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I am taking a break as I assume a position as Visiting Professor of Economics at Peking University, Beijing, China. I am teaching a course there on ‘Environmental and Natural Resource Economics’.
This is almost certainly among the best of the universities in China. The students there are selected as the best in China and they are, in my experience, the equal of any students I have encountered in any country. It’s my fifth visit there over the last couple of years.
There will be less blogging from me for a while and then blogging that – for some time at least – will focus on China and Chinese environmental issues.
Quote from Julia Dullard
“Labor has a long and proud track record of reforming the institutions and practices of political life I want to renovate that Labor tradition to bring lasting and durable improvements to our democracy”.
With the exception of the Hawke-Keating years – a significant period – Labor has no ‘long and proud track record’ at all. It has been a party of bunglers and fools.
This ridiculous quote is from the vixon who skewered old blabbermouth Rudd well and truely in the back because the government has ‘lost its way’. A government that she was a key part of.
From Greg Mankiw I got this interesting piece by Uwe Reinhardt critiquing the economic idea of efficiency – it’s a sequel to an earlier argument by Reinhardt. It interests me that both articles pop up in the business pages of the NYT.
Roughly efficiency means in a producer setting that more valued output is obtained from given productive inputs.
In Reinhardt 1 the point is made that no matter how hard economists seek to emphasise the notion that ‘efficient’ need not mean ‘better’ the connotation that an efficiency improvement increases welfare is difficult to dispel. The increased efficiency – for example the gains in total production in the US economy over recent decades – can accrue to a minority with most being worse off. This has happened. The standard response of microeconomics is to say increased production is good because the extra output can be redistributed to make everyone better off – the so-called Second Fundamental Theorem of Welfare Economics. The difficulty is that such distributions often are not made – they were certainly not in the US case – and, in any event, it is difficult to come up with the redistributions that do not in themselves create efficiency losses – all taxes except for pure profits taxes (including the RSPT) and proportional profits taxes distort incentives and reduce efficiency.
I agree with these types of arguments but few economists that I know seriously target output maximisation alone. Most economists understand that the pursuit of efficiency invariably creates both winners and losers unless fairly unrealistic compensations are made.
Reinhardt 2 points out that efficiency gains that improve everyone’s welfare are elusive. Most changes advocated by economists – for example appreciation of the Chinese RMB – help some (e.g. the shareholders of US manufacturers) and harm others (e.g. US consumers). Economists really have no business making such recommendations – it is better to adopt the strict constructionist approach of not arguing for such policies on the basis of economic ‘science’ but simply to point out who gains and who loses with various policy prescriptions. An alternative approach I like (I picked it up from an old (1953) though very worthwhile book on progressive taxation) is for economists to take the policy objectives of politicians or others as given and to stick to the positive question of whether policies advance the objectives that are intended.
The Kaldor-Hicks criterion of accepting that efficiency gains advance welfare if potentially after redistributions everyone can be made better-off (they need not be) is deceitful since it amounts to ignoring equity issues. It amounts to endorsing the pursuit of efficiency gains alone. For example it would contend that pure transfers have no efficiency costs.
The Reinhardt type arguments are perennial discussion points in economics but they are worth repeating. Economists are overly fond of advancing policy claims – recent arguments for revaluing the RMB are an example – on the basis of efficiency considerations alone. This isn’t sensible.
The Australian’s Kate Legge rang me during the week and asked why I am now voting Green. My response is in this article of Kate – basically my revisionism stems from my concern with climate change and more general environmental issues. There are a few Liberal supporters in this article who had similar ideas to mine. This raises a question.
Why don’t the Greens stick primarily to environmental issues and ditch their more general (and less plausible) pro-Labor agenda? Why don’t they try to influence opinion on both sides of politics? The resulting party might split on broad social issues but provide a cohesive platform for addressing key environmental issues. On the right of politics there are large numbers of middle class voters who are very environmentally conscious. It might be that this section od society provides a bigger base for environmental policies that do what Julia Dronespeak calls the ‘working families’ of Australia.
The high proportion of Greens voters who gave their preference to Labor might suggest it is this party who is their natural base of support. Maybe that’s true. But my impression is that among my colleagues in the universities and generally among people I meet (a narrow and biased sample I agree) there are many Liberals who did vote Green at this election. Many more would make the switch if the Greens went a bit easier on some of their anti-Liberal and pro-Labor babble. The result would be a stronger force seeking action on environmental issues.
Joseph Stiglitz is warning of a double dip recession in Europe because governments are becoming overly concerned with their deficits. Europe has similar fears but emphases weaknesses in US private sector housing demand that they some claim call for an increased US fiscal stimulus.
