Month: April 2012

Info item on modular nuclear reactors

John Quiggin29 Comments

Since lots of readers are interested, or, perhaps, a few are very interested, I thought I would mention that the US Department of Energy is beginning an effort to promote the development of modular nuclear reactors in the US. The plan is to choose two designs, with the object of having them in production by 2022. It’s pretty much a foregone conclusion that one of them will be the Westinghouse SMR, a cut down version of the Westinghouse AP1000 which is the only serious contender remaining as far as conventional reactors are concerned. That leaves one spot for another contender, call it SMRX.

I therefore need to revisit my previous conclusion on SMRs, namely, that none of them except the Westinghouse have any prospect of being in operation before 2020. First, I think it’s pretty clear that the designs that don’t make the DOE cut are finished – in a generally dire funding environment, who is going to back a horse that has already placed third or worse. Second, the DOE 2022 date is an aspirational target that is virtually certain to be missed, at least by SMRX. But, if things go well, 2025 is a possibility. So, by then we might have one conventional design and two SMRs in production on a serious scale.

Classical economics and recession in many countries (wonkish)

John Quiggin95 Comments

Sharp tests of economic theories are rare and hard to find, particularly in macroeconomics. Any examination of particular episodes in economic history necessarily involves counterfactuals, and these provide room for endless dispute. As an obvious example, assessing the impact of the Obama Administration’s 2009 stimulus requires an estimate of how things would have gone without the stimulus, and that is obviously hard to do.

Similarly, arguments about unemployment in the US get bogged down in disputes over whether it is structural or demand-driven and the extent to which policies such as the extension of unemployment benefits to 99 weeks have contributed. 

There is, though, one way in which the current Great Recession/Lesser Depression provides a sharp test of a critical proposition in economics. All forms of classical economics involve, in one form or another, the claim that the causes of unemployment are to be found in labour markets, and not in  macroeconomic variables such as the level of aggregate demand. That’s equally true of the Say’s Law version of classical economics criticized by Keynes, the New Classical macroeconomics of Robert Lucas and the attempts by Real Business Cycle theorists like Kydland and Prescott to explain cyclical fluctuations in terms of labor market shocks.

The crucial problem for all these theories is that labor markets and the associated institutions operate mainly at the national level. Even within the EU, different countries have very different labor markets. So, it is essentially impossible for labor markets in many different countries to move together, except as the result of macroeconomic influences operating at an international level[1]. That means that the occurrence of a sharp and sustained increase in unemployment, taking place in many countries at once, is inconsistent with classical economics.

This point seems trivially obvious, but as far as I can tell hasn’t been made, or at least not clearly. Once it’s conceded, it seems impossible to avoid a view of the world that is basically Keynesian in its analysis of the macroeconomy.  It is possible to hold such a view and reject Keynesian policies on pragmatic grounds, as in Friedman’s critique of ‘fine-tuning’. But the longer and deeper the recession the harder it is to sustain this view.

This seems like a good time to plug the fact that a paperback edition of Zombie Economics will be out soon (May 6) with a brand-new chapter on Austerity, bits of which have been seen here. On 9 May, I’ll be launching an Australian edition, where the added material is a chapter on Economic Rationalism. And a week or two ago, I received some copies of the Italian edition

http://www.stampa.unibocconi.it/articolo.php?ida=9724&idr=6

 

 

 

 

 

 

 

 

 

fn1. Of course, you can cheat and label these macro influences “technology shocks”, then assume them to be internationally correlated. But in the ordinary meaning of technology, there is no plausible way in which economies as disparate as, say, the US and Greece can experience a common technology shock.

The Steep Path to a Nuclear Future

John Quiggin114 Comments

That’s the title of my latest piece for The National Interest. The first three paras are below.

In the wake of the meltdown last year at the Fukushima nuclear plant, the viability of nuclear power has been called into question yet again. The Japanese government has closed down all but one of the country’s nuclear plants (though there are plans to start reopening them), and Germany has abandoned a previous decision to keep existing nuclear plants operating. Concern about nuclear power has also increased in the United States, with most opinion polls now showing a majority opposed to further expansion of the industry.

On the other hand, some commentators have been struck by the fact that the disaster did not cause any direct loss of life and that estimates of the adverse health effects of the radioactive releases are very modest. A striking example is English writer George Monbiot. An opponent of nuclear power before Fukushima, Monbiot has switched to the view that nuclear power should be supported as a response to climate change.

