A new sandpit for long side discussions, idees fixes and so on. Discussions about climate policy and related issues can be posted here, along with the usual things.
Monday Message Board
Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.
Oz and the Anglosphere
Here’s a piece for Inside Story, pointing out the rest of the English speaking world is doing worse than Australia, and that New Zealand, in particular, should never be used as a model in anything to do with economic policy.
The moral case for renewables
I have a piece in The Guardian, pointing out that the moral case for coal only works after you’ve ruled out, for amoral reasons of self-interest, the genuinely moral options for helping poor countries and saving the planet.
Armistice Day
As Armistice Day comes around again, I find it more and more difficult to avoid despair. Each new war seems even more brutal and pointless than the last, bringing nothing but ruin and destruction to all concerned. And yet, opposition to war in general, or even to involvement in any particular war, is increasingly being seen as unpatriotic.
My annual ritual of writing a post on this day hasn’t helped at all. I’ve repeatedly had it explained to me by learned commenters that the mass slaughter of 1914 to 1918 (and, by implication, the even more massive slaughter that followed it over the 20th century) was a right and necessary response to German imperialism, or that it must be understood in its historical context. I need only change a few place names, and substitute different enemies, to hear the voices of our present leaders, explaining the need for our armed forces to deliver more death and destruction, because “we must do something”. The fact that our current enemies are of our own direct creation, and that a decade or more of these wars has succeeded only it making matters worse, seems irrelevant.
Just about the only consolation is the fact that the scale and loss of life from war has been decreasing over time. Large areas of the world once riven by war now seem to be free of it, or nearly so.
Against that, however, is the ever-present shadow of nuclear cataclysm. The world has managed to survive, permanently within a few minutes of catastrophe, for 70 years now. But can that continue indefinitely? when belief in the rightness of war and the need for military strength is such a powerful force among ordinary people, and even stronger among the rulers who have the power to launch these weapons. Without radical changes in thinking, it seems almost certain that nuclear weapons will be used, sooner or later. Even a limited nuclear war, between India and Pakistan for example, would be a disaster as bad or worse than the World Wars of the 20th century.
Are recessions abnormal (crosspost from Crooked Timber)
I’m on to the macroeconomics section of my book in progress, Economics in Two Lessons. The key point of this section is that, whereas the academic economics profession has wasted most of the last thirty years on the project of founding macroeconomics on (some near approximation of) standard neoclassical microeconomics, the validity of the core results of neoclassical microeconomics depend on the assumption that the economy is operating at full employment[^1]. This observation isn’t original – it was why Keynes saw his theory as saving capitalism from itself. Even the title I used in this post on the macro foundations of microeconomics turns out to be a reinvention of the wheel.
Having noted the importance of the full employment assumption in the abstract, how relevant is it? If the economy is, with notably rare exceptions, at, or close enough to, full employment, then it seems safe enough for economists to continue, as the profession has for 40 years or so, to treat macroeconomics as a special subfield with little relevance to the rest of the discipline.
To put the question simply, are recessions abnormal?
Monday Message Board
Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.
Grattan Institute advocates cutting university research funding
Andrew Norton of the Grattan Institute has received quite a bit of attention for a piece arguing that universities don’t need additional funding because money intended to fund teaching is going to support research instead. Norton suggests that the funding going to research is around $2 billion a year
University research matters to Australia, but the evidence that it improves teaching is less clear. Direct spending on teaching, by contrast, is far more likely to ensure that universities offer the high-quality courses students want.
The obvious question is, if university research is important to Australia, won’t cutting $2 billion (or some substantial component of it) from research funding harm our national interest. As the quote above shows, Norton merely asserts that redirecting funding from research to teaching will benefit teaching.
The core of Norton’s piece is a misuse of accounting categories. The implicit claim that, since university funding is allocated on a per-student basis, it must be intended entirely for teaching. The further implicit assumption is that the only research that should be undertaken is that explicitly funded through bodies like the Australian Research Council.