Equity markets around the world – including Australia – are tipping trouble ahead. Uncertainty over the election outcome in Australia seems to be having a minor influence compared to fears of a global recession. The banks are being hammered.
These gloomy expectations have a self-fulfilling character. It is deeply troubling.
The world’s best one-liner?
Tim Vine has been crowned king of the one-liners after one of his gags was named the best joke of the Edinburgh Fringe. Tim won for the gag:
“I’ve just been on a once-in-a-lifetime holiday. I’ll tell you what, never again.”
My guess is that Tony Abbott’s Coalition will not win enough seats to form a government on its own bat but that it will fall just short of a majority of seats. With the support of the independents Abbott will be able to form a government in a hung parliament situation. Its a pretty good outcome in the sense that a totally incompetent Labor Government is being justifiably turfed out – Gillard herself has said her party ‘lost its way’ but the key difficulty for Labor – and one that the electorate will observe – is that she was an intrinsic part of this incompetence.
The election of a Coalition Government will mean a return to good quality administration of the Howard years. Unfortunately it will not mean decent policies on climate change and it won’t create the sorts of pressures necessary to reform the Coalition so that it does place adequate weight on environmental issues. Currently the Coalition has poor policies on climate change but it has better policies than Labor. In the House of Representatives I am voting 1 Greens with preferences to the Liberals and I will put the Labor Party last. In the Senate I will vote the Green’s ticket.
Sunday update: I take no pleasure in being spot on in my election eve forecasts. Not even in probably winning the ex ante tipping competition held at Club Troppo – ex post, yes, I don’t stand a chance. Well done Nick. Predicting the outcome of course does not mean endorsing it. I can see no positive outcomes from this election – no policy initiatives being introduced that I favour that would not have occurred without it. The only general message of importance sent to the major parties is the electorate’s repugnance with the poor Federal administration achieved by Labor. The Greens will hopefully become a permanent thorn in the side of the disgruntled Labor riff-raff.
I’ve got to say I enjoyed the antics of the Labor Party cry-babies at Larvatus Prodeo – my ability to enjoy the sufferings of others has never been stronger. Mark Banish is the court jester of student Labor politics in Australia – his earnestness and glib insights make him a possible future Labor leader in Queensland.
Last night I started to wince when wind-bag Rudd got wound up into giving a grand ex-Prime Ministerial account of election banalities. Kerry O’Brien on the ABC cut the interview short with a ‘this looks like it might go on for quite a while’ termination. I disagree with the proposition that getting rid of Rudd was a mistake for Australia – it might have been a mistake for Labor – but we have all been saved from a further 3 years of pointless wind-bagging from this bore.
Julia Gillard looked like a sad old spinster on the eve without much going for her. She is very unattractive to look at and to listen to and a shadow of her former intelligent self. She wound into a ritualistic Labor account that focused on ‘working families’ etc. and refused to mention the massive slap in the face that the Australian people had directed at her. I would not be surprised if Labor gets rid of her – off to the glue factory Julia dear you are well past your best.
The bloodletting inside Labor’s ranks should be a joy to watch over the next few months. Maxine McKew let fly with a few preliminaries last night but, with luck, the smarties at the centre of Labor’s NSW right wing machine will be publicly executed.
I am glad that Wilson Tuckey looks like ending his political career. One of the most ignorant and uninteresting Coalition MPs I cannot imagine his National Party replacement could be worse.
Labor incompetence in NSW and Queensland has been savaged while the relatively competent Labor Government in Victoria has left Labor federally with strong support here.
The contrast with the athletic and optimistic Tony Abbott could not have been more obvious. He ran a fantastic campaign and should be Australia’s next PM. My best bet is that he will be. Standing next to his 3 attractive daughters and wife he seemed to have everything that Gillard did not. My pity is about some of his policies. But he has re-invigorated conservative politics in Australia and my side of politics owes him a debt for that.
I voted Green in the House of Representatives with second preference to the Liberals but voted for the Liberal ticket in the Senate – in the end I could not go through with my commitment to vote for the Greens. I was a bit disloyal but not much as the Liberals effectively got my vote and I registered a protest via the Greens vote in regard to bad Liberal policies on climate change and mining taxes. If Abbott becomes PM and appoints Malcolm Turnbull to a senior front bench role and takes serious steps to upgrade his climate change policies I will return to the fold. Otherwise more fence-sitting.
