John Quiggin

We academics love nothing better than to give each other awards. The Australian Conference of Economists is being held in Canberra this week, and the big social event was the conference dinner on Monday night, where blogger-economists were (as usual) well represented when the gongs were handed out. The “Best Young Economist” award (it says something about the pace of academic life that “Young” = “under 40″) previously won by econbloggers Joshua Gans and Paul Frijters, went this time to Andrew Leigh, who left ANU last year to become MP for Fraser in the ACT. Academia’s loss will be the nation’s gain if Andrew gets to exert some influence over public policy.

I also scored, being chosen for the Distinguished Fellow Award. Looking at the list of previous recipients, it’s a big honour to join them and I’m very grateful to my colleagues in the profession, especially since I’ve argued pretty vigorously with most of them at one time or another. The economics profession has its problems (as I argued in Zombie Economics, we haven’t been too good at learning the lessons of the Global Financial Crisis), but all things considered, it has been a force for good in Australian public policy debates.

It’s time again for the Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language. Lengthy side discussions to the sandpits, please.

The Grattan Institute is advertising a lecture on “How to create a world-class university” by Andrew Hamilton, VC of Oxford and previously Provost at Yale. As the ad says, “Hamilton has been a leader in two universities that are world class by any measure”.

Still, if we take his experience as representative the obvious answer to the question is of how to create a world-class university is “found it in 1700, or preferably earlier”. Hamilton may have some significant achievements, but the creation of a world class university doesn’t appear to be among them.

That’s a snark, but it conceals a serious point. The fact is that (with a handful of marginal exceptions) the leading universities in most developed countries, including the US, UK and Australia, are those that were leading universities in 1900. There is very little evidence to suggest that anything done by a vice-chancellor or provost can achieve more than marginal improvements in the relative ranking of a new university. Conversely (and I won’t name the Australian examples I have in mind) even spectacularly bad management can’t do much to damage a university that has been around for 100 years or more.

That in turn means that common assumptions about the benefits of competition in the university sector are almost entirely wrong. In the absence of effective market mechanisms by which well-run firms prosper and grow while badly-run firms shrink and die, competition is essentially meaningless.

The expansion of competition between Australian universities has led to huge spending on marketing and advertising, and the growth of a large supporting bureaucracy, but it’s done nothing to improve standards.

The proposed carbon tax is a substantial improvement on the heavily compromised emissions trading scheme agreed between the Rudd government and the Opposition under Malcolm Turnbull. Although there is substantial compensation for emissions-intensive industry it is temporary and based on historic emissions level, so that the incentive to reduce emissions is not compromised. The design of the compensation package for households is also welcome.

The government has avoided the temptation to pretend that everyone will be better off, and has taken the reasonable position that high income households do not need to be compensated for the introduction of necessary reforms. This has permitted the very welcome measure of raising the income tax threshold and thereby taking more than a million low-income workers out of the income tax system.

While the primary focus of the package is, correctly, on the imposition of a price on carbon emissions, there are a range of supporting measures designed to encourage energy efficiency and innovation. On the whole, these seem more carefully designed than the measures introduced under previous governments.

Continuing on the theme of #newscorpfail, the ever-expanding scandal surrounding hacking, bribery, perjury and obstruction of justice by News Corporation in England has already brought about the closure of the venerable (at least in years) News of the World newspaper, but looks likely to go much further, with significant implications for the Murdoch press in Australia.

The scandal over hacking and other criminal behavior has now become an all-out revolt of UK politicians against Murdoch’s immense political power , which has had successive Prime Ministers dancing attendance on him, and rushing to confer lucrative favors on his News Corporation. Those, like Labour leader Ed Miliband, who are relative cleanskins, are making the running, while PM David Cameron, very close to the most corrupt elements of News, is scrambling to cover himself.

The hacking and bribery scandals appear (as far as we know) to be confined to the UK, but the greater scandal of Murdoch’s corruption of the political process and misuse of press power is even worse in Australia. The Australian and other Murdoch publications filled with lies and politically slanted reporting aimed at furthering both Murdoch’s political agenda and his commercial interests. Whereas there is still lively competition in the British Press, Murdoch has a print monopoly in major cities like Brisbane.

It seems likely that News International will be refused permission for its impending takeover of BSkyB on the grounds that it is not “fit and proper” for such a role. That would have important implications for Australia.

Regardless of how the current scandal plays out, we need to remember that while the productions of News Corporation be papers, what they print is certainly not news.

