John Quiggin

Peace now, more than ever.

So said Adam Smith a couple of centuries ago, and he will, I hope, be proved right, in the US, and elsewhere in the world. Trump and the Republican majority in Congress and (imminently) in the Supreme Court will, in all probability, repeal Obamacare, restore and expand the Bush tax cuts for the rich, stop action on climate change, overturn Roe v Wade, expand deportation and more.

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At CT and just about everywhere else, there’s been lots of discussion about who is voting for Trump and why. This began during the Republican primaries, when it made sense to ask “what kind of Republican would prefer Trump to Bush, Cruz etc?”.

This kind of discussion continued through the general election, even though the answer is now staring us in the face. Trump is getting overwhelming support from self-described Republicans and Republican-leaning independents, and almost none from Democrats and Democrat-leaning independents. The same was true for Romney four years ago, and for McCain and Bush before him.

This is well known, but few people seem to have drawn the obvious conclusion*. With marginal changes (I’ll discuss these below), the people who are voting for Trump now voted for Romney four years ago, and for Bush before that.
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In thinking about how the global economy can be decarbonized, I’ve focused on the electricity sector, and particularly the elimination of coal-fired electricity generation. In the transport sector, I’ve pushed for fuel efficiency standards, but have generally assumed that internal combustion cars are going to be around for a long time to come. That’s consistent with Australian experience where annual sales of electric vehicles are counted in the hundreds, and with the US, where cheap petrol has held electrics to a market share of a couple of percentage points.

So, I was quite surprised to find out that lots of European countries, including Germany, Norway and the Netherlands, are talking about ending sales of petrol driven vehicles in the near future (2025 or 2030), with diesel possibly being banned even earlier.

Obviously, achieving these goals will require some pretty strong policy encouragement, including subsidies and planned provision of infrastructure, and targets are easier to announce than to hit. Still, it looks as if eliminating internal combustion engine cars is not a distant dream but a feasible policy goal.
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While doing a bit of work on electricity policy, I dug out this piece from 2001, which was published as ‘Market-Oriented Reform in the Australian Electricity Industry’ in The Economic and Labour Relations Review, June 2001; vol. 12, 1: pp. 126-150. The conclusion, written at a time when supporters of electricity reform were trumpeting it as a huge success, stands up pretty well 15 years later, I think.

Some problems, however, are likely to become more rather than less acute. The Australian National Electricity Market commenced operation in a period of oversupply so that problems of market power and excessive prices have not emerged until recently. It remains unclear whether an electricity auction market can produce adequate incentives for investment while generating appropriate prices for consumers.

Similar problems are emerging in relation to the regulated monopoly component of the industry, the transmission and distribution sector. Regulators must set prices that do not reward inefficiency or allow monopoly profits, but nevertheless provide appropriate incentives for new investment. This is a delicate balance.

In the longer term, the problem of the environmental impact of an industry relying predominantly on carbon-based fuels remains to be addressed. A market solution would involve the creation of emissions credits that could be traded along with electricity in national markets. Although limited steps have been taken in this direction, much remains to be done.

There are reports that the ABC’s Catalyst science program is to be dumped, and replaced by a series of specially commissioned 1-hour documentaries. The move has reportedly been prompted by the disastrous broadcasts of Maryann Demasi, on the supposed dangers of statins and wifi. I have mixed feelings about this. Catalyst has serious problems, going beyond Demasi, but the alternative sounds like it will require a lot of money to do well. I fear that “specially commissioned” will turn out to mean “recycled from Discovery Channel” and that we will end up with lots of variants on “Shark week”

More generally, it’s depressing to reflect on the near-total failure of television as a communications medium for science. The demands of the medium (flashy visuals, and continuous sound) overwhelm what ought to be its potential. Discovery Channel is a joke that makes Catalyst at its worst look good. Even the great David Attenborough is now presented inaudibly, drowned out by the monotone background noise of Sigur Ros. Overall, radio is better, and text better still.