Potash or potassium carbonate has several industrial uses but is, in the main, used in agriculture. According to the Wikipedia entry: “Potash is important for agriculture because it improves water retention, yield, nutrient value, taste, colour, texture and disease resistance of food crops. It has wide application to fruit and vegetables, rice, wheat and other grains, sugar, corn, soybeans, palm oil and cotton, all of which benefit from the nutrient’s quality enhancing properties”.
The mineral exists mainly in deep mine deposits in various countries but some of the world’s largest known potash deposits are in Saskatchewan, Canada.
Yesterday BHP-Billiton made a $US38.56b all cash bid for Potash Corporation of Saskatchewan, to secure ownership of one such deposit. It would enjoy synergies with the nearby Jensen deposit that it already owns. It recently bought a nearby junior Canadian potash company Athabasca Potash.
These are early days and Potash Corporation have rejected the bid – the final price might go to $US 60b.
It is a stunning move – the current bid is about equal to one-third of BHP-Billiton’s market capitalisation or, to provide perspective, more than the estimated cost of Australia’s proposed high speed broadband network. The move while not as big as the (fortunately) failed bid for Rio Tinto it is still enormous. In the press it is variously described as a merger/takeover.
I’ll watch developments but the planned takeover probably reflects expectations of strong continued growth in global food demands. As the developing world develops it will not only want steel, coal and concrete – it will also want to feed itself better.
This quote from the Australian says it all:
People in Asia eat only 27.8kg of meat per head each year, compared with 123.2kg in North America and 74.3kg in Europe. As Asians become richer, their consumption of meat is expected to rise, and so more wheat and grain will be needed to raise cattle.
It has been estimated that it takes 7kg of grain to produce every kilo of beef. The population of the world is also expected to increase by half to more than nine billion by 2050, putting further pressure on food production.
Fruit and vegetable consumption is forecast to rise by a quarter to 2 billion tonnes a year in the next decade, while demand for grains and oilseed is expected to rise by a fifth.
With the supply of agricultural land declining in some areas as a result of rapid urbanisation, existing land will have to become more productive. Countries such as India and China are therefore expected to use much more fertiliser, increasing demand for potash, nitrogen and phosphates.
It is now 5 days until the Federal elections and most people I talk to can’t wait for the campaign to be over. The obsession in the media with personal and electoral trivia and the blatant dishonesty and misrepresentation by each side in their public pronouncements and the use of ’sound bite’-style advertising leaves me feeling really angry. Whatever the ‘party-minders’ may say this type of campaigning insults ordinary Australians.
I think both potential leaders – Gillard and Abbott – are better politicians than their actions and words in this campaign suggest. Perhaps neither have the requisite leadership skills and they feel pressured enough to pursue ‘party-minder’ strategies. Continue reading Banal thoughts on Federal Election
Several of the Fairfax newspapers ran this op ed by Laurence Kotlikoff. The linked version is superior to the local version because of the valuable IMF hyperlinks it contains. The stalling of the US recovery is no news to anyone who watches international equity markets. The bloodbath over the last few days reflects these fears but also perhaps a growing sense that doomsayers such as Kotlikoff might be right – the US is broke and, given its current economic sickneeses, there are no low pain options.
The notion that dealing with the massive public debt can occur after addressing shorter term economic weaknesses seems increasingly unrealistic. Continue reading US bankrupt?
A guest post by DavidP
Julia Gillard probably knows Shakespeare’s story of Macbeth. It was a standard high school text in English during the late 1970s and early 1980s. Noble lord, ambition stoked by witches’ prophesies, murders his king, turns into a bloody tyrant, and then himself is killed on the battlefield by his successors. And, if she missed learning at high school, odds on she saw Roman Polanski’s violent film version which was regularly screened at places like the Valhalla while completing her studies at Melbourne Uni. The underlying message of the play for Elizabethan audiences, as stressed by my English teacher at Eltham High, was: You don’t kill the king! Bad things will happen to people who remove their ruler! A message that recent events suggest seems still relevant.
The Prime Minister and her colleagues presumably ignored the message of Macbeth when removing her predecessor. They must have calculated that the benefits of removing the king outweighed the costs and proceeded. And, like in the play, at first, things seemed to go well. All hail the new queen! But as the story has unfolded, striking parallels with the story of Macbeth have occurred and it looks more and more likely that we may be living through a modern interpretation of the classic play.
First, like the noble lords Banquo and Macduff, senior colleagues Lindsay Tanner and John Faulkner quickly departed after the coronation. While they weren’t removed like in the play, they certainly left surrounded by questions. And the queen seemed unable to escape the way she seized the throne. Questions about the removal continued. The Labor party was dogged by leaks. And the slightly panicked policy announcements suggested a government not at ease with its position. Am surprised a cartoonist hasn’t thought to depict the Prime Minister washing her hands saying again and again “Out Damned Spot”!