But this has historically never been the case. In Australia, and (as far as I know) in every other country, university academics are expected to undertake research as part of their duties, whether or not they have grant funding. The standard proportion, which hasn’t changed in my 30+ year involvement in the system is 80 per cent teaching (and associated service), 20 per cent research, which appears to be exactly the proportion cited by Norton.
It’s true that more transparency in the allocation of resources between teaching and research would be a good thing, if it were feasible. But as the travails of exercises like the Excellence for Research in Australia process have found, this is easier said than done.
For-profit education: plenty of blame to go around
Success has a thousand parents, failure is an orphan. The truth of that proverb is illustrated by the blame game now going on around the disaster that is for-profit Vocational Education and Training (VET) in Australia. In the last couple of weeks, I’ve seen dozens of different stories illustrating the extent of the failure. The Oz alone has at least ten.
Reading these stories, it’s clear that this isn’t a matter of bad apples or abuse of the rules. The for-profit sector as a whole is delivering abysmally poor results while chewing up billions of public dollars.
Unsurprisingly, Labor is blaming the government for allowing this to happen. Equally unsurprisingly the Oz is running the line, pushed by Minister Simon Birmingham that it’s all the fault of the ALP who extended the FEE-HELP scheme to the VET sector in the first place.
I had to check back on the history, which reveals that this was actually an initiative of the Howard LNP government, announced in its final year, implemented by the Rudd Labor government, and carried on by the Gillard and Abbott governments. Victorian governments of both parties led the charge at the state level. So, there’s plenty of blame to go around.
But, that’s history. The real problem is that no one is willing to admit the obvious lesson, already evident from the US; for-profit education, funded by public subsidies, is a recipe for disaster.
I should concede though, that Birmingham is already edging towards the right answer, saying that he is and not as keen as he was to extend subsidies to bachelor and sub-bachelor courses at private colleges.
Another piece of good news is that the ACCC and Auditor-General are finally getting their teeth into this, doing what should have been done by the supposed regulator, the Australian Skills Quality Authority, which has been asleep at the wheel ever since it was established.
But no amount of tightening up at the edges can fix this problem. The only solution is to abandon subsidies to for-profit providers and put a serious effort into restoring and upgrading the TAFE system.
Finally, a blast from the past. Back in 2012, ACPET, the for-profit VET lobby group cited me as saying
“I think we will continue to see many examples of (dodgy) educational institutions. They are going to be much more common than examples of successful profit driven training or educational enterprises”.
The report in question (paywalled) concluded by quoting me as saying
The only solution is ultimately for the federal government to take over this area [of VET] and to then have a much more robust accreditation system for private providers than we have, and a much more sceptical one”
ACPET suggested that my position was reminiscent of the Flat Earth Society. At this point, I’d say the Flat Earth Society has at least as much credibility as ACPET.
No New Coal Mines
Along with 60 other Australians, mostly more eminent than me, I’ve signed an open letter to world leaders calling for a moratorium on new coal mines and coal mine expansions. The letter focuses particularly on Adani’s proposed Carmichael mine but it’s important to be clear that this is part of a global movement to stop new coal mines everywhere in the world.
The underlying reasoning isn’t spelt out but ought to be clear enough. If we are to stabilize greenhouse gas concentrations at 450 ppm or below, as the world’s leaders have already agreed we should, it is necessary for carbon dioxide emissions to peak soon, and decline to zero over the next 30 years or so. Given that burning coal creates major health hazards in addition to C02 emissions, coal burning needs to eliminated even more rapidly. That means first, that no new coal mine can expect to work for an operating life of more than 30 years, and second that any new coal mine must be offset be additional closures of existing coal mines. Once these factors are taken into account, it’s essentially impossible for new coal mines to make economic sense within the constraints imposed by a limited carbon budget. Certainly, that’s the case for Carmichael, which is a massive boondoggle keeping alive only in the hope of extracting some form of government assistance or compensation.
John Quiggin 