Over the fold, my column from yesterday’s Fin, on NSW electricity privatisation, which ran under the title above
A lot or a little?
A dollar is not very much money. A billion dollars is a lot of money. Twenty billion dollars is an awful lot of money.
For most people reading this (though not for Bill Gates or for the billion or so people living on a dollar a day or less), these statements should seem pretty obvious.
But all of these can be (and have been used as) different ways of measuring the same thing. If every Australian receives, or pays, a dollar a week, the total amount is very close to a billion dollars a year. And if you have a cash flow of a billion dollars a year, and your interest rate is 5 per cent, the present value of that cash flow (the amount of extra wealth you would need to generate the flow) is twenty billion dollars.
It’s easy to stretch this gap even further. A dollar a week is about fourteen cents a day. And, if we looked at the US (about 300 million people), or the entire developed world (around a billion people, depending on your definition), the total would be that much larger. Fourteen cents a day for everyone in the developed world has a present value of one trillion dollars.
The fact that the same flow of money can be presented in such radically different ways, and that each of them is appropriate in certain contexts, is one reason public policy debates get confused.
Having posed the problem, I’ll leave it for discussion, and hope to come back with some relevant examples and suggestions on how to improve our understanding of these things.
Waiting for the tsunami
The sudden collapse of shares in the Centro group following the announcement that they were having trouble refinancing their debt (there’s been a partial recovery today) reminds us that no-one really knows what is going on in global credit markets. Bad debts have been buried under layers of collateralised debt obligations, and seemingly sound companies may (or may not) have all kinds of off-balance sheet obligations, liable to be called in at short notice.
Given that we are collectively among the most indebted people on earth, we probably ought to be more worried than we are. But, as Costello and Howard found during the election campaign, it’s hard to stir up concern about a possible crash when we’re still worrying about whether strong growth will overheat the economy.
Individually, the only real preparation for a possible jam in credit markets is to make sure that we are not relying on the availability of credit on easy terms in the near future. For example, if you are planning on refinancing a home loan and locking in a fixed rate, you might think about doing so sooner rather than later (note: I’m not a financial adviser, and this isn’t financial advice – if you’re actually in this, or a similar, situation, consult a professional).
Pons asinorum – CIS edition
The scientific debate regarding global warming has been over for some time, and the Australian policy debate has moved beyond the point where delusional pseudoscience has any impact. What remains of the scientific debate is a screening device in which individuals and institutions identify themselves as so lacking in intelligence, judgement or honesty as to cast doubt on their contributions on any topic. As with Euclid’s fifth proposition failure on this test distinguishes the donkeys.
The latest to self-identify as a donkey is Barry Maley of the Centre for Independent Studies whose latest piece in the Oz states, among other pieces of nonsense scooped up from teh intertubes
Beyond a relatively small concentration, the effect of additional carbon dioxide decreases logarithmically, almost to vanishing point.
As Wolfgang Pauli would have said, this is not even wrong, since “decreases logarithmically” is a contradiction in terms.
Maley identifies himself as a “former academic” and his CIS bio describes him as a former senior lecturer in Behavioural Science who has worked on family and social policy. It’s a safe bet that he wouldn’t know a logarithm if it bit him, and that the simple exercise in logarithmic differentiation required to convert the claim above into something that can be assessed and refuted (here’s a good post that covers several more of Maley’s talking points) would be utterly beyond him.
Clearly he’s scrambled together a bunch of nonsense from delusionist Internet sites, and published it along with his “research” on family issues. Since he invites us to treat the two as being equally credible, I’m happy to accept. And since the CIS invites us to treat Maley as a serious researcher, the same goes for them.
The culture war: time to mop up
Both before and since the election, commentators of the centre-left, including me, have pronounced the end of the culture wars that have dominated a large stream of Australian political commentary for the past fifteen years or so (for a further sample, here’s Polemica and LP). These pronouncements have not been well received. Rather, in the manner of this (according to family legend) distant relation of mine, those on the losing side have taken the view that news of their defeat is a deceitful ruse de guerre.