A while back, I made the case that the political crisis evident in most developed countries could be explained in terms of a “three-party system” in which the political forces were divided between tribalism, neoliberalism and a somewhat inchoate left. This replaced a neoliberal consensus in which power alternated between hard/right neoliberals (in the US context, the Republican party), relying on the political support of tribalists, and soft neoliberals (in the US context, centrist Democrats) relying on the left to support them as a lesser evil. The first stage of this breakdown has been the capitulation of hard neoliberals to the tribalist right. The most obvious instance is Donald Trump, but the same thing is happening in Australia with Pauline Hanson, in England with UKIP/Brexit and in many European countries as well.

That this is happening is now obvious. What should the left do about it? It’s obviously insufficient to make the point that Trump, or Hanson, or Farage is a racist (or uses racism for political benefit) and expect that to settle the question. That doesn’t mean that we should maintain the long-standing taboo on using the word “racist” to describe such people. Rather, we should start developing a proper analysis of political racism and strategies to oppose racism and tribalism.

The problem we face today is new in important respects. The civil rights and anti-apartheid movements were was a struggle against overtly racist racist state structures. The success of those movements did not end racism, but drove it underground, allowing neoliberals to exploit racist and tribalist political support while pursuing the interests of wealth and capital, at the expense of the (disproportionately non-white) poor.

That coalition has now been replaced by one in which the tribalists and racists are dominant. For the moment at least, ahrdneoliberals continue to support the parties they formerly controlled, with the result that the balance of political forces between the right and the opposing coalition of soft neoliberals and the left has not changed significantly. However, unlike the Civil Rights era, where racists had a clear agenda of defending the status quo, the new politics of the right is driven more by a general expression of resentment (or, if you want to be fancy, ressentiment) than by coherent policy objectives.

I have some ideas about what kinds of strategies and arguments are needed here, but I thought I’d post this first, and wait to see what others have to say.

I’ve just done an interview with Channel 10, about cost blowouts on the infrastructure projects supposedly funded by Mike Baird’s asset sales program. I made the point that such blowouts are more likely when projects are funded from special pots of money rather that avoid normal processes of budget assessment.

More tiresomely, I repeated a point that I have been making for 20 years, and that (as far as I know) every economist in Australia agrees with. Selling income generating assets does not provide any additional capacity to invest in non-income earning assets such as (untolled) roads, schools and hospitals Exactly this point was made by the Secretary of the NSW Treasury in relation to PPPs back in the 1990s (I’ll dig out a link).

Despite this nonsense idea being refuted over and over again, it continues to be believed by politicians of both parties and to get a free ride from our economically illiterate press, most notably (since it ought to do better) the Financial Review.

I’ve given up hoping that this will change. Fortunately, privatisation is so politically toxic that justice is usually served in the end.

A few weeks ago, I gave the FH Gruen lecture, on the topic After reform: the economic policy agenda in the 21st century. Thanks to sound editor Simon Kravis, I now have a version of the podcast with improved audio quality, but unfortunately the part of my tribute to Fred that was drowned out by a hailstorm is permanently lost.

So, I thought I would try to write something like what I said, with a few (I hope) improvements. Here it is:

It’s great honour to be invited to give the FH Gruen Lecture.

Fred was very much a role model for me, and while I will never be able to emulate his effortless personal style, I have done my best to follow his lead in my approach to economics. He saw economic theory as a tool, and only part of what economics should be: what really matters is the application of theory to improve policy.

In a small country like Australia, it’s necessary for economists to take part in public discussion and public debate. The older generation of academic economists, exemplified by Fred, did this, and I’ve tried to maintain this approach.

Like me, Fred began his career as an agricultural economist, and I’ve always thought this was some of the best training for an economist. But Fred’s contributions weren’t limited to agriculture. He ranged across a wide range of policy issues. He always brought to bear both a keen economic insight and a commitment to the use of economic policy to improve the lives of ordinary Australians.

He greatly encouraged me, and many of my generation of economists who worked with him in the Economics Department of the Research School of Social Sciences at ANU.

I am very proud to be able to give a lecture in his honour.

