Why the Texas electricity market failed

by John Quiggin on February 25, 2021

Some thoughts on the failure of the Texas electricity market to deal with unexpected cold weather, published at Inside Story. Focus on implications for Australia, but much of it should be of interest to US readers also.

{ 8 comments }

Twigs and branches

by John Quiggin on February 23, 2021

Another open thread, where you can comment on any topic. Moderation and standard rules still apply. Lengthy side discussions on other posts will be diverted here. Enjoy!

{ 43 comments }

Sunday photoblogging: Ashton Avenue bridge (2)

by Chris Bertram on February 21, 2021

This is from the same sequence as last week’s picture. Some people seem to like it more, and it provides some context for the previous photo also.

Ashton Avenue Bridge

{ 1 comment }

The last time I

by Maria on February 18, 2021

The one-year anniversary of the last time I met a friend in a café is coming up. I’m glad it was such a good one. I met the marvellous Francis Spufford, occasionally of this parish, for a coffee in the British Library. I had a flat white and a kind of cake/biscuit hybrid that came in a plastic wrapper, and was energetically reassured by the person at the till that there was no mistake in my bill of almost eight pounds. (A café scene in Fleabag comes to mind, when Phoebe Waller Bridge charges twenty-five pounds for a plain tomato sandwich and the exasperated customer just says “London!”) Astonishing to think of now, but we sat at a table in the atrium – inside, no less – surrounded by other tables of people, near the main entrance, with people walking past, breathing, every moment. We talked about the pandemic from China then ravaging Italy, and how people in the UK and elsewhere didn’t seem to believe it was coming for us. There was a stillness and strangeness in having our eyes turned, horrified, to the east in that weeks-long moment when so many, and all the UK’s leaders, put their fingers in their ears and sang ‘la la la’ to the storm that irresistibly propelled them into a future to which their backs were turned. (My apologies to the angel of history.) But even then we knew the fascinated horror was all for naught. We agreed that a lifetime of reading science fiction, especially my favourite sub-genre, post-apocalypse, gave us at most a two-week head start on everyone else in understanding the gravity of what was about to happen.
[click to continue…]

{ 12 comments }

Economic lessons of the 20-year armistice

by John Quiggin on February 18, 2021

Another extract from my book-in-progress, Economic Consequences of the Pandemic

The 20-year armistice from 1919 to 1939 was a period of economic stagnation in Europe, punctuated by crises which had disastrous economic and political effects. And while the US boomed in the 1920s, the Great Depression that began in 1929 caused massive unemployment and suffering which lasted through the 1930s. What lessons can we learn for the present?
[click to continue…]

{ 20 comments }

Sunday photoblogging: Ashton Avenue Bridge

by Chris Bertram on February 14, 2021

Ashton Avenue Bridge

{ 4 comments }

The 20 year armistice

by John Quiggin on February 14, 2021

One of the striking discoveries of the Internet age for me is that, no matter how original and idiosyncratic you imagine your thoughts to be, someone else has already thought them[1].

My book-in-progress, The Economic Consequences of the Pandemic is largely about the mistakes made between 1919 and 1939, and what we can learn from them. This period is usually called ‘interwar’, going along with the conventional naming of World War I and World War II, implying two separate conflicts.

I’ve long thought of these conflicts as one long war, with the Cold War that followed as a falling out between the victors. In this context, it struck me that the ‘interwar’ period 1919-39 would better be described as a 20-year armistice.

In formal terms, the Armistice of 1918 was ended by the signing of peace treaties between the Allies and the defeated Central Powers, most importantly the Treaty of Versailles with Germany, signed on 28 June 1919, five years to the day after the assassination of Archduke Franz Ferdinand.

The starting point of my book is Keynes’ critique of the Treaty of Versailles, The Economic Consequences of the Peace. Given the failure of the Treaty to secure peace, it makes sense to regard the subsequent 20 years as one long armistice, ending in a renewal of the same war. Going to Wikipedia to check info on some technicalities of the Versailles Treaty, I found the following statement attributed (as usual, dubiously [2]) to French Marshal Ferdinand Foch “”this (treaty) is not peace. It is an armistice for twenty years.” So, Foch (or whoever actually coined the phrase) was way ahead of me. Foch’s view was that the treaty was not hard enough on Germany, and would therefore not remove the threat of German aggression

Whatever its provenance, I’m adopting the term[3], even if I can’t claim credit for it.

