John Quiggin

To support my fundraising appeal for HeartKids Queensland. Just click on the ad on the right and give money[1]. It would be great to reach $2000 by the end of the financial year (30 June).

An added incentive – after the carbon tax comes in on Sunday, money will be worthless and bank balances will be confiscated by the UN[2], so you may as well give generously while you still can.

fn1. Unfortunately, the widget isn’t updating the total amount at the moment, but I’ll announce it soon.
fn2. Oops, not sure if I was supposed to pre-announce that, so don’t tell anyone

The sharp drop in the price of coal over recent months might be just one of the fluctuations that go on all the time in commodity markets. That’s the preferred view of Fitch Ratings cited by Coalspot, saying “the weakness seen in thermal coal prices in recent months should reverse once demand from major importers recovers”. On the other hand, though “there is a risk low prices may persist into 2013, changing the industry’s supply side dynamics.” The crucial point is that most coal contracts are negotiated annually, so suppliers can ride out months, but not years, of low prices.

News from the US today increases the likelihood of a sustained drop in prices. The US Court of Appeals delivered a complete and unanimous rejection of an attempt to block regulation of CO2 emissions by the EPA, under the Clean Air Act. That could be overturned if the Repubs make a clean sweep in November, but otherwise it means, for practical purposes, the end of new coal-fired power plants in the US, and the shutdown of many existing plants. As noted in the Fitch report, declining US demand for coal is already pushing US coal onto world markets, contributing to the declining price.

Fitch is optimistic about demand from China and India, but there’s plenty of room for doubt about China. Not only does it appear that economic growth is slowing, but China is giving a lot of support to renewables which are now the focus of an incipient trade war with the US, and may also be expanding doemstic coal production. From whatever cause, coal is piling up on the docks.

The situation for metallurgical coal is a bit better, but not much. Iron ore and steel prices are also weakening, despite a recent rally.

What does this mean for Australia ?

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A new sandpit for long side discussions, idees fixes and so on.

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

My latest in The Conversation

There’s more to good policy than increasing GDP

By John Quiggin, University of Queensland

Economists are regularly criticized for worrying about Gross Domestic Product (GDP), and similar measures. The classic statement of the case was by Robert F Kennedy:

“Too much and too long, we seem to have surrendered community excellence and community values in the mere accumulation of material things. Our gross national product … if we should judge America by that – counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for those who break them. It counts the destruction of our redwoods and the loss of our natural wonder in chaotic sprawl. It counts napalm and the cost of a nuclear warhead, and armoured cars for police who fight riots in our streets. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children.

“Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile. And it tells us everything about America except why we are proud that we are Americans.”

Much of the time, this criticism is misplaced. For the purposes of medium-term macroeconomic management, that is, trying to maintain full employment and low inflation, it is important to measure how much economic activity is going in aggregate. If aggregate demand is weak, for example, it is sensible to stimulate the economy by cutting interest rates or increasing public spending. GDP is the best single measure of economic activity, precisely because it captures all output, taking existing market prices as the measure of value.

In the longer term though, the problems with GDP start to matter, even in relatively narrow issues of economic policy. In measuring economic performance, as opposed to activity, GDP suffers from three major drawbacks in this respect

• It’s Gross – that is, depreciation of physical and natural capital is not deducted

• It’s Domestic – that is, it measures output produced in Australia, even though the resulting income may flow overseas[1]

• It’s a Product – the ultimate aim of economic activity is not production in itself but the income it generates, which should be taken to include the economic value of leisure, household work and so on

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In comments, David Barry, winner of the previous crowdsourcing contest writes

I would be interested in seeing how much global research funding goes towards different diseases. My goal here is to see if research funding into a disease is roughly proportional to the global burden of the disease, or if there are relatively under- and over-funded areas; the former might then be the best place for individuals to donate to, if they want to support medical research.