According to today’s news, the government has estimated that for-profit vocational trainers are three times as expensive as TAFE. That’s no surprise to me, but it’s a striking contrast with the barely qualified enthusiasm (until very recently) of the Productivity Commission.

I’ve put in a submission to the PC inquiry into Competition in Human Services arguing that
(i) there’s no reason to expect that competition will deliver improved “consumer” (that is, student) choice or better outcomes
(ii) the failure of the PC to foresee, or recognise until much too late, the disastrous failure of for-profit vocational education means that its judgements about areas that might be opened to competition in future should not be relied on.

My submission is here

A long-running theme of this blog has been the disaster of the Great War, and the moral culpability of all those who brought it about and continued it. It’s fair to say, I think, that the majority of commenters have disagreed with me and that many of those commenters have invoked some form of historical relativism, based on the idea that we shouldn’t judge the rulers (or for that matter the public) of 1914 on the same criteria we would apply to Bush, Blair and their supporters.

It’s fascinating therefore to read Henry Reynolds’ latest book, Unnecessary Wars about Australia’s participation in the Boer War, and realise that the arguments for and against going to war then were virtually the same as they are now. The same point is made by Newton in Hell-Bent: Australia’s leap into the Great War (recommended in comments a while ago by James Sinnamon. He shows how, far from loyally following Britain into a regrettably necessary war, leading members of the Australian political and military class pushed hard for war. In Newtown’s telling, the eagerness of pro-war Dominion governments helped to tip the scales in the British public debate and in the divided Liberal candidate. I don’t have the expertise to assess this, but there’s no escaping the echoes of the push towards the Iraq war in 2002 and early 2003, when this blog was just starting out.

The case against war was fully developed and strongly argued in the years before 1914, just as the case against slavery was developed and argued in the US before 1861. Those who were on the wrong side can’t be excused on the grounds that they were people of their time.

The only defence that can be made is that those who were eager for war in 1914 had not experienced the disaster of the Great War and its consequences. The failure of today;s war advocates to learn from this disaster makes their position that much worse. But the same is true of anyone defending the warmakers of 1914 on any grounds other than that of their ignorance.

Looking at the Abbott-Hanson government that is now taking shape behind the nominal leadership of Malcolm Turnbull, the dominant theme is one of pointless resistance to inevitable change.

The most striking instance of this is the plebiscite on equal marriage, dreamed up by Abbott as a way of dodging the issue of a Parliamentary vote. At this point, it is obvious that the whole thing is just an expensive and painful exercise in delaying the inevitable. Equal marriage is law throughout the English-speaking world, and is rapidly becoming so everywhere, as well as being supported by a majority of Australians. Even if the opponents could somehow carry the day in a plebiscite, the position couldn’t be sustained for long. And of course the Abbott group know this. As soon as Turnbull was locked into the plebiscite they started loading it up with everything they could to ensure it would never happen. Even from the most cynical viewpoint, this seems silly to me. They are going to lose in the end, and when they do, they will be wailing about freedom of conscience for cake-makers and so on. If they agreed to a Parliamentary vote now, they could make it a condition for Turnbull to include such clauses and reject any amendment. But in three years time, or whenever a parliamentary majority emerges, there will be no reason to appease people who have shown themselves to be bigots.

Then there’s climate change. Everywhere else in the world, things are moving fast. Country after country is abandoning coal, and the share of renewables is rising rapidly. Even England is generating more power from solar PV than from coal. But Australia is going backwards. Having dropped any idea of turning Direct Action into an emissions intensity scheme, Turnbull and Frydenberg have joined the science denialists at the Oz in a campaign against renewable energy. At least they have signed on to the agreement to phase out HFCs, an agreement driven by, among others, the US, Canada, China and Brazil (the EU has already legislated an early phaseout). It’s good that the government has agreed to do the minimum required for developed countries under this deal, but takes some chutzpah to say, as Frydenberg does that this makes Australia a world leader.

The only remaining item about which the government seems to care is Abbott’s vendetta against the unions, settling scores dating back to the 1980s.

Abbott and Hanson and are almost exact contemporaries of mine (as is Turnbull, though he scarcely seems to have any active role). But politically it seems to me that they have chained themselves to ways of thinking that were ossified even in John Howard’s generation.

Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

In the discussion of my three–part critique of Locke, I mentioned my view that Rothbard and Nozick added nothing of value, and promised to expand on this when I got some time. I discussed Rothbard here, and have finally got around to Nozick.

Someone (I think Jerry Cohen) remarked that Nozick was be taken very seriously by Marxists and not nearly as much by social democrats and (US) liberals. Obviously, my reaction (that of a social democrat) illustrates this. The reason for this divergence is obvious enough. If you would like to derive property rights from a notion of self-ownership (and the Marxist concept of exploitation is close to this), Nozick provides a reductio ad absurdam. So, a critique like Cohen’s is essential.

OTOH, if you start from the ground that property rights are social structures, and that their justice or otherwise is inseparable from that of the society in which they operate, Nozick is of no real interest. All the important errors in his work were already made by Locke. However, I’ll point out some new ones.

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That’s the (slightly ambiguous) headline for my latest piece in Inside Story. The central argument will be familiar to readers here. While the term “ageing population” is presented as a reason for gloom, this is a fallacy of composition. What’s actually happening is that, as individuals of any age, we are less likely to die than we use to be. Since dying is usually preceded by sickness and disability, it’s also true that, as individuals of any age, we are less likely to be sick and disabled. This is 100 per cent good news.

After publishing this I was pointed to an interesting article, maybe in the LA Times, which I didn’t note down, something like “a new view of aging”. If anyone else has seen it, maybe they could post a link. Also, there was a piece in Nature claiming 115 as an upper limit to the human lifespan. I think the conclusion is right, but the supporting analysis looked pretty dodgy to me, essentially based on two data points: namely that the longest lived and second longest lived people known to us both died in the 1990s and no one has matched them since. Still, at least Joe Hockey will be happy.

Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

Only a tiny minority of American academics are Republicans, a fact that is a continuing source of angst for much of the political right, as well as quite a few centrists. It’s generally assumed that this fact requires some explanation specific to the way in which universities work. The implicit assumption is that the group of those qualified and willing to take up academic jobs is roughly representative of the US population, and therefore contains roughly equal numbers of Democrats and Republicans. To state that submission is to see immediately what’s wrong with it. As a group, academics are obviously not typical of the US population. They have much more education and significantly higher incomes, though not as high as those of highly educated Americans in general. We know that these two characteristics work in opposite directions politically. Other things equal, more income is positively associated with Republican voting while more education is associated with lower support. So, a proper test of the idea that there is something special about academic voting patterns would begin with a multiple regression incorporating income and education as explanatory variables, then see if a dummy variable for academic employment was (statistically and quantitatively) different from zero.

But this is a blog post, so I’m not going to bother with all that hard work. Rather, I’ll point to this New York times article about the voting patterns of doctors. It includes a bivariate regression of voting patterns on income, with specialisations marked as observations It includes a bivariate regression of voting patterns on income for a sample of 30 000 doctors. This graph shows the resulting regression and plots the mean values for different specializations

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That’s the title of the FH Gruen lecture I gave on Tuesday. The slides and a podcast (unfortunately interrupted by hail) are here.

As a social democrat in an era of market liberal dominance, I’m only rarely on the winning side of policy disputes (privatisation, where lots of privatising governments have been defeated, has been the big exception). But the Turnbull government’s decision to put an end to the worst of the rorts in for-profit vocational training is certainly a big win. Three main changes were announced
* First, for-profit providers will have to demonstrate in advance that they are capable of doing the job for which they are paid. Given the appalling record of the industry as a whole on measures like graduation rates, it seems likely that most firms will fail this test
* Second, courses are being restricted to those that have some possibility of leading to employment
* Third, fees are being capped in a three-tier scheme ($5k, $10k, and $15k) depending on the type of course and the cost of provision. That should wipe out more of the shonky providers.

I’ve been going on about this since 2012. Others like Leesa Wheelahan at Melbourne Uni have been on the case even longer. We copped plenty of flak for our pains (‘flat earther‘ was one of the kinder terms), but have now been vindicated. Of course, that doesn’t mean that the advocates of market-oriented reform will listen next time around.

