Rafe’s Roundup 31 August

Not much good news around at present. Tasmania made it to the international news in Britain with the Big Sheep. Some light relief: crashing wind turbines and a problem with demolition.

The history of Europe in maps, note especially the consolidation of the Germany from a myriad of princedoms to become the big bully of the 20th century, especially under the influence of their walkover victory over the French in 1879-71.

The trendiest neighbourhoods in the world. Eat your heart out Byron Bay and Carlton.

How to be a good colleague at work.

The joy of worrying about climate change. And the pain of not being alarmed in academia – the strange story of Murry Salby.

Books. The bookshops of Chicago, Scott Fitzgerald books, the evolution of rock/pop music, minimalist book covers.

Around the town. IPA HEY. The Sydney Institute. Australian Taxpayers Alliance, Liberty on the Rocks, the notice board for the ATA: Quadrant on line, Mannkal Foundation, Centre for Independent Studies.

The Black Steam Train, back on deck and running hot on s18.
Gerard Henderson’s Media Watch Dog. Don Aitkin. Jim Rose, feral and utopian!

Sites of interest. Richard Hammer, Free Nation Foundation.
Aust NZ libertarian students.
Powerline.

For nerds. Melvyn Bragg’s radio program. Pessimistic comments by Frank Knight on teaching economics to people who don’t want to learn.

My interest has of late tended to shift from the problems of economic theory, to the question of why people so generally, and the learned elite in particular, choose nonsense instead of sense and shake the dust from their feet at us.

And I also note that the period of my career as an economist has been marked by a series of “movements”-I will not say fads-in economic writing and teaching, consisting largely of attacks on traditional views of the nature and function of economics, in which the term “orthodoxy” commonly appears as a “cuss-word,” an epithet of reproach. The critics, aggressors, have more or less explicitly advocated the abolition of an economics of economic principles and its replacement by almost anything or everything else.

Posted in Rafe, Rafe's Roundups | 6 Comments

High-speed broadband can quickly be delivered at a reasonable cost

In The Australian today:
“That the release of the cost-benefit analysis of the National Broadband Network has generated as much heat as light is perhaps unsurprising. The debate about the NBN has always been drenched in politics. And the analysis itself is lengthy and complex, making its findings difficult to communicate and absorb.”

Posted in Uncategorized | 29 Comments

Open Forum: August 30, 2014

Posted in Open Forum | 1,286 Comments

A paragraph everyone should read

So this is more than a story of opportunistic men taking advantage of vulnerable girls from a poor, postindustrial town. It speaks to the elevation of offense-avoidance above everything else, even the basic civilized requirement to protect the vulnerable. This is why the Rotherham story has rattled so many. They feel that the abuse is partly a consequence of the moral cowardice of modern-day politicos more concerned with appearing right-on than doing what is right.

That’s Brendan O’Neill in the Wall Street Journal.

Posted in Cultural Issues | 210 Comments

Simon Chapman admits vaping safer than cigarettes

Listen to anti-tobacco activist Simon Chapman talking vaping. At about 27:50 he describes research into vaping – in particular he refers to a recent British study that shows that vaping is the better quit method over cold-turkey, and replacement therapies. He then tries to downplay that result – we have covered that issue here before.

But then – listen carefully at 29.36. The other guest suggests that vaping cannot possible be more harmful than consuming tobacco, and Chapman agrees. Yet he still doesn’t want tobacco consumers to substitute to what he has now acknowledged to be a safer substitute. Simply astonishing – vaping is safer than cigarettes, and more likely to result in quitting behaviour than the alternatives, but it still shouldn’t be allowed.

Mind you, without big tobacco Chapman would have get a proper job or find another target. Being a nanny-stater is good “work” if you can get it, so it is unsurprising he is trying to string this gig along for as long as possible.

Posted in Hypocrisy of progressives | 16 Comments

Light posting

I’m off to Hong Kong for the Mont Pelerin Society meeting next week. Posts may be light or not. In the meantime I’ve programmed all the regular open threads so there will be plenty of opportunity for discussion.