The global burdens are on the WHO’s website: http://www.who.int/healthinfo/global_burden_disease/estimates_regional/en/index.html I don’t know where I’d find funding statistics. As a first step, I’d be happy with just US/EU government agency funding data. For instance, the National Cancer Institute has a nice table here, http://www.cancer.gov/cancertopics/factsheet/NCI/research-funding

This is a great topic, and I encourage readers to look into it. I’d offer the minor caveat that research is conditioned to some extent by the availability of researchable topics. For example, I believe (though I’m happy to be proved wrong) that the mortality rates from prostate cancer are similar to those for breast cancer, but that breast cancer research gets much more funding. As I understand it, this is mainly because there don’t appear to be as many promising avenues for research on prostate cancer.

Also, a reminder that my crowdsourcing request for a simple model-based estimate of the date at which a minority of Census respondents will identify as Christian is now open. (Minor update: The proportion claiming Christian affililation fell from 64 to 61 per cent between 2006 and 2011. Simple extrapolation gives a target date of 2031. I’m sure a model with some demography would do better than this).

Watching the 7:30 Report the other night, I saw Bronwyn Bishop (once touted as a possible PM) oppose legislation requiring automatic enrolment of 18-year olds to vote (already in place for state elections in NSW and Victoria). Her argument “it is a binding requirement, under the Electoral Act, for people to enrol themselves”. Umm, yes, and tomorrow, when the new legislation is passed, no such binding requirement will exist.

That’s the headline for my latest piece in The National Interest. Opening paras:

On October 1, 1950, the forces of a U.S.-led coalition, acting under the authority of a UN resolution, drove the forces of the Korean People’s Army across the 38th parallel and back into North Korea. It was the culmination of a string of stunning military victories.

From the surprise North Korean invasion in June, U.S.-led forces had taken just four months to mount an amphibious landing at Inchon, break out from defensive lines around Pusan and drive the KPA into headlong retreat.

With the North Korean forces routed, the United States was in a position to dictate the terms of peace. Instead (with Russia absent) the United States secured a UN resolution demanding the reunification of Korea. By October 19, U.S. forces had occupied Pyongyang (the first and almost certainly the only time the United States captured a communist capital). Not satisfied with this, General Douglas Macarthur pushed on rapidly. By the end of October, his forces were close to the Yalu River, marking the border with China.

I’ve seen a bunch of reports from the census saying that the proportion of Australians reporting “no religion” has increased substantially, to around 22 per cent. I’d be interested to know if this is mainly a cohort effect (non-believing younger generations entering the population) or the result of people who previously reported a religious affiliation switching to reporting none. I’d be surprised if much of it was the result of people abandoning previous religious beliefs, as opposed to nominal affiliations, but I don’t think the data allows a test of this.

I just had a brilliant idea for how to motivate this effort. The first person to give a good answer gets to nominate the next topic for crowdsourcing. As a hint, the ideal way to answer the question would be to compare responses from a given age group in 2006 with the same group, now 5 years older, in 2011, adjusting, if possible for migration effects.

Update: The evidence, collected in the comments threads, suggests that cohort and conversion effects each account for about half of the shift.

The prize goes to David Barry, with honorable mentions to Aldonius and Luke Elford. I’ll give Dave first shot at proposing a new topic (in comments), but also invite suggestions from Luke and Aldonius. Meanwhile, I’m going to suggest something a bit more challenging for crowd-sourcing. If anyone would like to use the data to develop a simple model to project likely changes in stated Census affilations over the next two decades, with a specific focus on the question “When will (Census reported) Christian affilation become a minority response in Australia”, I’ll add a write up and send it as a joint post to The Conversation, the new(ish) academic-focused website.

Some big news (at least for me). I’ve just been appointed as a member of the Climate Change Authority. I was pleasantly surprised by this – although I’m a strong supporter of the carbon price policy, I’ve been highly critical of the current government in other respects.

As regards the blog, the main implication is that I’m going to avoid posting anything that might constrain me as a member of the Authority (for example, views on policy issues) and also avoid polemical statements about climate issues. I’ll still post relevant information on the topic, and welcome debate in the comments section, but I won’t take an active part myself.