Greg Sheridan was upset about my piece in the Fin, attacking his claim that the effects of Australian action on climate change will “will have an impact on the global environment so tiny it will be unmeasurable.” I’ll respond to the details of his objections over the fold, but let’s first tackle the substantive question. Australia is currently responsible for a about 2 per cent of global emissions. Under business as usual projections, our emissions were expected to grow by 20 to 30 per cent between 2000 and 2020. If we achieve the target of 5 per cent below 2000 emission, that implies a reduction of 25 per cent relative to business as usual, 0.5 per cent of global emissions. That’s about 1 per cent of what is needed if the world is to cut total emissions by 50 per cent over the next couple of decades, as is necessary in a stabilisation scenario.

That’s a small step that is not going to solve the problem, but neither is it “so tiny as to be immeasurable”. In fact, it’s pretty typical of Australia’s weight in international affairs – small relative to the big players like the US and China, but large relative to our share of world population. As a comparison, Australia currently has about 1500 troops in Afghanistan, out of a total (ISAF and Afghan army) force of over 150 000. Would Sheridan want to argue that, since our troops are less than 1 per cent of the total, their effects are so immeasurably small that we might as well do nothing[1]. Well, no. It appears that Australia is immeasurably tiny only when we are doing things US Republicans don’t like.

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Another really bad employment report from the US Bureau of Labor Statistics. Employment has been essentially static for the last couple of months, and most of the ground gained in 2010 has been lost. Unsurprisingly, public sector job cuts are leading the way downwards, as the stimulus fades into memory and austerity proceeds at the state and local level. In this context, it’s hard to know what outcome of the current negotiations over the debt limit would be worse: unconditional surrender to Republican demands for yet more spending cuts, or a failure to pass any legislation, with consequences that remain unclear[1].It’s hard to see US unemployment falling substantially any time soon. The decline in the participation rate (it’s fallen by about 3 percentage points of the population, equal to about 5 per cent of the labor force) means that the standard measure seriously understates the severity of the problem. If employment growth were to resume, lots of people would re-enter the labor market, so that unemployment would not decline fast.

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There are plenty of reasons to be gloomy about the prospects of stabilising the global climate, but there are also some promising developments, so I’ve started a series on this topic. Part 1 on peak gasoline herePart 2 on solar PV here

This post is about energy efficiency, which is often neglected, but is likely to be the biggest single source of emissions reductions over the next few decades. I’m going to define efficiency fairly narrowly, to refer to technologies that deliver essentially the same services using less energy than those they replace: so, for example, I’m including more efficient airconditioners, but not “smart” systems that cut off when demand is high.

The shorter version is

1. With existing technologies or straightforward extensions, it’s possible to double energy efficiency (reduce energy use per unit of energy services by 50 per cent) at relatively low cost and with marginal changes in performance.
2. With rising carbon prices over time, it’s likely that further improvements can be made in many areas

3. Concerns about possible rebound effects (aka the Jevons paradox) are misplaced

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That’s the title of my column in today’s Fin

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It’s time again for the Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language. Lengthy side discussions to the sandpits, please.

It’s time again for weekend reflections, which makes space for longer than usual comments on any topic. In keeping with my attempts to open up the comments to new contributors , I’d like to redirect discussion, and restatements of previous arguments, as opposed to substantive new contributions, to the sandpit(s). In particular, please post nothing related to nuclear energy. As always, civilised discussion and no coarse language please.

Here’s a new sandpit for (non-nuclear) lengthy side discussion, rants on idees fixes and so on.

When my wife sent me the link, this ABC story was headlined Treasury head says Australians must work harder. It’s now been changed to “Australians must increase productivity: Treasury head”, which sounds a bit more reasonable, but I think is still a somewhat problematic.

I’ll try to discuss this in detail later, but for now I just want to push a point I’ve been making for a long time, which came up in comments recently. If governments want a simple reform that would improve our economic performance (though maybe not the standard measures of that performance), one of the best things they could do is legislate for six weeks annual leave as a standard employment condition. We have parental leave for parents of new babies, but there’s an equally big problem for parents of school age children trying to deal with the mismatch between school holidays (six weeks over summer, as well as term breaks) and the measly four weeks they are allowed, unchanged since the Whitlam government. And the rest of us could do with more of a break as well.

An extra week’s leave is like a 2 per cent wage increase. If annual leave were increased in a couple of stages to six weeks a year, it would only be necessary to find productivity increases or other offsets of 2 per cent, and, as Martin Parkinson implies, that shouldn’t be too hard.