Posted in Site News | 13 Comments

That’s a bit rude

So this morning I see in the internal news briefing that I’ve been quoted all over the place commenting on the Qantas loss that got announced yesterday.

Except that I haven’t. So how to explain the anomaly?

It turns out the media have lifted quotes from an article I wrote in February.

While my opinion hasn’t changed much it still strikes me as being a bit naughty.

Posted in Media | 29 Comments

Warburton recommendations on the RET’s future

To recap, the present arrangements on renewables are ramping up to require 41,000 GWh of electricity from large scale facilities (wind mills) and 4,000 GWh from small scale Rooftop PVs) to be supplied by 2020.  Electricity from windmills costs 2-3 times the price of conventionally supplied fossil fuel plant while solar PV cost 2-3 times the price of electricity generated by windmills.

The Warburton report on renewable energy, released yesterday, calls for a canning of the roof top solar PV systems and grandfathering existing facilities and not creating others (it has two options for this which amount to the same thing).

The rent-seekers” support group are spitting chips at seeing future opportunities for consumer plundering being cut off.  Giles Parkinson notes, “If the government accepts either of the recommendations, Australia would become the first country to either ditch a renewable energy target, or wind it back – in much the same way as it was the first to scrap a carbon price.”  The AFR reports, the Warburton proposals, ”would kill billions in investment, put thousands out of work and bankrupt the industry”.  In The Australian Graham Lloyd puts the prospective investment at $15 billion. Of course, as the report notes, this is investment and work with negative value that cannibalises funds and employment that would otherwise be directed to productive ventures.

The Warburton recommendations did canvass but in the end excluded the best option: abandoning the scheme entirely in view of the waste it brings.  However the report did scotch the myth that to do so would impose “sovereign risk” which the rentseekers had been claiming would shut out future investment in Australia across the board.  Warburton argued that immediate abandonment would simply represent “regulatory risk”.  This is faced by any investor who suddenly finds environmental standards more onerous or, for that matter, motor vehicle manufacturers who, facing a reduced level of privilege are pulling out with a write-off of investment of at least $6 billion. Unlike the highly organised renewable industry, these firms did not receive on going rorts as compensation for government creating conditions whereby their investments failed, in spite of assurances from successive ministers that the requisite support would always be forthcoming.

If existing wind farm investments continue to receive three times the price of commercially supplied electricity, the cost to the consumer will be $6 to $13 billion.  Not a bad return on the  treasure poured into lobbying but a cost that household consumers will pay and from which businesses will suffer in loss of competitiveness.

The Warburton review’s recommendations need not be accepted and there is still room to wind back totally the excesses of this spectacularly profligate scheme which has done so much to corrupt the political system as well as imposing crippling costs on electricity users.

Posted in Uncategorized | 76 Comments

Cross Post: Peter Swan AM – In defence of fiscally conservative treasurers

Many highly distinguished economists such as my friend Geoff Harcourt come from what is commonly known as the Post-Keynesian school. This means they believe the theory of economics and fiscal policy applied to the nation bears little if any resemblance to the brand of economics that you and I as individuals are subject to.

Writing for The Conversation’s recent series on the language of economics, Geoff finds that when treasurers use phrases such as “you are using taxpayers’ money” they are confusing affairs of state with decisions that should be left to individual households.

No, my treasurer does not suffer from deficit fetishism

But every treasurer should be aware each dollar of expenditure must come out of the pockets of taxpayers eventually, even if they borrow to finance the outlay in the short-term. Exactly the same is true for you and me. We cannot borrow indefinitely to fund our consumption.

Geoff believes it is fallacious to “balance the budget over the cycle”. But if the government fails to do this then the outcome is undoubtedly eventually the Greek and Spanish solution. This means more bailouts, massive rises in unemployment, a collapsed economy and departures of the able-bodied to work in economies such as Germany that have displayed better fiscal discipline.

Yes, if on average the economy were growing sufficiently fast, and the government borrowed during recessions and repaid the debt with a sufficient surplus in booms, then perhaps balancing the budget over the cycle could be relaxed slightly.