One of the things Polanski’s film made very clear, from the first battlefield scene, was that while Duncan’s murder was shocking, these were violent times. And similarly, the election campaign has reminded us of the turbulence at the highest level of politics. The king returned, like a ghost, being visible but unable to answer questions (at least from the media). And ghosts of past removed kings soon swirled around distracting and disturbing the Prime Minister as she attempted to campaign and announce policies.
The parallels to the play are not exact. We may have to wait for someone’s memoirs to learn which factional warloads or journalists played the role of the witches stoking Macbeth’s ambition and bringing the bad news of the end. And it is too early to say whether the Opposition leader will be able to bring Birnham Wood to Dunsinane and overthrow Macbeth. Though at different times it has looked like the trees were busy packing their bags for the trip. But the play and the film make it clear that all this toil and trouble was not good for Scotland. And the quality of policies proposed during the campaign, suggests it is not good for Australia either.
For the most part I have refrained from entering into the current discussions on migration and population targeting. My preferred approach to these issues – as an economist – is to recognise the potential for economic gains from migration and population increase and then to look for policies that guarantee resident Australians will be better off as a consequence of such changes.
Demographer Peter MacDonald from the ANU and I gave talks on these issues to the Faculty of Commerce, Leaders Forum at Melbourne University. The powerpoints for my talk are here.
You were linked to it here first. These clowns have got to be joking. Haven’t they? Who will be the First Assistant Secretary for monitoring your local footy club? Will this be part of the ‘education revolution’? Is this devisive policy the real reason Dullard dumped Krudd?
One of the plausible hypotheses I have seen raised is that China’s internal environmental problems (air, water) are improving but it is the regional and global problems that are continuing to worsen. This article in The Economist suggests that internal problems are not improving – they are worsening. The only possible ray of light is the attempt by the authorities to reduce energy intensities but here too there are problems – Chinese energy-intensity data are as wobbly as other indicators:
“In 2006 China set a target of a 20% cut by 2010 of its energy intensity (the amount of energy consumed per unit of GDP). As some 70% of China’s energy comes from coal, efforts to achieve this have been closely watched. After successive years of improvement, the first quarter of this year saw a big reversal, with energy intensity increasing by 3.2%. But on August 3rd new data showed that in the first half of the year, energy intensity nudged up by a mere 0.09% compared with the same period a year ago. This implied a huge recent improvement.
As The Economist notes perhaps warnings by the prime minister, Mr. Wen Jiabao, that an “iron hand” would be used to meet the target, will have an effect.
China’s Ministry of Environmental Protection has a 2008 State of the Environment Report here. I’ve read of a more recent report but cannot track done more than some isolated observations.
I posted on the Gulf oil spill a while back and a discussant argued I was being alarmist. The NYT thinks he is right. It is bad but there seem to be worse environmental problems. 74% of the oil released was captured which reduces the scale of the problem and ”much of the rest is so diluted that it does not seem to pose much additional risk of harm”. Of course the cleanup effort will partly reflect the alarm calls so it is not clear the situation has been mishandled. But the Todd Litman estimates of total costs in the $50-$500b range (I never believed the top of this range) don’t sound right.
This policy proposal is something I have long advocated. The views of big tobacco – BAT and Phillip Morris - that there “is no credible evidence that plain cigarette packs reduce smoking but the move will instead add time to shop transactions and ultimately cost businesses money” are not plausible. Plain packaging hasn’t been tried in any country yet so evidence won’t be found. The claim that it will add to transactions costs is false – as ASH points out, packs will still contain the name of the manufacturer. I suspect that the big carcinogen deliverers are concerned that sales will drop off but, more than that, if they do this will be an invitation for countries around the world to emulate this genuinely innovative Australian policy.
We know that cigarette consumers (irrationally) choose pale or cool-coloured (blue-green) packs rather than bright red packs to reduce what they see as cancer risks. Pack design has an impact on decisions. Smokers identify with particular brands and the only way firms are left to advertise their products is by branding them in a particular way. My guess is that plain packaging will reduce smoking and smoking-related deaths. This is a welcome move and will, as part of a package, help in what should be the central community objective of eliminating smoking and bankrupting the carcinogen producers within this generation.
