Tag Archives: economics

Collaborate or control

The task of eco­nom­ic sci­ence, since Adam Smith, has been to explain the ori­gins of wealth. John Kay observes that the the­o­ry most favoured, even by Smith—that pro­duc­tiv­i­ty is ‘almost’ all that matters—is not by any means the only expla­na­tion for per­son­al wealth. Nor is it, his­tor­i­cal­ly, the most suc­cess­ful expla­na­tion (because the arbiters of […]

Economics’ standard model defective

Apt reminder from John Kay

The stan­dard approach [‘ratio­nal expec­ta­tions’ the­o­ry: PWG] has the appear­ance of sci­ence in its abil­i­ty to gen­er­ate clear pre­dic­tions from a small num­ber of axioms. But only the appear­ance, sincethese pre­dic­tions are most­ly false. The envi­ron­ment actu­al­ly faced by investors and eco­nom­ic pol­i­cy­mak­ers is one in which actions do depend on beliefs and per­cep­tions, must deal with uncer­tain­ty and are the prod­uct of a social con­text. There is no uni­ver­sal eco­nom­ic the­o­ry, and new eco­nom­ic think­ing must nec­es­sar­i­ly be eclec­tic. That insight is Keynes’s great­est lega­cy.” Extract from FT.com / Colum­nists / John Kay — Eco­nom­ics may be dis­mal, but it is not a sci­ence


Tim Harford—discussing the diss­ing of macro—quotes P J O’Rouke:

[M]icroeconomics con­cerns things that econ­o­mists are specif­i­cal­ly wrong about, while macro­eco­nom­ics con­cerns things that they are wrong about gen­er­al­ly” Extract from Tim Har­ford in the Finan­cial Times

Myopic NBN economics


Bill Glas­son is an opthal­mol­o­gist from Win­ton in West­ern Queeens­land who now chairs the Region­al Telecom­mu­ni­ca­tions Inde­pen­dent Review Com­mit­tee. His Com­mit­tee is dol­ing out more than $60m in sub­si­dies for rur­al satel­lite phone bills, indige­nous phone ser­vices and remote broad­band. His view on Telstra’s pro­pos­al to upgrade it’s urban cable net­work?

Dr Glas­son said it was not in the nation’s inter­est to ‘build two bridges over the same riv­er five metres apart’.” Extract from The Aus­tralian

Sure it is. Com­pe­ti­tion isn’t road­works, Bill.

It is absolute­ly in the inter­ests of con­sumers and the mar­ket to have com­pet­ing offers on a cru­cial infra­struc­ture like the NBN. Five meters apart or nose-to-nose. Just imag­ine how much more insuf­fer­able Qan­tas would be if it were not for Vir­gin­Blue, or for V and Delta across the Pacif­ic. [Hmmm… Maybe Bill won’t like the Qan­tas anal­o­gy. After all, Win­ton is their home town too. Could that explain.…?]

We can safe­ly assume that if Optus elects to spend $bil­lions on a par­al­lel cable net­work then they think they’ve got a win­ning propo­si­tion (for con­sumers) that will return them a big prof­it. And you can assume that Tel­stra has also fac­tored in this risk. Let the games begin!

Transition to a non-carbon economy

The objec­tives of cli­mate-change mit­i­ga­tion pro­grams such as those in the Gar­naut Report or in the Aus­tralian Government’s absurd­ly-named ‘car­bon pol­lu­tion reduc­tion scheme’ can­not be achieved by 2020 or 2050 with­out a mas­sive, and rapid, tran­si­tion away from car­bon-inten­sive ener­gy sources of pri­ma­ry ener­gy for base-load pow­er gen­er­a­tion, trans­port etc.

But forc­ing rapid change in the way we pow­er pro­duc­tion and con­sump­tion across the econ­o­my —for exam­ple, by means of car­bon-quo­ta (or tax) penal­ties— will cut growth and will redis­trib­ute resources to less pro­duc­tive sec­tors such as gov­ern­ment and (prob­a­bly) some house­holds. Cer­tain­ly, the emis­sion con­trols will affect busi­ness and con­sumer plans, but the wealth impacts also risk under­min­ing our capac­i­ty to invest in the infra­struc­ture nec­es­sary for an even­tu­al ener­gy tran­si­tion.

Prof. Vaclav Smil argues that the iner­tia of ener­gy sys­tems is much greater than these ‘trans­for­ma­tion­al’ pro­grams acknowl­edge. Unlike infor­ma­tion sys­tems that the micro-proces­sor rev­o­lu­tion­ized with­in the span of half a work­ing-life, a tran­si­tion in ener­gy sys­tems takes gen­er­a­tions because it requires fun­da­men­tal changes in large-scale ‘coop­er­a­tive’ infra­struc­ture such as trans­mis­sion net­works as well as in the orga­ni­za­tion of pro­duc­tion and con­sump­tion.

Memoir of Keynes

GrantKeynes.gifAmus­ing, anec­do­tal, accu­rate short memo­r­i­al of the great man, now again in the news (the por­trait of Keynes at work by his one-time lover, Dun­can Grant).

Easterly vs the Growth Commission

The Growth Com­mis­sion report has been described by David Warsh as an orphan of the World Bank’s for­mer regime (under Wol­fowitz). Now Bill East­er­ly claims its reduc­tion­ist exper­tism—aban­don­ing all grand the­o­ries of development—is also an emp­ty promise. There is at least one gen­er­al prin­ci­ple that can be dis­cerned in every case of suc­cess­ful devel­op­ment:

Con­firm­ing Hayek, sys­tems that give more lib­er­ty to indi­vid­u­als – fea­tur­ing both more eco­nom­ic and polit­i­cal free­doms – are asso­ci­at­ed with much less pover­ty. The evi­dence for this comes from both his­to­ry (for exam­ple old, despot­ic, poor Europe com­pared with mod­ern, free, rich Europe) and cross-coun­try com­par­isons (for exam­ple South Korea com­pared with North Korea, for­mer West Ger­many com­pared with East, New Zealand com­pared with Zim­bab­we). This alter­na­tive par­a­digm has a much small­er role for experts, because experts can­not direct or impose free­dom from the top down (or else it would not be free­dom).”  extract from: Bill East­er­ly in the Finan­cial Times