Month: June 2012

Last chance this financial year

John Quiggin2 Comments

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 end of the coal boom?

John Quiggin28 Comments

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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There’s more to good policy than increasing GDP

John Quiggin25 Comments

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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Crowdsourcing contest: global research on disease

John Quiggin18 Comments

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).

Impressive logic

John Quiggin32 Comments

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.