Still, a win is a win. The big question now is whether the damage to the public TAFE system can be undone in time to prevent a future skills crisis.

Climate policy under the Abbott-Turnbull government has been so uniformly grim that it’s sometimes hard to remember how well things are going elsewhere in the world. A few of the most notable developments

* India has ratified the Paris Agreement, a big step for a country which not so long ago was disclaiming any responsibility to act. The EU will follow suit next week, and the agreement will enter into force 30 days after that.

* (H/T James Wimberley) Renewable electricity investment in 2015 was “more than sufficient” to cover the growth in global demand, according a new report by the International Energy Agency (IEA). Unfortunately, fossil fuel capacity is still growing, adding to overcapacity, particularly for coal. But once this idiocy ends, the combination of growing energy efficiency and new renewables will be sufficient to see electricity-related emissions peak and then decline.

* Despite a 60 per cent reduction in the crude oil price, oil demand has barely moved. Admittedly, supply has also been slow to respond, but capital expenditure has been slashed, suggesting that we will see reduced oil production in future.

There’s still the chance of disaster. Should Donald Trump manage to get elected as President of the US, the whole process will be set back (though withdrawing will be difficult to do in a 4-year term of office) as will just about everything else. Currently, that chance is estimated at 30 per cent and falling, which is much better than it was a week or so ago, but still way too high.

But if that can be averted, there’s every chance that the world can reach peak CO2 emissions by 2020 and reduce emissions drastically after that. If that requires sanctions to bring a handful of recalcitrant governments into line, those governments will have well and truly earned it.

I’ve found the reaction of Malcolm Turnbull to the South Australia blackout too depressing to discuss, but I suppose it’s time to talk about it. Turnbull was depressing for three reasons

First, there was the absurdity of failing to distinguish between transmission failures (pylons destroyed by storms) and intermittency. Reading the comments of Turnbull and others, it seemed as if the reasoning process was something like “wind bad for electricity system, so must cut back on wind power”). I gave up on expecting any substantive difference between Turnbull and Abbott quite a while ago, but this silliness coming from the alleged “smartest guy in the room” was depressing.

Then there’s the substantive political content. Turnbull and Frydenberg have already any ruled out kind of carbon price, even the emissions intensity mechanism proposed by the Climate Change Authority (of which I’m a member) as an evolution of Direct Action. When doing this, Frydenberg justified his position by saying that an energy transition, presumably to renewables meant that the government’s targets were achievable. Now, even this fig leaf has been stripped away.

Finally, and worst of all, it’s one more step in the capitulation of rightwing neoliberalism to the rising tide of tribalism. In the LNP-ONP coalition I described a month or so ago, it’s now clear that One Nation with its associated faction within the government (Bernardi, Christensen, Abbott and others) has the upper hand. ONP Senator Malcolm Roberts tweeted to Turnbull that it was “Good to see you coming around to One Nation’s position“, and he was spot on. Doubtless he’ll have many more occasions for similar tweets in the future

The polls suggest that the public reaction to all this is unfavorable, but unfortunately it’s a few months too late. We’re stuck with this for another three years.

Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

In my final post on Locke’s theory of appropriation/expropriation, a while back, I mentioned that his latter-day successors, Nozick and Rothbard didn’t offer any improvement. I said at the time I would spell this out a bit more. I’ll start with Rothbard who is more politically relevant, and also, in my opinion, more interesting. As an example, at least during his 1960s flirtation with the radical left, and at the time he developed the theory of ‘homesteading’, he favored reparations for slavery.

The core of Rothbard’s position is that appropriation of property justifies ownership even without the Lockean proviso that ‘enough and as good’ is left over for others. Rothbard doesn’t, as far as I can see, go far beyond presenting this as a self-evident truth, and in any case, I don’t propose to argue about in detail. Rather, I want to look at Rothbard’s choice of the term ‘homesteading’ to describe this process. This choice of term is self-refuting in two ways, one that applies to any historical process of appropriation/expropriation and the other specific to the US.

