Roundup 27 June 2019: Austrian economics special edition. Plus the super industry on future power policy

BREAKING NEWS. Thanks to Ben this is the report from Industry Super Australia on the future of power. A very stylish effort, they have obviously got some money to play with! There are 100 pages and at a glance it is mostly waffle, including a carbon tax. From the press it looked like a case for nuclear power but in reality it skirted around the issue to avoid upsetting anyone. Please no hysteria!

An important element in technological choice is the development of capacity. Uncertainties around the pace of change and technological developments mean that it is essential to have the ability to choose between a wide range of policy options. There are potential problems for Australia in this regard. It currently runs the risk of being trapped by a lack of flexibility.

One problem is that Australia has no capacity to build or operate a nuclear facility. This result follows from the mathematical principle that a constrained solution to an optimality problem can never be better than an unconstrained solution.

This lack of capacity puts Australia in the minority of first world economies. It is also lagging several second and third world economies in our region and elsewhere such as Argentina, Mexico, Bangladesh and Turkey and geographical neighbours such as Indonesia and Vietnam.

This exposes the economy to considerable risk since it is far from obvious that solar and wind can provide all primary energy in any feasible combination. In this case we are dealing with a widely deployed and rapidly developing technology. This means that the current barriers to nuclear may be subject to rapid and unpredictable policy change.

It is important that our discussion paper does not fall prey to hysteria on this point. Our suggestion is neutral between technologies. It is a simple matter of reducing risk by developing the capacity to choose the most appropriate combination of low carbon options.

Richard Ebeling on the 45 anniversary of the conference that triggered the revival of the Austrian school of economics.

This June marks the 45th anniversary of the revival of the Austrian School of Economics. During the week of June 15-22, 1974, the Institute for Humane Studies brought together about 50 people in South Royalton, Vermont to listen to a series of lectures by three of the leading figures of the, then, existing remnant of the Austrian School. The conference served as a catalyst for the rebirth of Austrian Economics over the following decades.

What is the Austrian school of economics you might say. This is an account by the late Leo Dunbar of the relevance of the Austrian school to economic reforms that were promoted under name of economic rationalism in the 1980s.

An ‘Austrian’ in Australia demonstrates the strength of the Austrian analysis of our economic predicament. In The Destruction and Creation of Jobs (Australian Institute for Public Policy, 1985) Wolfgang Kasper explores the destructive effect on employment of the “stop-go” policymaking which has prevailed in Australia, whereby successive governments deliver various brands of snake oil to the creaking wheels of industry. The selection of policy instruments has been too narrow and concentrated in the area of macro-manipulation, whether of the Keynesian ‘print more money’ kind or the monetarist ‘print less money’ variety. This echoes the comment by Brittan (Encounter, April ’85) that both Keynes and the monetarists tried to get around the real problem which is malfunction of the labour market due to state-protected monopolies and other rigidities in the centralised wage-fixing system.

The ‘Austrian’ prescription for economic recovery has three major parts; first, open markets without import restrictions or constraints on entry to local markets; second, a variant on the open market theme, namely de-regulation of the rigid and centralised wage-fixing system; third, reduced public sector spending and privatisation. These strategies are linked because the problems they address are interlocked; Kasper shows how trade barriers in the form of tariffs and quotas generate leverage for organised labour to form monopolies in the labour market which in turn creates problems for job creation and increased efficiency. Unfortunately for the Labor ‘dries’ the labour monopolies are apparently untouchable (by Labor). Equally unfortunately for the Liberal dries the tariffs and quotas are sacrosanct for the ‘wets’, the ‘pragmatists’ and their backers in heavily protected industries, especially textiles, clothing and footwear.

Cats will recall from my recent posting of press cuttings from the 1980s that the policies of economic rationalism aroused fear and loathing from all sides of politics.
The second section of this paper suggests that the Austrian-born Karl Popper has a lot to offer the Austrian economists and I have made a cottage industry out of promoting the synergy of Popper and the other Austrians. This has so far made no headway with the contemporary followers of Popper or the Austrian economists. Not to be deterred I will take up the contest again at a conference in Zurich in September on “The Soul of Economics” and again in Vienna in November at a conference on Austrian economics at its birthplace. Then to Washington DC to catch up with my agents of influence in the swamp – Tim Andrews, Dan Mitchell and the troops at Cato, the Center for Competitive Enterprise and the hive of Austrian activity at George Mason University.

