AARES

John Quiggin12 Comments

I’ve been in Cairns for the last few days, at the annual conference of the Australian Agricultural and Resource Economics Society. Although the city hasn’t been much affected by the floods, roads to the south were cut until today, so fruit and vegetables have been in short supply.

The conference opened with an address by Ross Garnaut, who got stuck into the government’s proposals Soldier buy for free permits and exclusions under the proposed ETS. My research group (Risk and Sustainable Management Group) presented a paper on this topic, and a number of others on modelling risk and uncertainty and the complex trade-offs between environmental flows, trees for carbon capture and irrigated agriculture. As well, I presented a paper with Terry Hughes of JCU on the future of the Great Barrier Reef, and gave the after-dinner speech, which I’ve promised to write up and post when I get a free moment. More soon, when I get a free moment or two.

Insulation and emissions

John Quiggin26 Comments

I’ve thought some more about the home insulation component of the stimulus package and I’ve come to the conclusion that (drum roll!) my immediate reaction was correct. In the absence of a corresponding lowering of the aggregate emissions target, the package will have no effect at all on emissions. The Australia Institute has come to the same conclusions, and IPART (the NSW utility regulator) has made the same point in a more general context.

Some minor qualifications to this. As Joshua Gans points out here The Russell Girl divx the effect of the scheme will be to reduce the demand for permits and therefore the equilibrium price. If the “safety-valve” price in the CPRS is binding, the scheme will reduce the government’s obligation to supply permits at the safety valve price. And, if home insulation is a cost-effective method of reducing emissions, which householders are neglecting for reasons such as credit constraints, the scheme could allow the target to be reached at lower social cost. This might, in the long run, encourage more ambitious targets

But there is no need to wait for the long run. The Greens and any other Senators who care about saving the planet should demand a reduction in the emissions target, equal to the savings from the scheme, as part of the stimulus package.

Fire and flood

John Quiggin63 Comments

The news from the fires in Victoria just keeps getting worse, with whole towns wiped out and more than 60 people confirmed dead. We can only hope the change in the weather will give firefighters a better chance. The loss of life in the Queensland floods has not been so severe, but there is still widespread devastation.

Picking up the phone

John Quiggin45 Comments

Looking at various topics that have been covered by both journalists and bloggers, I’ve noted a common theme in which journalist deplore bloggers’ habit of speculating about subjects instead of “just picking up the phone” and asking those directly involved (examples here

Doomsday hd

and here). The implied (and sometimes expressed) view of bloggers is that of lazy amateurs.

It struck me though, that asking questions of total strangers is both a distinctively journalistic activity and one that implies and requires a special kind of professional license. In fact, “Journalists do interviews” comes much closer to a definition of what is distinctive about journalism than formulations like “journalists report news, bloggers do opinion”.

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Souffles rising twice

John Quiggin50 Comments
.!.

As the financial crisis has developed over the past year, I’ve been struck by the near-complete absence of any comment on the economy from Peter Costello. He would seem to have all sorts of reasons for commenting, from a desire to defend the previous government’s record, to enhancing his public profile and even, perhaps, contributing to public understanding of the issues and improving policy outcomes.

But, until the last couple of days, there’s been nothing. Now, however, he seems to be talking, and inevitably, this sudden end to reticence is being interpreted in terms of leadership aspirations.

For me, though, the more interesting question is how Costello performs without the Treasury, or even the staff allocated to a shadow minister to back him up. You can make your own judgements on this Lateline interview. My take: Costello performed reasonably well, as you’d expect from a sharp lawyer and Parliamentary debater, and he made some good debating points. But he didn’t give the impression that he had, or was interested in, any deep understanding of the financial crisis or the choices facing the Australian government, and other governments in responding to it.

The global spread of the financial crisis

John Quiggin66 Comments

Jim Henley asks a lot of good questions

There’s an awful lot of right/conservative/soft-libertarian economics I consider well and truly refuted by events. That said, I haven’t seen progressive thinkers grappling with the global nature of the current downturn, which seems to be falling on the social democracies and neoliberal regimes and post-mercantile states alike. What does it mean that pretty much all national economies are in a tailspin, regardless of model? Are the safety-net features of the social democracies successfully blunting the impact on their citizens? In ways that can be sustained through another year, say, of recession? Is the protectionism of post-mercantile states in East Asia protecting their industries more than the less protectionist regimes of the neoliberal countries?

I’ll try and answer these, with more confidence on some points than others.

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Quick reactions on stimulus package, Mark 2

John Quiggin68 Comments

As expected, the government has announced a new round of fiscal stimulus, and the Reserve Bank has cut interest rates by a further 1 per cent, incidentally achieving a further devaluation of the dollar. All of that is likely to stimulate economic activity, but will it be enough and will it be in the right directions.

The magnitude of the package, $42 billion over 2 years, amounts to around 2 per cent of GDP per year, which is pretty modest given the scale of the crisis. But it follows the $10 billion package from late last years, and is virtually certain to be followed by more. I’d be surprised if the deficit is held under 5 per cent of GDP for 2009-10, and deficits are likely to continue for quite a few years. With fiscal stimulus of that magnitude and interest rates near zero, it ought to be possible to keep the inevitable recession to a relatively modest scale, assuming (a big one) that the international financial system is on the road to stabilisation.

The main concern I have with the package is that it continues a heavy focus on construction. That sector has been the first (apart from the finance sector itself) to take a big hit, but it won’t be the last. It’s great building schools, but we need to be hiring teachers, teachers aides and support staff to work in them. As I’ve mentioned before, human services are the most labor-intensive areas of the economy, and also an area that’s been constrained in the era of economic liberalism that is now coming to an end. Hopefully, we’ll see more action on this front, and on direct measures to help the unemployed in the Mark 3 package.

I also have some concerns about the idea of insulating homes. That’s great if it’s additional to the impact of the emissions trading scheme, but not so great if all it does is make it easier for electricity companies to meet their targets.

Easter in January

John Quiggin19 Comments

As many readers will have noticed, the supermarkets began selling Easter items like eggs and hot cross buns early in January, just as they were clearing out the remaining Christmas stock. I must say this is a sorry commentary on what is supposed to be a consumer society

* First off, what about those of us who want to celebrate Christmas and Easter at the same time? If the stores could get their act together and put on the Easter items a couple of weeks earlier this would be easy, but they seem to stick to the tradition of one festival at a time

* Valentines Day is only a couple of weeks away, but there’s scarcely anything in the way of Valentine’s items. Given that Valentines falls in the middle of the Easter season surely it’s not beyond the capacity of the marketing guys to come up with Valentine-themed Easter eggs, or Heart-Cross buns

* There’s no risk of going short on gluttony during Lent, but there’s a long drought from Easter to Halloween, with only Mother’s Day and Father’s Day to provide options for excess consumption. Surely they could invent an Australian version of Thanksgiving and put it in midwinter.

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