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That’s the title of the FH Gruen lecture I’ll be presenting at ANU on Tuesday 4 October.

I’ll be talking first about the end of the era of reform that began in the early 1980s, and then about the information economy and a policy agenda for the 21st century.
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My article on the failure of for-profit competition in human services included a hook to the recently published Productivity Commission report recommending more of the same. I haven’t had time to go through the report in detail, but I was struck by reports that the PC mentioned the FEE-HELP fiasco in the VET sector as an example of the way not to go about things.

It’s good to see some recognition of this but what matters here is foresight, not hindsight. So, I thought I’d check back to see what the PC was saying a couple of years ago, when the disaster was obvious, but was still being denied by those in charge of it. Here’s a quote from their submission to the Harper Competition review

The Commission’s study into the vocational education and training (VET) workforce (2011f) found that there had been a rising trend to harness market forces in the allocation of VET services, with principles such as user pays and user choice increasingly underpinning VET policy. The Commission suggested that, as the VET sector becomes increasingly competitive, a move towards greater managerial independence for public providers would give them the autonomy and flexibility they need to respond.
The Commission (2011f) also noted that opening up of the VET sector had not been a complete success, with some stakeholders raising concerns about quality assurance, monitoring and enforcement (especially in the international student sector).

Going back to the 2011 report, there is indeed a box referring to problems with international students, which drew a lot of attention at the time. But there’s nothing to suggest any awareness of the broader problems, which were already apparent*, let alone any capacity to predict them using the PC’s analytical framework.

* I wrote a report for the National Council on Vocational Education Research in 2012, making many of these points, and drawing on several years of evidence from Victoria. I was roundly derided for my pains by the private provider lobby.

I have a couple of pieces in The Guardian. The first, which came out a few days ago, points out the consistent failure of market competition and for-profit firms to deliver human services effectively and equitably. The second gives the mainstream economic analysis of the problem, in terms of market failure and the mixed economy, developed 40 to 50 years ago, and ignored by the policy class of today, which takes the assumptions of market liberalism (aka neoliberalism) for granted. My summary:

The problem is that the political class, along with much of the economics profession, have done worse than the Bourbons, of whom Talleyrand observed “they have learned nothing, and forgotten nothing”. … Our leaders, and the economists who advise them, have not only shown themselves incapable of learning from experience, they have forgotten much that we once knew.

Following my previous post, I’d like to add a bit more to the debate about Brexit and migration. On this issue, a common defence of the Leave campaign is that the central concern was about the need to cut the number of migrants to the UK so as to reduce competition for jobs. The plausibility of this defence has been undercut by recent negotiations, widely reported in the Australian press, but largely ignored by British media.
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Twice in the last couple of days, I’ve bumped into the seemingly unkillable zombie idea that the New Zealand economy is doing well and ought to be a model for Australia. Checking Wikipedia to make sure I hadn’t missed anything, I found that, as of 2015, NZ income per person was 30-35 per cent below that in Australia, as it has been ever since the miraculous reforms of the 1980s and 1990s. NZ is down with Italy and Spain on most rankings, while Australia is comparable to Germany (above on some rankings, below on others).

This wasn’t always the case. Before the reform era, New Zealand and Australia had almost identical income levels, among the richest in the world. NZ took a bigger hit from British entry into the EU in the early 1970s but after 50 years, that can scarcely serve as an excuse (and of course, no one is predicted that Brexit will be a gigantic benefit to NZ; rather the reverse)

Then there’s migration. I dealt with this here, but I’ll repost crucial points over the fold.

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With August 2016 setting yet another record for global temperatures, the need for action on climate change is obvious. The good news is that most national governments are finally recognising the urgency of the problem. The bad news is that Australia is not among them. Having commissioned a Special Review from the Climate Change Authority (of which I’m a member) and received recommendations designed with the current policy as a starting point, the government’s response has been that it might take another look at the problem in 2017.

I’ve written the statement over the fold in response. Comments very welcome. I won’t engage in discussion; in this context, I’d rather let the statement speak for itself.

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Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.