In kindly sponsoring my effort in the Noosa Triathlon, where I’m supporting HeartKids (click on the button at the right to help) long-time commenter Jack Strocchi made a demand for a “pound of flesh” in return. Sad to say, I’m going to shortchange him. Based on past performance I expect to burn about 2500 calories (or about 10 Megajoules, just to make life hard for some of the computationally-challenged media figures we’ve been poking fun at lately). That corresponds to about 10 ounces (300g) of fat, most of which will be replaced in advance with a big pasta meal the night before the race. Of course, if I allow fluid loss, and weigh in just after the race, it will be more like 2kg.

One of the side benefits of taking up exercise is that I can now do all sorts of conversions of this kind. For example, a glass of red wine is about 150 calories (600 kJ)[1], and running uses about 75cals/km[2] so I have to run 2k to burn it, which seems like a fair deal. By contrast, despite their healthy image, a typical muffin is about 450cal/6km, definitely not worth it to me.

Perhaps I’m a bit too obsessed with numbers. But on matters of this kind, I’m with Lord Kelvin who observed

I often say that when you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind; it may be the beginning of knowledge, but you have scarcely, in your thoughts, advanced to the stage of science, whatever the matter may be.

Update A fun theoretical observation that just came to me, and which I don’t remember seeing anywhere else. It’s obvious and well known that, the heavier you are, the more energy you need just to move yourself about. In fact, a 50 per cent increase in body weight implies a 25 per cent increase in the energy intake needed to sustain a given level of activity (try this calculator). What this means is that there is a linearly increasing relationship between body weight and the energy intake consistent with maintaining that weight. Turning that around, any given energy intake is consistent with a unique stable weight, for given activity level. So, whatever your starting point, if you eat the amount consistent with your target weight, and change nothing else, you will end up there, sooner or later.

fn1. A "standard drink" is more like 100, but that's a small glass. If you are keeping count for driving purposes, two drinks of any kind usually amount to three standard drinks.

fn2. Surprisingly, so does walking. Energy consumption is determined mainly by distance travelled and body mass – the speed at which you go affects the rate of energy use, but not (much) the total over a given distance.

Today’s Oz runs the headline, “Carbon tax pushes Brisbane City Council rates up 40pc“, which, as a Brisbane ratepayer, I would have found alarming, if it had been printed in a newspaper, rather than a Murdoch rag. The story, bylined by Rosanne Barrett, reveals that the true number, according to Liberal Lord Mayor Graham Quirk, is 1.8 per cent[1], out of a total increase of 4.5 per cent. Blame for the ludicrous error must be shared between Barrett, who tried a beatup in her opening line, saying “AUSTRALIA’S biggest council has blamed the carbon tax for almost 40 per cent of its rates increase next financial year” and the Oz subeditor, who, not surprisingly, translated that into a 40 per cent increase in rates, not 40 per cent of a 4.5 per cent increase.

Update The headline has been (silently) corrected to read “Carbon tax helps push Brisbane City Council rates up $55″. Good to see the Oz reads me, though not, as a rule, vice versa. I picked the story up from the Making Environmental News digest service, to which you can subscribe here.

fn1. The numbers are disputed by the Labor Opposition.

Thanks to some generous donations, we reached the $500 target over the weekend, though the display is not updating (at least for me). As promised, I’ve put in $500, and Flavio has done the same. With some additional donations we’re now over $1600. It would be great if we could make the $4000 target before the end of the financial year.

Coincidentally, Australia’s carbon price will come into effect on the same day, 1 July, as the new feed-in tariffs for solar PV, wind and other renewable adopted in Japan as part of the response to the Fukushima disaster[1]. The tariffs are incredibly generous (around 50c/kwh on a net feed-in basis) and supposedly guaranteed for 20 years. I can’t see it lasting that long, but it will certainly make Japan one of the world’s biggest markets for renewables, having installed almost none until now. China has also adopted feed-in tariffs, but at more realistic prices around 20c/Kwh. These policies will ensure continuation of the spectacular growth in installations of renewable energy and the associated reductions in costs.