Unfortunately, this debate has taken place without much attention to the economics of electricity production. The critical question is whether nuclear power can be a cost-effective alternative as compared to renewables, investments in energy efficiency or even such long shots as carbon capture and storage. A look at the economic cost of the Fukushima meltdown suggests that the path to a nuclear future is steeply uphill.

I’m too busy to referee another fight over nuclear power today, so I’m delaying opening comments here until tomorrow. The TNI post is open to comments there, so that will give everyone a chance to get started straight away.

We shall remember them ? (repost*)

John Quiggin87 Comments

On Anzac Day, there are two important things to remember

* Thousands of brave men died at Gallipoli and in the Great War and we should always honour their memory

* The Gallipoli campaign was a bloody and pointless diversionary attack in a bloody and pointless war. Millions of soldiers were killed, and tens of millions of civilians starved and mistreated in a fight over trivial causes that were utterly irrelevant by the time the war ended. The War that was supposed to “end war” only paved the way for the even greater horrors of Nazism and Stalinism. Nothing good came of it.

From what I’ve seen of the last surviving Diggers they were fully aware of both of these things. At one time, it seemed possible that, as the generation who fought in the war passed on, we would forget the first of them. Now the danger is that we will forget the second. We should judge as harshly as possible the political and religious leaders who drove millions, mostly young men, to their deaths, and honour the handful who stood out against the War, including Bertrand Russell and Pope Benedict XV.

* I’ve posted versions of this on previous Anzac Days. There is really nothing new to say, except to hope that we will soon be able to celebrate an Anzac Day without the thought that Australians are still fighting and dying in pointless wars.

Guest tweeting at #Lateline

John Quiggin23 Comments

Showing my dedication to moving with the times, I’ll be staying up late to guest-tweet on #lateline tonight. Covering French elections, tobacco packaging and, inevitably, Peter Slipper.

Update Turned out to be a complete bust from my POV. The whole show (except for an out-of-place Foreign Correspondent style piece on asbestos in Swaziland) was spent on gotcha questions about Slipper, with Roxon playing a straight bat. Nothing on any of the topics where I could have made a useful comment. Apparently, this was unusually bad – #lateline is a trending topic on Twitter tonight, and not in a good way.

“Future generations” are already here

John Quiggin36 Comments

The Journal of Public Economic Theory has a special issue on Managing Climate Change, to which they are providing free access (hopefully, this link will work). I’m mentioning it partly because I have an article which I think is really important, even though the point it makes is a simple one, and partly because any initiative to make important information more freely available (even a limite special case like this one) deserves some applause.

My paper is a bit wonkish, but the basic point is simple, and, I think provides a knockdown argument against any form of utilitarianism that discounts future utility (including those misleadingly referred to as future generations.

Read More »

The case for narrow banking

John Quiggin24 Comments

Here’s my first post under the new approach to blogging I’m trying. It’s the intro to an article I just published in The National Interest. They ran it under the headline “The Next Global Collapse” which is a bit more dramatic than the article itself. The deal with TNI is that I can published the first three paras here, to tease your interest. Thinking about how best to work this, it struck me that it would be really great if readers here would follow the link, comment on the article at TNI, then repost their comments here. Perhaps this might just be duplication, but it might also lead to quite different conversations. So, please give it a try

Four years after the near-meltdown of the global financial system, the world is no closer to an adequate system of financial regulation than it was in 2008. Attempts to regulate the market for derivatives have been stymied by a mixture of determined resistance from the industry and the technical difficulties of defining and regulating such complex and opaque financial instruments. The “shadow-banking” system, associated with investment banks, hedge funds and other speculative financial institutions, is as large and dangerous as ever.

Right now, the only thing preventing a new bubble and bust is the memory of the last one. And with the return of massive profits and bonuses to Wall Street, that memory is fading fast. Already, observers are noticing a renewed appetite for risk, fueled in part by the low returns available on relatively safe investments such as U.S. Treasuries.

As in most unwinnable wars, the time has come when the best option is, in the immortal words of Republican senator George Aiken (speaking of Vietnam) to declare victory and get out. But what does getting out mean, as far as the shadow-banking system is concerned?