Tony Abbott is likely to be the next Prime Minister of Australia. I think that Julia Gillard has not provided a successful substitute for the unfortunate Kevin Rudd. It’s an interesting and conflicted situation for me since I am a long-term Liberal Party supporter who sees a very poor Labor Government facing the prospects of defeat and yet I feel at best a mixed joy. Its doubly mixed since I have long had an affection for both Abbott and Gillard. I have long thought Abbott was the most pragmatic and intelligent senior member of the Liberal Party. I am fairly anti-religious but I liked his commitment to a core set of values that he was prepared to argue in parliament and the fact that he, at least in the past, would sit back and he would listen to an argument. I liked Gillard because she was intelligent and could rise above politics and deal with the truth.
A turning point for me was a debate I watched between Gillard and Abbott on health reform that was held at University of Melbourne. Abbott listened and Gillard argued in a non-polemical way for anticipatory policies dealing with chronic health conditions such as diabetes. I liked both approaches and felt this debate, admittedly in a university, was a worthwhile change from the usual pollie babble. By a margin I gave the debate to Gillard – she was less political and polemical. But I ranked Abbott highly also.
Long since that debate both Gillard and Abbott have become leaders of their respective parties and both have become abusive, non-reflective monsters. Both will lie and distort to put their opposition member in a bad light and neither displays the political sophisticated and intellectual intergrity each once showed. Its a disappointing outcome.
What happened? What changed and what detracted from their revealled intelligence? Is their current behaviour is a stance forced on them by party mobsters that will be reversed if they gain power. I almost hope it is although the implication for the outcome of any objective assessment of their individual current moral scruples is poor. Or did I just get it wrong in the first place? Was it just that on a narrower issues they sounded better?
John Quiggin does a sound job demolishing Tony Abbott’s claim that a $40 per ton carbon tax will double the price of electricity. It won’t – the increase John calculates at about 20%. I have been equally puzzled by people’s assumption that a $40 carbon tax on fuels would increase petrol prices dramatically. Again it won’t – the increase is about 10 cents per litre or less than 9%. Most of the political speeches in this campaign have been evasive/irrelevant and of the “he said/she said” character with very limited policy analysis. It is annoying that when a political leader like Abbott does get specific he gets it wrong. I guess if Abbott can get away with this that he will get away with the more complex idea that direct interventions in the energy sector will outperform imposing a price on carbon.
Of course the implication of this findings is that carbon price taxes need to be fairly hefty to have any significant effect. Both fuel and electricity demands are very price inelastic of the order -0.2 to -0.3 as suggested by the Garnaut Review. This means that large carbon taxes are needed to have much of an effect on emissions. Hefty taxes need to be accompanied by income redistributions to low income households in order to prevent serious disadvantages as, again, was suggested by Garnaut.
I’ve previously reported on my Kindle and Ipad purchases. Both are great technology so I am happy to praise both. Though I must say that – given its connectability to any part of the WEB – the range of things you can do with Ipad is much greater. And OK, this is fairly bourgeois, but the colour screen is a winner. Ipad is a fair bit more expensive than Kindle so you are paying for the extra capability – if you only wanted an E-reader Kindle might hacve an edge. The only real advantage of the Kindle for me was access to the enormous Amazon.com E-bookshop. But now that is gone too since Kindle provide an APP for Ipad that allows download and purchasing items direct from Amazon.com. I did this over the weekend and I think its navifgation potential within a document is better than Kindle.
As Machievelli wrote five hundred years ago, “there is nothing more difficult … than to take the lead in the introduction of a new order of things, because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new.” Nowhere has this been truer than in the climate change debate, where those with most to gain are not even born yet, and those with most to lose are some of the wealthiest and most ruthless industries on the planet. (Ben Eltham, at Unleashed).
It is now quite clear that the US Senate will not approve comprehensive measures to address climate change. The denialists, as well as the near universal human emotions of greed and stupidity, have won the day and we will all pay for this. My immediate concern is to watch for the reaction of China. The US and China each contribute about 20% of the world’s CO2 emissions and jointly consume about 50% of the world’s coal. Over the next few years China will add about 500,000 MW of coal-fired electricity which will provide emissions about equal to those currently delivered by coal-burning for electricity in the US today. It is a huge surging delivery of carbon emissions. China is currently embarked on a massive renewables and carbon-containment regime – a program which utterly dwarfs anything in the US but still they need to dramatically expand their energy consumption to realise even modest development goals. The hope was that the surge in Chinese and other developing country emissions would be accompanied by dramatic cuts in developing country emissions until roughly equal per capita emissions resulted globally. Then countries would all stabilise their emissions at levels which do not threaten climate.
China insists that the US make significant emissions cuts before it will do more than it currently is doing. The fear of course is that the Senate outcome will lead to no additional mitigation responses by China and to a real global crisis. The US policy failure is immoral, destructive and dangerous. For me the stark issues this failure raises are only starting to sink in. It is a disaster.
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