Month: February 2007

Warwick McKibbin on climate change

John Quiggin11 Comments

Last night I went to hear Warwick McKibbin at the Brisbane Institute talking about climate change. It was a good presentation and Warwick made an effective analogy between the McKibbin-Wilcoxen plan for climate change which uses fixed prices in the short run and fixed quantities in the long run, and the bond market, where central banks set short-term interest rates but allow long-term rates to be set by the market.

One thing I hadn’t realised, though, is that the plan doesn’t allow for international trade in emissions permits, even in the long run. McKibbin sees this as an advantage, since there’s less of a reduction in sovereignty, but I see it as a big problem for two reasons. First, there’s an obvious efficiency loss in not allowing countries with low-cost offsets to trade with high-cost countries. Second, the biggest source of credits so far is China, the country that is going to need the most persuading to join an international agreement (contrary to Warwick, I’m confident the US will ratify Kyoto, perhaps extracting some concessions on timing and targets, as soon as Bush goes out, and that Australia will do so then, if not earlier). The possibility of gaining credits, combined with the threat of border taxes on exports from non-ratifying countries will be needed to overcome the obvious free-rider problems.

It doesn’t seem to me that the restriction to national markets is crucial, at least to the long-term part of the plan. A modified version that incorporated some form of international trade would be more appealing.

The fall and fall of the House of Sadr

John Quiggin13 Comments

One of the many useful services performed by Glenn Reynolds is his chronicling of the relentless decline of Moqtada al-Sadr. Some past instalments

The murders are the first sign of organised Iraqi opposition to Sadr’s presence a apr 29, 04

those who thought Sadr represented a mass movement among Iraqis were seriously mistaken. [May 5, 04]

ANOTHER BAD DAY for the increasingly irrelevant Sadr. [May 26, 04]

SADR’S DECLINE CONTINUES [Jun 17, 04]

Demonstrators shouted chants denouncing al-Sadr, including one that equated him with deposed dictator Saddam Hussein. [Sep 3, 04]

Bush has successfully mitigated the perils of having to grapple with two insurgencies simultaneously– through a nuanced combination of sophisticated counter-insurgency efforts and attendant political machinations contra Moktada al-Sadr. [Nov 1, 04]

And now:

Moqtada al-Sadr doesn’t like the surge. That he’s saying so from a secret location may explain why. . . .

I think it’s time for Glenn to let up on the guy. Hated, with no public support, isolated, irrelevant, outfoxed by the sophisticated Bush and now a lonely fugitive, surely by this time he’s too unimportant for a post.

Another bad day for delusionists*

John Quiggin122 Comments

With Al Gore winning the Oscar for An Inconvenient Truth and the CBC news “The Denial Machine” airing on Four Corners last night, it must be getting hard to hold on to the delusions that have been propagated so vigorously throughout the parallel universe created by Fox News and similar bodies. While it’s no news to anyone who reads blogs on the topic, the revelation that the “skepticism” propagated by our local delusionists was produced by recycled hacks for the tobacco industry, such as Fred Singer and Fred Seitz (I was mildly disappointed that Steve Milloy didn’t get a run) must have shaken a few more people awake.

“Happy Feet”, an Australian animated feature about penguins that has been attacked by the Fox News delusion machine because it refers to overfishing, also scored a gong. No doubt, Neil Cavuto would have preferred an award to the Astroturf exercise on penguins produced by DCI. It’s delusion all the way down with these guys.

* The problem of terminology has always been difficult. It’s obviously unreasonable to use terms like “skeptic” or “contrarian” to describe people who produce or swallow transparently fraudulent propaganda like that of Singer and Seitz because it happens to suit their preconceived ideological views or financial interest. On the other hand, there have been vigorous objections to “denialist”. So, I’m switching to “delusionists”, a term which covers:
(i) people who manufacture delusions for a living like those mentioned already and their local counterparts
(ii) people who prefer to accept ideologically convenient delusions rather than face the truth
(iii) people who have genuinely been deluded by this propaganda (not many of these left in Australia now).

Dodging a bullet

John Quiggin24 Comments

Looking at the stories of pervasive corruption coming out of the Burke inquiry in WA, a point I haven’t seen noted is that Federal Labor dodged a bullet by dumping Kim Beazley just as the scandal was breaking. Beazley was no doubt telling the truth when he said he’d never spoken with Burke about the latter’s business interests. Still, given is role in WA Labor, he could scarcely have been unaware that Burke was in a position to influence ALP preselections, and that Burke was using that power for his own personal enrichment. That might not have been a crime, but it was obviously damaging to the Labor party. And given the damage Burke had already caused, having such a person as a friend was an indication of judgement so poor as to cast doubt on Beazley’s capacity for high office.

Sticking with state issues, I can’t recall such a deplorable choice as that being faced by the voters of NSW on May 24. If ever a Labor party could do with a spell in opposition to sort itself out, the NSW branch is that party. Iemma seems decent enough, but thoroughly mediocre, Carr made a dreadful mess of things but profited handsomely out of it, and the ministerial team seems On the other hand, thinking over the string of mediocrities, sharpers and no-hopers who’ve led the NSW Liberals since the corrupt but competent Robin Askin departed the scene, I can’t thing of one who’s less appealing than Peter Debnam.

By contrast with these states and with the systematic corruption of the Federal government (the fact that no-one in government can be charged with anything over the payment of hundreds of millions of dollars to Saddam Hussein indicates a situation far worse than if a single minister or public servant had acted corruptly), the problems faced by the other Labor state governments seem pretty minor. Still, I nearly spat out my morning coffee when I read that Peter Beattie was canvassing yet another canal project, reviving and expanded the Bradfield scheme. I can only hope this is some sort of diversionary tactic.

Update Not as clean a dodge as all that, as it emerges that Rudd met Burke several times. The factional system that gives power to people like Burke is a disaster for Labor. More generally, the decay of mass political parties is a big problem for Australia.

Discounting the future, yet again

John Quiggin74 Comments

Felix Salmon gnashes his teeth at yet another incorrect report on discounting and the Stern review, by David Leonhardt in the New York Times.

Using his discount rate and other assumptions, a dollar of economic damage prevented a century from now is roughly as valuable as 7 cents spent reducing emissions today. (In fact, it’s less than that, because Stern adds another discount rate, called delta, on top of eta.)
Leonhardt says that “spending a dollar on carbon reduction today to avoid a dollar’s worth of economic damage in 2107 doesn’t make sense” – but this is a straw man, since Stern never comes close to saying that we should do such a thing. Leonhardt also spends a lot of time on the academic qualifications of Stern’s opponents, but neglects to mention that Stern himself, a former chief economist of the World Bank, is actually a real expert on discount rates, and understands them much better than most economists do.

Salmon is right, both about the Leonhardt piece and, unfortunately, about the limited understanding of discounting issues on the part of economists in general.
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