A bonus link to Don Aitkin on the way alarmism over climate change became dominant without really being a conspiracy. He listed several factors starting with the rise of the radical Green movement.

First, there has to be a message, and it has to be of some moment, some significance, to involve players like governments. In my view the message came half a century ago, in the form of the environmental movement, which proclaimed that human beings were destroying the one planet they lived on. The message came at the same time as a steady decline in the proportions of people in the Anglophone societies, and in the Protestant parts of Europe, who took organised Christianity seriously. The message was quickly politicised by a new formation, political parties often called Greens, which used the colour as their symbol, and increasingly as their name. The Greens were not part of the liberal/conservative, left/right, Labor/Coalition divide that is familiar to us, though their tendency, being radical, was to the left. The established parties did their best to ignore the Greens, but when in time they reached ten per cent of the popular vote both traditional sides of politics tried to work out how best to counter this new threat.

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8 Responses to Roundup 27 June 2019: Austrian economics special edition. Plus the super industry on future power policy

  1. Nob

    The established parties did their best to ignore the Greens, but when in time they reached ten per cent of the popular vote both traditional sides of politics tried to work out how best to counter this new threat.

    Which they have done by adopting Green policies.
    This is what radical parties with favourable* media do: drag the debate in their direction.

    So people start to get the impression that radically destructive policies are “centre” and neutral.

    *Not just “favourable” in the Greens case but supine, biddable, obedient. Nobody questions them or points out the obvious impossibilities and contradictions for fear of appearing uncool, uncompliant, uncouth.

    Only those who seriously don’t give a flying frack speak up which makes them easy to cast as strident loonies.

  2. yarpos

    Australians are delusional about our capabilities and our place in the first world. We are basically a quarry for the world. A quarry with pretensions but a quarry never the less.

  3. Percy Popinjay

    but when in time they reached ten per cent of the popular vote both traditional sides of politics tried to work out how best to counter this new threat

    And failed dismally by selling out to the insane apocalyptic scumbags.

  4. Mark M

    Thing of the past …

    “There is no doubt, that in Australia, governments of the past, stuck on Green ideology, being lectured to by the lefties and the Greenies that we shouldn’t be building dams; well, today we are paying the price,” Mr Barilaro said.”

    Barilaro blames green ideology and lefties for lack of government’s drought preparedness
    https://www.armidaleexpress.com.au/story/6242450/barilaro-blames-greens-and-lefties-for-drought/?cs=471

  5. Ben

    Check the authors, they include:

    – The Australia Institute
    – Ross Garnaut

  6. Genghis

    Rafe,Nothing to do with the above. I give talks on Nuclear Energy and follow Wind Farm Performance closely. To day 28.06.2019 the YAMBUKWF was working at around 120% of capacity! In fact so good it was off scale. I wonder if it shat itself? My email is [email protected] if you want to get in touch

  7. Elderly White Man From Skipton

    Energy policy is Australia’s Brexit. Everyone has an opinion. Everyone has a powerful preference and conviction. Very few are dealing in facts and outcomes. Britain will probably end up with the equivalent of a no deal Brexit for the simple reason that it’s the default when no one likes the facts. Let’s see how they like that.
    We already have a busted energy system, with old and failing base load generators, ridiculous gas prices and weak local gas supply plus a rapidly dispersing renewables generation share. Not to mention the cost baggage of gold plating the grid to create the illusion of delivery security. The govt thinks the best solution is to add more cost, with a default scheme that imposes regulated revenue reductions on the companies that are supposed to invest in new capacity.
    Sportbet should run a bet on when pollies will feel they have to actually make decisions. Will it be when power prices take 15% of household budgets?

  8. Nato

    That kind of trading is what Saturdays are made for. Loved it!

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