What does this make of the claim that Australia is moving ahead the rest of the world with the carbon price policy. There’s a sense in which it’s true – our experience with MRET and various state-level policies have shown that these are second-best options compared to a comprehensive carbon price. The Europeans can teach the same lesson, but it seems as if everyone has to learn it for themselves.

But the belief among economic doomsayers that we are the only country doing anything about this is just nonsense. Even in the US, where nothing can be done through legislation thanks to Republican delusionists, a combination of regulation and low gas prices is leading coal-fired power plants to shut down at a rapid rate.

At this point, the global choice is not between doing nothing and doing something. It’s between sensible market-based policies and costly second-best options, of which the worst is the “direct action” in which Tony Abbott claims to believe.

fn1. Two nuclear plants are also to be restarted, and presumably most of the rest will follow eventually. The government still wants to build more,

With two weeks to go before the carbon price takes effect, I thought it might be fun to collect a few of the predictions of economic disaster that have been made about this very modest reform. And these people call climate scientists “doomsayers”

Piers Akerman
Tony Abbott
Christian Kerr
Andrew Robb
David Murray
Barry O’Farrell
John Howard
The coal lobby
The entire Liberal party, in unison

Feel free to add any I’ve missed. And, if anyone would like to reaffirm the predictions of disaster, preferably using real names rather than pseudonyms, this is a great opportunity.

Update

Here’s Terry McCrann claiming a doubling of electricity prices, a claim originated by Alan Moran and picked up by Tony Abbott. My response
Andrew Bolt, claiming a carbon tax will be ‘ruinous’
Alan Jones, going too far even for the toothless ACMA tiger
George Brandis, blaming carbon taxes for the woes of Fairfax

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

The counter on my fundraiser widget is not updating properly, but I’m happy to say we’ve already raised $380 for HeartKids. Thanks to everyone who has given so far – I’ll be sending individual thankyous soon. There’s still plenty of time to get your donation in before the end of the financial year, but the sooner you do, the sooner I’ll be able to show the undead hordes a clean pair of heels.

To give everyone an incentive, if I get $500 in donations by Monday*, I’ll match it.

*You can also donate to Flavio’s part of the effort, which is tallied separately

Just in time for the end of the financial year, another fundraiser! I’m planning to run in the Noosa Triathlon in November. My friend Flavio Menezes and I have set up a charity fundraising team, with the hopeful title “Faster Than Zombies #2″, and you can give money through the Everyday Hero widget on the sidebar. We’re aiming to raise $4000 between us. A few points which I hope will help to get the credit cards out:

* We’ll be supporting HeartKids Queensland which helps children born with heart disease and their families. I know it’s always hard to choose which charities to support, but this one does a lot of good and scores really well on the “warm inner glow” scale

* Last time around, some commenters expressed concern about the cost charged by Everyday Hero. I raised this with HeartKids and got the advice that, for a small charity like theirs, going through Everyday Hero is more cost-effective than handling donations directly

* This blog is free and always will be. The only financial return I ask for is support in efforts like this one.

* For those in paid work, donations are tax deductible. That means you can give more!

I know not everyone can afford to give much to charity, and many of you will have made your own choices already. But for those with a bit of spare cash, here’s a chance to put it to good use.

By resigning gracefully. If I were advising Gillard on how best to secure her place in history, I’d suggest waiting until the 1st of July and then making a speech along the following lines

The carbon price, legislated by my government is now in place. It will soon become obvious that the scare campaign run by Mr Abbott and the Opposition has no basis in reality and that our plan will achieve cost-effective reductions in carbon emissions, while making most Australian households better off. I am proud of my government’s achievements in this and other areas. Nevertheless, I recognise with sadness that I am not the best person to take this message to the Australian public. I have therefore decided to resign the office of Prime Minister and advise my Labor colleagues to support the return of Mr Kevin Rudd to this position. Mr Rudd and I have had substantial disagreements over matters of managerial style, but we are agreed on the need for a Labor government with Labor values, and on the need for action in key areas including the carbon price, the mineral resource rent tax and the successful management of the Australian economy. I will give the new PM my enthusiastic support, and work for the re-election of a Labor government.