I’ve been writing series of posts examining the question – what is left of Marxism, as a way to understand the world, and as a way to change it, once it is accepted that capitalism is not going to be overthrown by a working class revolution. The first was about class and the second about crisis. Now for the final instalment: capital.

By the way, the first post got translated into Spanish, here. It’s one of the things that I still find stunning about the Internet that things like this can happen.
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I’ve been travelling and going to meetings, hence slow posting. Light posting for a while to come, but I thought I’d throw in a last minute reminder that there’s still a few hours left in which to support the Queensland Cancer Council and claim a tax deduction in the process.

I’ve been travelling, so I only just got around to putting in my $100 as promised for the fundraising appeal. By the time I got to it, we were well past $1000, which is great. But there’s still a long way to go to the target of $5000. And, I’ve got a fair bit of training to do if I’m going to run the implied time of 1:55. So keep the money rolling in and keep me motivated to train hard.

Once again, thanks to everyone who has donated so far. The fact that I can raise funds for good causes is one of the things that motivates me to keep blogging especially at those times when it feels a bit like the 15k mark in a half-marathon.

I’m writing series of posts examining the question – what is left of Marxism, as a way to understand the world, and as a way to change it, once it is accepted that capitalism is not going to be overthrown by a working class revolution. Last time I talked about class. This post is about crisis. As before, the shorter JQ is “there are lots of valuable insights, but there’s a high risk of political paralysis.”

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On the right hand sidebar you can see my latest fundraiser, a half-marathon run where I’ll be supporting the Queensland Cancer Council. It’s tax-deductible and there’s still time to donate before June 30, so you get the refund straight away (or, to think of it differently, you can give twice as much as you planned, and the government will pay half).

As I said last time, the deal with this fundraiser is that I’ll commit to a minute below two hours for each $1000 I can raise. We’re just about there for the first $1000, so to hurry things along, I’ll put in $100 of my own if the total gets past $900 by the end of tomorrow (Friday) evening.

My column from the Fin, on the latest call for Labor to abandon everything but the kitchen sink is over the fold.

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It’s time again for the Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language. Lengthy side discussions to the sandpits, please.

I’ve mentioned Erik Olin Wright’s Envisaging Real Utopias a couple of times, and I’ve also been reading David Harvey’s Enigma of Capital and Jerry Cohen’s if You’re an Egalitarian How Come you’re so Rich. In different ways, all these books raise the question: what becomes of Marxism if you abandon belief in the likelihood or desirability of revolution[1]? To give the shorter JQ upfront, there are lots of valuable insights, but there’s a high risk of political paralysis.

I plan alliteratively, to organise my points under three headings: Class, Capital and Crisis, and in this post I’ll talk about class

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There was a time when Labor’s aim for the poor and disadvantaged was to end poverty and disadvantage. Now the best they can hope for is “extending opportunity“. Even equality of opportunity is a step too far it seems.

According to Steve Lewis in the Daily Telegraph

CONSUMERS will be slugged with price rises on everyday items like milk, cheese, chocolate and pizza’s as the carbon tax puts the squeeze on retailers and producers

(the apostrophe in pizza’s suggests News may have cut the subediting budget a bit too far). He illustrates with a picture of a mother of three who is currently paying $300 a fortnight for groceries.

Steve can’t say how much, and neither can his sources, though they are happy to give scary quotes. So, instead he quotes some big-sounding numbers derived from the Dept of Climate Change analysis. Woolworths, for example, will pay around $73 million a year in higher electricity costs. That certainly sounds like it would put a dent in the household budget. As the old saying has it, a million here, a million there, pretty soon you’re spending real money. That’s where Lewis leaves the story

But those of us capable of primary school arithmetic can take things a little bit further. There are 20 million or so people in Australia, so the cost amounts to aroun $3.50 a year, or 7 cents a week for us. For the archetypal (if unrepresentative family of four) that’s around 30 cents a week or 60 cents a fortnight (an increase of 0.4 per cent for the mother in the example). Looking at the illustrative photo, that’s rather less than the difference between the Kleenex tissues in the shopping trolley and the home brand alternative.

For a validity check on the impact, we could look at Woolies’ total sales of around $18 billion a year. A cost increase of $73 million is approximately 0.4 per cent. Of course, this doesn’t really get to the right answer either, because it doesn’t take account of changes in the wholesale cost of goods (so-called Scope 3 emissions).