Of course, what we have seen is massive borrowing when the economy was doing quite well during the global financial crisis (GFC) due to China, and even more borrowing during the sequent post-GFC period. Now there’s little chance of balancing the budget over any foreseeable period.

Hypothecation may have been more successful if doctors were the beneficiaries

Geoff is closer to the mark when it comes to hypothecation. For example, if police patrols are rewarded based on fines imposed on speeding motorists, they may become excessively zealous. Medical research funding is more properly determined by its social contribution – not based on a Medicare co-payment.

Countries with as good or better health care systems than ours, such as New Zealand and Singapore, rely far more on co-payments. The insurance aspect of Medicare requires subsidies to life-threatening and expensive medical intervention and not to regular GP visits.

Cynically, would the AMA have been more amenable to co-payments if all the revenue raised were to be paid to doctors rather than medical researchers?

Geoff points out that government expenditure has a significant impact on the efficiency and productivity of the nation. Not always beneficial, I might add. He indicates that this may be especially true of capital expenditures.

There is always a real burden due to borrowing

Geoff then goes on to make the remarkable claim that domestic borrowing to fund such deficits entails no real burden since both the taxpayers and the interest recipients are Australians. I agree, it is true they could in part overlap.

So the government borrows a dollar, perhaps to fund more welfare benefits. I as the taxpayer lend a dollar to the government instead of investing it in (say) advances in technical know-how to raise our future living standard. Activities other than welfare suffer in the Australian economy.

The government then raises the tax on me in order to pay the interest it owes me. I now work less hard because leisure and idleness remain untaxed. Taxes are then raised again in order to repay the principal as well as the interest on the loan I have made to the government. I consume more idleness and the Australian economy suffers yet again.

The burden is no different if foreign borrowing funds it. Geoff points out that repayment of principal and interest must come out of export earnings. These additional export earnings have to come at the cost of lower domestic consumption and investment, that is lower non-welfare related activities. The tax burden is the same as in the case of domestic borrowings.

All borrowing, whether domestically or foreign, entails a tax burden with the burden increasing in the size of the deficit. Only if the borrowing is to fund long-lived public goods that I, and others, benefit from collectively is the borrowing justified. Most federal borrowing is to fund current expenditures and interest payments, not infrastructure.

‘Scare tactics’ are no more than the law of economics

Geoff concludes that “the end result has been the use of scare tactics over a wide range of issues, tactics which have no foundation in proper economic logic”. Yes, I agree scare tactics have been tried. Not very successfully so far because senators fail to see that in one way or another taxes have to be raised or outlays slashed to fund the repayment of principal and interest.

Are these tactics contrary to the laws of economics when applied to deficits? No. In fact, these laws are rigid and ultimately are little different from that faced by you and me as individuals.

Peter Swan AM is a Professor of Finance and UNSW. Originally published at The Conversation. Cross posted with Peter’s permission.

Posted in Budget, Cross Post, Economics and economy | 15 Comments

Russia invades Ukraine

Mr Useless still president:

Declaring that Russian troops had crossed into Ukraine, President Petro O. Poroshenko on Thursday canceled a planned visit to Turkey and convened a meeting of the national security council to focus on the “marked aggravation of the situation” in the southeast of his country.

The meeting of the national security council will focus on shaping a response, and Ukraine will also request a meeting of the United Nations Security Council.

Mr. Poroshenko made his comments as the leader of the main separatist group in southeastern Ukraine said that up to 4,000 Russians, including active-duty soldiers on leave, had been fighting against Ukrainian government forces and NATO released images that show Russian artillery units and about 1,000 soldiers operating in Ukraine.

Weird to be here dealing with the liberation of France in 1944 and the start of World War I in 1914 and now to see this.

Meanwhile: Obama confesses: ‘We don’t have a strategy yet’ for dealing with Islamic State.

Of course, to have one it is necessary to want one. On this, I do sincerely have my doubts.

Posted in International | 121 Comments