Would this work? I’m not really sure. But given Abbott’s failure to achieve any popular support at a time when Labor has plumbed unheard of depths of popular support, it would have to be worth a shot. At a minimum, it would help avoid the Queensland-style wipeout that is currently on the cards. And if it worked, history would certainly look kindly upon a PM willing to give up the job for the sake of her party and, more importantly, in the best interests of the country.

A new sandpit for long side discussions, idees fixes and so on.

I’ve been a bit slack about open threads lately, but I’ll start again with weekend reflections, which makes space for longer than usual comments on any topic. Side discussions to sandpits, please.

I’ve long had the suspicion that the Catallaxy blog is an experimental test of the Dunning-Kruger effect. The clearest examples have been Sinclair Davidson’s posts on the question of “no significant warming since 199x”, where it seems as if he is angling to get the most super-confident commentator to reveal the fact that they have no clue what statistical significance means, while being sure that they can do climate science better than those who have spent decades studying the subject.

Now, with this post by well known hip-hop artist Samuel J, the hypothesis is beyond doubt. The post itself is about as extreme an example of Dunning-Kruger as could be imagined, but clearly Sam is just daring the commentary team to outdo him. With the exception of a handful of killjoys who take the post seriously and point out how silly it is, they deliver.

Hat Tip: Harry Clarke, who scratches his head in amazement, here.

Ten years ago, plus or minus a few days[1], I wrote my first ever blog post. There weren’t many blogs around then, and very few of those that were around have lasted long enough to celebrate a tenth birthday. In fact, I’m not sure if anyone on my original blogroll is still around (feel free to write and tell me that you’ve been blogging since 1992, and I’ve overlooked you).

Here’s my early reaction:

My blog is just about a week old, and I haven’t found the Internet this exciting since I discovered Usenet in the early 90s. Even setting up my website five years ago was not as good. Despite wildly varying ideological views, I’ve had a friendly welcome from bloggers across the board, and I’m already getting links and referrals (My return links will be up soon, I promise). It really seems as if blogs might deliver on the original promise of the Web – certainly the technology seems ideally suited for individuals and small groups, with no obvious way of scaling it up to corporate level. No doubt I’ll get jaded and disillusioned one day, but I hope it will be a long way in the future.

Camaraderie across ideological boundaries didn’t survive long. It was killed off mainly by the debate over the Iraq war. And, eventually, the corporates found a way to get in on the act, through Facebook, Twitter and media websites. although the content is still overwhelmingly supplied by individual users, rather than paid professionals. I’ve adapted to the new reality by putting posts on high-traffic media sites, but crossposting here.

Inevitably, I’m not as excited as I was in the bright dawn of blogging, and the most optimistic hopes for the medium have not been fulfilled but after ten years I’m still not jaded or badly disillusioned. For that, I have to thank my readers, especially my commenters, as well as the many fellow bloggers who’ve given me help and encouragement along the way.

Update Another ten-year veteran, Ken Parish, who dates his startup to April or May of 2002. Ken’s post reminds me that I forgot to thank various people who have helped me with hosting the site, including our current host, Jacques Chester and, way back when, Rob Corr. Thanks so much to Jacques, Rob and the various commercial and open source services I’ve sued at different times.

fn1. A series of blog moves and crash recoveries have scrambled the archives, so that I can no longer determin an exact starting date.

That’s the title of my latest piece in Foreign Policy, about the seemingly inevitable collapse of the eurozone

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That’s the title of my latest post at The Drum (over the fold). It’s the latest round in my long dispute with the Productivity Commission on this issue, which flared up most recently here.

This is not an issue on which I’ve been impressed with the performance of either the PC or other economists who’ve weighed in to this debate (mostly associated with the business sector). As I point out below, my analysis is mainstream textbook orthodoxy, and led me to predict the productivity “slowdown” at a time when the PC and the others were proclaiming a miracle. But my arguments get even less attention now than they did fifteen years ago, when the PC was at least willing to reply.

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That’s the title of my latest piece, at ABC Environment. It’s over the fold
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