In a tactical sense, this is all to the good. With no share of political power anywhere in the country, the culture warriors can’t do any actual harm, except to the conservative side of politics. So, there’s an argument that they should be encouraged, rather than persuaded to give up the struggle. But it doesn’t seem like a good idea to encourage vitriolic debate about side issues, while letting the big questions be settled by default. In relation to climate change, for example, as long as the delusionist and do-nothingist culture warriors dominate one side of the debate, serious discussion about questions like how best to combine adaption and mitigation will be drowned out.
So, it seems like a good idea to survey the culture war and consider what can be done about it.
Monday message board
It’s Monday again. Post on any topic. Civilised discussion and no coarse language please. If in doubt, read the discussion policy.
A big win for the planet, and others
The outcome of the international climate talks in Bali has been a huge win for the planet. Given the participation of the Bush Administration, we were never going to get firm short-term targets in the agreement of this round of negotiations (except as the result of a US walkout, and a deal struck by the rest of the world). But on just about every other score, the outcome has been better than anyone could reasonably have expected, including:
* Agreement in principle on a 2050 target of halving emissions
* Agreement to negotiate a binding deal in 2009, when Bush will be gone, and short-term targets back on the table
* Agreement to provide assistance to developing countries for both mitigation and adaptation
* Agreement by China to pursue emissions-cutting actions that are “measurable, reportable and verifiable.�
There are of course, some individual winners too, of whom the most notable is undoubtedly Al Gore. His intervention, correctly blaming the US Administration for the lack of progress at the talks, and putting effective pressure on its remaining allies, the governments of Canada and Japan, made it clear that the political price for a failure would be paid by the US, and that those who backed Bush now would find themselves alone in the near future.
Kevin Rudd has also been a big winner. Until his election, Australia, as the only other significant country not to ratify Kyoto, was Bush’s most important supporter. After the switch, Australia was able to pursue a negotiating strategy which sometimes seemed to accommodating to the US, but ultimately produced an excellent outcome.
Blogging knols and wikis
After reading lots of discussion of Google’s knol initiative, I finally got around to actually looking at the example screenshot, which is about insomnia. Naturally, I was interested to look at the competition provided by the Wikipedia article on the same topic.
The Wikipedia article starts with a cleanup-needed tag (maybe Google’s choice of example topic wasn’t accidental in this respect), but doesn’t look all that bad. What’s startling is that wiki and knol disagree on some fairly basic points.
The knol, written by Rachel Manber states, without citation, that insomnia affects about one in ten US adults, which I would guess to be about 25 million people. Wikipedia says ’60 million Americans suffer from insomnia each year” and supports this with a link to the NIH which says “About 60 million Americans a year have insomnia frequently or for extended periods of time, which leads to even more serious sleep deficits.” . This WebMD article says “In a 1991 survey, 30-35% of adult Americans reported difficulty sleeping in the past year and 10% reported the insomnia to be chronic, severe, or both” again consistent with Wikipedia. It looks as if the knol introductory sentence should have stated “chronic or severe”.
There’s also disagreement over classifications of transient, acute and chronic insomnia. The knol classification is purely on duration, while the Wikipedia article offers a rather confusing mix of duration and causative indicators. A quick search of the web suggests that there’s lots of different definitions out there.
The 75 per cent solution: tourism
A lot of discussion of climate change is based on the implicit or explicit premise that, since we use energy in everything we do, and most energy is derived from carbon-based fuels, large reductions in CO2 emissions will require radical changes in the way we live. Some people welcome this prospect, but most do not.
Having looked at this problem in various different ways, I’m convinced that this premise is wrong, and that quite modest changes, many of which would follow more or less directly from the imposition of a suitable cost on CO2 emissions, could achieve large reductions in emissions. I’ve argued this at the macro level, based on demand elasticity estimates, and also at the micro level in terms of road transport. I thought it might be a good idea to attempt more micro estimates and, while I was visiting Cairns last week, my thoughts naturally turned to long-distance tourism.
So, this is hoped to be the first in a series where I consider the question: Could we reduce emissions in a given sector of the economy by 75 per cent in a way that wouldn’t substantially change the services delivered by that sector?
Weekend reflections
It’s time for another round of weekend reflections. Feel free to post your thoughts at greater length than in a standard comment thread. Before you do so, be sure to read the discussion policy
John Quiggin 