But doing the analysis at an aggregate level fixes this pretty well. A tax at $26/tonne will raise around $10-$12 billion, depending on exemptions and particularly on the treatment of petrol. That’s about 2.5 per cent of total household expenditure on goods services, meaning that the gross impact of the carbon tax will be about a quarter that of the GST (note however, that the GST was offset, for goods, by the removal of Wholesale Sales Tax). The increase will be greater than this for energy services (electricity, gas and so on), and therefore must be less on non-energy goods. Overall, it’s safe to predict that the impact on grocery bills and similar items will be around 1 per cent.

Over the fold, I’ll do the cents per week exercise for all of Lewis’ examples when I get a moment

Time for another Monday Message Board, but we’re enjoying a long weekend, at least in Brisbane where the miserable weather of last week, forecast to continue for several days more, has disappeared. I’d welcome thoughts about the monarchy, honours lists and so on, and would also be interested to hear from readers affected by the volcanic ash clouds.

I’m tightening up on the civility rules and will, from now on, delete anything I regard as personal criticism of another commenter, along with coarse language. As usual, save long rants, extensive debates with other commenters, and repetition of old themes for an appropriate sandpit.

There are plenty of reasons to be gloomy about the prospects of stabilising the global climate, but there are also some promising developments, so I’ve started a series on this topic.

I’ve been meaning to write this post for a while, but Stephen Lacey at Grist (via David Spratt on Twitter) has done much of the job for me, and better than I could have. The crucial point is that the cost of solar photovoltaic electricity has fallen dramatically and is almost certain to fall further. In particular reaching the point where it is the cheapest large-scale alternative to carbon-fuelled electricity generation, and competitive (at reasonable carbon prices and in favorable locations) with new coal-fired power.

This makes for some fundamental changes in the debate over climate change and mitigation, even as it reaffirms the central point that advocates of mitigation have made all along, namely that, with an appropriate policy response, the costs of drastic reductions in carbon emissions will be modest in relation to national or global income.

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While we are on the subject of charitable giving, a reader has sent in a link to the Giving one percent website of a non-profit group trying to create a culture of charitable giving. Well worth a visit!

It’s been a while since we’ve had a fundraiser here, but a great opportunity has just come up. I’ll be attempting a half-marathon as part of the Brisbane Running Festival on 7 August, and there’s an associated fundraiser for the Queensland Cancer Council, which promotes research, awareness and support services. So, I’ve created a webpage for my effort here, where you can donate money (before June 30 if you want to claim it in this year’s tax return!).

A good fundraiser needs a good gimmick, so here goes. I completed my first[1] half-marathon run a week ago, in a time of 1:59:24, staying just ahead of the 2:00:00 pacerunner (someone who runs with a balloon or flag at a steady pace so others can keep pace) the whole time. I was pretty tired and sore by the time I finished – it’s not what you would call a fun run! This time, I want a commitment device to push me to run at 1:55 (or even better!). So, for each $1000 I can raise before race day, I’ll commit my best effort to stay a minute ahead of the 2:00:00 pacerunner. If I can raise $5000, I’ll run at the 1:55 pace as long as I can[2]. And, if there’s $10 000, I’ll try for 1:50, which will really push me to the limit.

I’ll start the ball rolling by promising to give $200 for each minute below 2:00 hours. So, you only need to give $800 to push my time down.

This is a great chance for everyone. If you enjoy the free commentary I’ve provided, please say thanks by giving whatever you can afford. If I’ve annoyed you, toss some money into the pot, and you can enjoy a Sunday morning lie-in thinking about me struggling to keep a punishing pace (at least for a middle-aged academic) over 21.1 km.

I’ll provide regular updates, and thanks to contributors, except for those who prefer to give anonymously.

fn1. I also did one in 2010, but I had to walk a fair bit, so I don’t think it counts.
fn2. No guarantees, as I’ll slow down if I’m feeling knee damage, but I’ll do my best to push on through exhaustion.

