Good news day!

Two big pieces of news for me today. This morning I got the first physical copy of my book Economics in Two Lessons.

Then, I got the news that, for the first time in my career, I’ve had an article accepted in Econometrica, the top theoretical journal in economics. It’s full of arcane maths, drawing heavily on the expertise of my co-author Ani Guerdjikova, but the key implication is simple. If people aren’t equally good at predicting movements in asset prices, restrictions on the set of assets available to them may improve economic welfare. This undermines the general presumption that financial deregulation will be beneficial.

All in all, a good day!

Pinker polymathic

The New York Times has a piece pushing the idea that nuclear power is the solution to our environmental problems. It’s familiar stuff, citing the French success in the 1970s, the promise of Gen IV and small modular reactors, and so on. Indeed, two of the authors had an almost identical piece in the Wall Street Journal in January. What’s most interesting is that the set of authors[1] this time includes Steven Pinker, who seems to be spreading his claims to expertise yet more broadly[2].

None of the authors has any training or expertise in economics, AFAICT. So, they make extreme claims such as that South Korea and China can build nuclear plants at one sixth the cost of the US. With the abandonment of the nearly-complete VC Summer project, the only nuclear plant now under construction in the US is the 2GW Vogtle project in Georgia. That looks like coming in at about $20 billion or $10 billion/GW. Most estimates of Chinese costs are around $3.5 billion or one third of that – the most optimistic I’ve seen is $2 billion.

Moreover, it might have been worth mentioning that South Korea has stopped new nuclear power and China hasn’t started a new project in three years. In both cases, renewables have undercut even the lowest estimates of the costs of nuclear.

Also striking is a sudden shift in the argument about halfway through. The article begins reasonably enough, pointing out that the success of the French model in the 1970s depended critically on the large-scale deployment of a small number of standardised designs. (That wasn’t the only crucial feature, as I’ve pointed out before.) That contrasts sharply with the current situation where nearly every new plant is First Of A Kind, or close to. They point to US efforts to promote new nuclear power, including the Nuclear Energy Innovation and Modernization Act, recently passed through Congress by big margins (361 to 10 in the House, and a voice vote in the Senate).

Then suddenly, the article shifts gears, claiming that the crucial problem is irrational public fear of radiation, nuclear accidents and so forth. The obvious question to raise is: how does this supposed climate of fear manifest itself? Obviously not in a Congress, generally notable for bitter partisan division, where pro-nuclear legislation sails through with negligible opposition. Nor is there any evidence of significant resistance at the regulatory level, where numerous plants have had their licenses extended.

With the abandonment of the nearly-complete VC Summer project, the only nuclear plant now under construction in the US is the two-reactor Vogtle project in Georgia. Googling for Vogtle protests, I found numerous links to protests from shareholders, customers and others concerned about the massive cost overruns of the project. But the only anti-nuclear protest I could find was back in 2011, and appeared to have no effect at all on the project.

The myth that nuclear power would roar ahead if only public fear could be overcome is comforting to nuclear fans. But the truth is that the technology is doomed by economics.

fn1. The only author with any relevant expertise is Staffan Qvist who works on Gen IV reactors and has previously written policy pieces with our own Barry Brook.

fn2. I also write on lots of different things. On the blog, I’m happy to state my views on all kinds of topics, as I would in ordinary conversation. But when I write for the general public, citing my professional affiliation, I try to stick to areas where I have some claim to expertise.

The average (median) worker does not earn the (arithmetic) average wage

Eryk Bagshaw, recently[1] appointed economics correspondent for Fairfax, is certainly aware of that. In fact, mentions it right near the end of this scare story about the effects of Labor’s rejection of the second-stage of the Morrison government’s legislated tax cuts. But that didn’t stop the Fairfax subeditor running his article under the headline “Average full-time workers to be $1000 a year worse off under Labor”

To spell it out, the trick here is that Bagshaw is looking at workers who earn between $90,000 [the arithmetic mean of wages for full time workers} and $120,000. He estimates that there are about 1.6 million such workers. That’s a bit over 10 per cent of the workforce (about 13 million people). As he admits, the median full time wage is well below this, and the median wage for all workers lower again. Once pensioners and welfare recipients are taken into account, it’s evident that Bagshaw’s “average workers” are well towards the top end of the income distribution.

This is amusing since I had a previous run-in with Bagshaw over this very issue of headlines. On that occasion, Bagshaw was scathing about a sloppily written ACTU press release, which ended up with a totally inaccurate headline. I don’t think a defence of innocent error is available here. Bagshaw’s story is written in a way that would lead any casual reader to make the same inference as the subeditor. Moreover, there’s no obvious reason why workers receiving between $90K and $120K should be of more interest than any decile of the workforce. Certainly they aren’t average in any meaningful sense. So, without the misleading phrasing, the story would probably have been spiked.

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The weakness of dictatorship: China and coal

Global Energy Monitor, Greenpeace India, and the Sierra Club have just released the fifth annual Boom and Bust report, tracking the global coal plant pipeline. The news is mostly good, with three glaring exceptions, all related to China.

First, as reported last year, provincial governments appear to have restarted construction on a number of coal-fired power plants, previously suspended on the orders of the central government. Second, the China Electricity Council, which represents the country’s power utilities, has proposed setting the country’s coal capacity cap at 1,300 gigawatts, a level that would allow 290 gigawatts of new capacity to be added—more than the entire coal fleet of the U.S. (259 gigawatts). Finally, Chinese financial institutions, mostly state-owned are the last large scale backers of coal-fired projects at a global level.

It remains to be seen how this will play out. Perhaps the central govenment will pull the provinces and state-owned enterprises into line and override the Electricity Council.

The bigger lesson here is that even though China is well on the way to becoming a personal dictatorship of Xi Jinping, and despite the supposedly Leninist organization of the Communist party he leads (the official phrase is “democratic centralism“) most of the real power in the country is exercised by local magnates, just as it was in the days of warlord rule. That seems to be characteristic of dictatorship.

Over the fold, the good news

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Half right, and all left, on coffee

Back in the Paleozoic era of blogging, I wrote, in relation to a prediction that latte drinkers would soon be in the majority

I would view this prospect with horror, but I think it will not come to pass. Latte is the Cold Duck of the 21st century, and like Cold Duck will be shaken off with a shudder as people realise what real coffee is about.

Recent research from the Australia Institute suggests I was, at best, half right. Latte drinking hasn’t become the norm but it has survived, while real coffee (short black) remains such a minority taste that it has to be lumped in with the watered down long black.

The good news, (that is, the news that confirms my prejudices) is that latte drinkers are more likely to be LNP voters than anything else. The same is true, though only marginally, for chardonnay.