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Monday, 18 January


Decarbonizing transport John Quiggin

I’ll be talking on this topic to the Victorain Transport Economic Forum on Wednesday, 10 February 2016 from 5pm at the Public Transport Victoria Corporate Centre, 750 Collins Street, Docklands. I’m still formulating my thoughts, so I’ll be happy to read those of anyone who’d like to comment. Here are a few observations to get started

* The process of decarbonizing electricity supply is well under way and, I think, just about unstoppable. To some extent at least, this process provides a template for an approach to transport. In particular, there’s a close analogy between cars and coal. Both have negative local effects (air pollution, congestion, negative amenity and so on) that haven’t been properly taken into account, in addition to generating CO2 emissions. Focusing on the local effects may be a more effective way of reducing CO2 emissions than attacking the problem directly

* By contrast, although we have the technology to greatly reduce the use of carbon-based fuels in transport, we haven’t made nearly enough progress, and it’s not clear what is the best way to go. Should the focus be on improving existing modes of transport (for example, with electric cars), or in switching modes (public transport instead of private) or in reducing the need for travel (with urban design, telepresence and so on).

* Relatedly, is it better to rely on prices, direct controls such as vehicle fuel efficiency standards, or on some other approach?


Monday Message Board John Quiggin

Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.


Currency-issuing governments have unlimited financial resources to fight recession Bill Mitchell – billy blog

The elites are gathering for another junket aka the World Economic Forum, in the frosty, but salubrious surrounds of Davos this week (January 20-23, 2016). The Monday morning temperature there is forecast to be -22°C. According to the Forum’s Home Page – Searching for the 21st century dream at Davos – the delegates are going to be reimagining life under the theme “Mastering the Fourth Industrial Revolution”, which is spin for eating a lot of gourmet food, drinking a lot of expensive wine, and, denying the presence of the very large elephant in the conference venue. I suppose it is easy for them to live in denial when the sort of policy regimes they have influenced have categorically failed and will continue to do so with the result that millions remain unemployed and poverty rates are rising. Apparently, the elites have to “‘defetish’ … dialogues about future technologies” and the “onset of a new era of ‘limits’ is a chance we must not miss to imagine and engineer the futures we want”. Here is some gratuitous advice to the elites – forget the robots; forget worrying about the so-called “inflection point … where social, economic and political crises meet rapid technological change, where progress feels like disruption, not promise”; and, instead, more fully understand why this obsession with “a new era of ‘limits'” (by which they mean fiscal limits on governments) has sidetracked any hope of progress and deliberately disrupted people’s lives in a way that dwarf the impacts of technological change.

The Davos theme “Mastering the Fourth Industrial Revolution” would be hilarious if the consequences of the actions that follow these meetings had not been so disastrous for common folk. The id...


Trans-Pacific trade deal a hard sell for PM Turnbull in Washington AFTINET

Media Release January 18, 2016 : "Prime Minister Turnbull faces an uphill battle convincing members of the U.S. Congress to support legislation for the TPP, given recent studies which show negligible or negative impacts from the TPP on the Australian and US economies, and threats to environmental laws,” Dr Patricia Ranald,  Australian Fair Trade and Investment Network said today.


How the export boom is shaking up Australia’s gas market Renew Economy

You might have missed it, but last month something unusual happened in Australia’s eastern gas market.


Germany mulling €2 billion incentives for electric vehicles Renew Economy

The potential boost for electric vehicles would also include adding more EV charging stations and supporting the acquisition of more electric vehicles for federal offices.


Nevada shutters its residential rooftop market Renew Economy

Over the past month, the state of Nevada has been at the centre of a national debate about how utilities treat customers with solar PV—and for all the wrong reasons.


Can Germany reach its renewables target for the energy sector for 2020? Renew Economy

Germany's target of 18 percent renewable energy by 2020 is not out of reach when calculated differently.


Benefits from renewable energy programs far outweigh costs Renew Economy

State targets offer $7.2 billion in environmental and health benefits, compared to an estimated $1 billion in compliance costs.


New 25MW solar plant to break new ground in Australia energy market Renew Economy

A 25MW solar plant proposed for outskirts of Perth could break new ground on a number of fronts in the Australian solar market.

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Sunday, 17 January


New low for wind energy costs: Morocco tender averages $US30/MWh Renew Economy

Morocco attracts average bids of $US30/MWh from tender for 850MW wind energy tender, with one project at record low of around $US25/MWh.


An inconvenient gun fact for Nicholas Kristof, and David Leyonjhelm John Quiggin

Nicholas Kristof has a column in the NY Times, headlined Some Inconvenient Gun Facts for Liberals . The headline, though presumably not chosen by Kristof, is a pretty accurate summary of the article, which berates liberals for proposing various ineffectual gun control measures, and concludes:

Let’s make America’s gun battles less ideological and more driven by evidence of what works.

If Kristof wants to be taken seriously, he ought to acknowledge the actual evidence of what works, namely, measures that drastically reduce the number of guns and restrict their availability. I discussed the evidence a bit more in this post, with links.

Of course, such measures aren’t politically feasible in the US, and have to be disavowed by politicians seeking even limited progress. But if Kristof started by admitting this, he’d end up with a very different analysis than the one he’s putting forward. The primary criterion for any gun control policy in the US has to be to maximize the ratio of long-term harm reduction to political cost. I don’t have any particularly good ideas about political strategies. Still, it’s clear that Kristof’s operating assumption that sweet reason will be sufficient, or even helpful, is way off the mark.

In the Australian context, it’s notable that the only people who deny the obvious facts about gun control are those who have a strong ideological or personal motive for doing so. It’s scarcely surprising that gun enthusiasts want to resist an...

Saturday, 16 January


The Weekend Quiz – January 16, 2016 – answers and discussion Bill Mitchell – billy blog

Here are the answers with discussion for The Weekend Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Question 1:

When the government matches an increase in deficit spending with debt issued to the private sector, the growth in aggregate demand is less than would be the case if the government didn’t borrow at all.

The answer is False.

The mainstream macroeconomic textbooks all have a chapter on fiscal policy (and it is often written in the context of the so-called IS-LM model but not always).

The chapters always introduces the so-called Government Budget Constraint that alleges that governments have to “finance” all spending either through taxation; debt-issuance; or money creation. The writer fails to understand that government spending is performed in the same way irrespective of the accompanying monetary operations.

The textbook argument claims that money creation (borrowing from central bank) is inflationary while the latter (private bond sales) is less so. These conclusions are based on their erroneous claim that “money creation” adds more to aggregate demand than bond sales, because the latter forces up interest rates which crowd out some private spending.

All these claims are without foundation in a fiat monetary system and an understanding of the banking operations that occur when governments spend and issue debt helps to show why.

So what would happen if a sovereign, currency-issuing government (with a flexible exchange rate) ran a fiscal deficit without issuing debt?


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