One great thing about soccer, at least for me, is that it is possible, and (by contrast with other sports where this can theoretically occur) relatively common, to score for the other side[1], thereby giving the language the phrase “own goal”. While not an own goal, I certainly had a missed shot with my prediction back in 2007 that the Liberals would never win another federal election. Technically, I’m still in the clear – the prediction that they would merge with the Nats before regaining office was right for the Queensland parties and may turn out correct at the national level – but the underlying analysis posited that Labor would remain politically dominant at both the Federal and State (except NSW) level for years to come. That prediction was derailed by a spectacular series of own goals on the part of the Labor Party, including

* WA Premier Carpenter’s decision to allow ministers to resume contact with Brian Burke
* The NSW government’s suicidal pursuit of electricity privatisation, thereby turning a defeat that was already inevitable (given past own goals) into a rout
* The Bligh government’s similarly suicidal program of asset sales
* Federal Labor’s dumping of the ETS, followed by the dumping of Kevin Rudd

While there is no particular disaster to explain the narrow defeat of the Victorian Labor government, spillovers from the Federal level probably did enough damage to make the difference.

But after only a short period in office, it seems that both the NSW and Victorian Coalition governments are scoring own goals on a regular basis. In Victoria (as at the Federal level) there have been huge blowups over senior ministers missing Parliamentary votes. And NSW Premier Barry O’Farrell, having campaigned as cuddly and unthreatening, made a huge mistake when he tried to retrospectively reduce the feed-in tariff paid to people who had, in good faith, invested in the previous government’s solar PV scheme. He followed that up by ramming through Parliament anti-union legislation that had not been mentioned in the campaign. Given how far Labor’s stocks have sunk, mistakes like this probably won’t be crucial. But a government that manages to mess up what should be its honeymoon period is unlikely to last for long.

For political analysis, the “own goals” phenomenon presents a serious problem. If you want to estimate things like election outcomes you have to work on the basis of things that are more or less predictable, like economic conditions, ideological positions and so forth. Implicitly, this assumes that politicians do the best they can to win, given the objective circumstances. But if political outcomes are driven primarily by unforced errors like those I’ve mentioned, then predictability goes out the window.

fn1. In Australian football, it is, for course, very common to rush the ball through your own goal for a behind, scoring 1 point for the other side, but preventing a goal worth 6 points.

I wrote a while ago that most of the denialists touting the line that “there has been no statistically significant warming since 1995″ wouldn’t know a t-statistic if it bit them[1]. There’s an even better example in the Letters page of today’s Fin, where JL Goldsworthy of Woorim writes “A carbon tax will save about 0.00001 per cent of anthropogenic emissions, if that”.

We can easily check this estimate. Australia is currently responsible for about 2 per cent of global emissions, and the carbon tax is intended to reduce emissions to 5 per cent below 2000 levels (a target that Tony Abbott also ostensibly supports). Business as usual growth will be at least 25 per cent, so the policy goal is an emissions cut of 30 per cent. Primary school arithmetic tells us that 0.02*0.3 = 0.006 or 0.6 per cent. That is, JL Goldsworthy of Woorim is out by a factor of 60 000.

While this is an extreme case, it’s pretty much routine for the rightwing side of the climate debate. Ludicrous numbers like Goldsworthy’s can be found on just about any rightwing blog you care to visit. I’ve pointed out similarly massive errors by Andrew Bolt, Greg Hunt and Terry McCrann among others.

And they don’t care. The point of the debate is not to get things right but to keep up a steady supply of talking points so that those who have been sucked in by the delusions their opinion leaders spout never catch up with the refutations.

Update Unsurprisingly, this number appears to come from the ludicrous, but dangerous, Alan Jones, already notable for the corruption of Cash for Comment, and for his promotion of race riots, thankfully a rare phenomenon in Australia. It’s hard to say anything good about Jones. But the “respectable” right, exemplified by David Flint and John Howard, embrace and defend him. And not a single self-described “sceptic” has tried to correct this absurd and dishonest claim. If there is a single person on the anti-science side of the debate who cares in the slightest for truth, this is an ideal opportunity to step forward – Bob Carter, Ian Plimer, Don Aitkin and William Kininmonth come to mind as candidates.

fn1. The minority who do know what statistical significance means, and keep circulating this spurious (and now factually false) talking point are even worse. I’ll come back to them in another post.

At afternoon tea yesterday, one of my colleagues raised the point that, particularly in Europe, the prefix neo- is automatically taken to be pejorative, with neo-liberal as the obvious illustration. It struck us that the corresponding, positively weighted prefix is post- , as in post-Keynesian, post-Communist and so on. [1]

My thought on this is it reflects an underlying progressivist assumption, shared even by many people who would reject explicit claims about historical progress. Given this assumption “post-X” is good, since it represents an advance on X, while “neo-X” is bad since it represents a reversion to X, implying the existence of some Y which must be post-X.

Feel free to provide counterexamples, contrary explanations and so on.