest piece in Inside Story, along with the short version of my answer. The long answer is that, even with dubious modelling choices and extreme parameter assumptions, Brian Fisher of BAEcon* comes up with estimates of about 2 per cent of GDP, trivial compared to the potential cost.

So, he uses the same presentational trick he’s been using since the first ABARE modelling exercise back in 1996, turning an annual flow into a present value over ten years to make it look bigger.

The truth is that the economic impact of reducing emissions by 45 per cent relative to 2005 levels by 2030 will be so small as to be lost in the noise of statistical revisions and exchange rate effects. By contrast, the costs of doing nothing about climate change are already visible and are only going to get bigger.

Considered in terms of opportunity cost, action to mitigate climate change is a no-brainer, which is why so much intellectual and rhetorical energy has to be used to mount any kind of case against such action.

  • BAEcon is a play on the title of the Bureau of Agricultural Economics, precursor of the Australian Bureau of Agricultural Resource Economics (ABARE) where Brian was Director and I was Chief Research Economist in the 1980s and 1990s. It’s now ABARES having absorbed the Bureau of Rural Sciences.