[click to continue…]

{ 53 comments }

Hands off the rich ?

by John Quiggin on February 12, 2021

The idea that we should tax the rich to fund public services and transfers to the poor seems obvious from an egalitarian perspective, at least as long as we are in a society with significantly unequal incomes. But it has been challenged recently by some advocates of Modern Monetary Theory.

[note: The meaning of ‘rich’ is rarely spelt out, and isn’t very helpful. Hardly anyone is willing to admit to being rich, so the discussion tends to focus on a handful of cases like Bill Gates, rather than on people in the top 1 per cent or 10 per cent of the income distribution. So, from now on, I’m going to use the term ‘high-income’ and refer to proposals raising taxes on some subset of the top 10 per cent.]

Over the fold, an extract from my book-in-progress, The Economic Consequences of the Pandemic

[click to continue…]

{ 18 comments }

How can we reduce inequality in Australia?

by John Quiggin on February 11, 2021

Late last year, along with Emma Dawson, John Hewson and Angela Jackson, I took part in a discussion for the ABC[1]’s Big Ideas program, hosted by Paul Barclay. It went to air recently. Here’s a link to the podcast[2]

Unfortunately, I don’t have the time/ patience to listen to audio. I also don’t like the sound of my voice on radio – this is true for many people I think. It would be great to have a program that took an audio file and generated text output. A very quick search mostly turned up paid transcription services. Does anyone have any experience with this.

fn1. Australian Broadcasting Corporation, our equivalent of the BBC

fn2. Is a recording of a radio program a podcast? Can anyone clarify this.

{ 7 comments }

Twigs and branches

by John Quiggin on February 10, 2021

Another open thread, where you can comment on any topic. Moderation and standard rules still apply. Lengthy side discussions on other posts will be diverted here. Enjoy!

{ 40 comments }

Sunday photoblogging: a new kid on the block

by Chris Bertram on February 7, 2021

Up at Alderman Moore’s allotments in Bristol there’s a new young fox with a very healthy-looking coat. He came by to say hello yesterday.

Fox at Alderman Moore's allotments

{ 10 comments }

Climate conspiracy, classical liberalism and Q-Anon

by John Quiggin on February 7, 2021

Writing in Reason magazine, Jacob Sullum laments that “Marjorie Taylor Greene Presents Republicans With a Sadly Familiar Choice Between Blind Loyalty to Trump and a Basic Respect for Reality”.

That’s true. But the choice between in-group loyalty and basic respect for reality was a core problem for the right when Trump was still a Democrat, and propertarians/libertarians/classical liberals were among the most prominent enemies of reality. For decades, they advanced a conspiracy theory in which all the governments in the world, backed up by every major scientific institution, were advancing a fraudulent theory of global warming.

Here’s a pretty typical example from Pat Michaels, then the lead climate authority at Cato, being interviewed on Fox

LEVIN: Let me stop you there. Who does these computer models?

MICHAELS: Governments. There are 32 families of computer models that are used by the United Nations, each government sponsored. And all of them are predicting far, far too much warming.

… it’s not the science that’s determining how much it’s going to warm. A lot of people don’t know this, but it happens to be true, and you know, we could speculate as to why that paper was published right before the 2016 election? I wouldn’t want to impute causation, but gee, if …

… When you buy off the academy, you can get what you paid for …So now, the academy roots for anything that is big government that it feels it can tie onto to maintain this relationship. The roots of political correctness, there are many, manifold and varied. But one of them certainly was the enslavement of the academy.

This seems to me to be more, rather than less, crazy than Trump’s “stop the steal” or even QAnon. At least in these theories, the conspirators are trying to achieving something big – establishing a socialist dictatorship or making the world safe for cannibal lizardoids. By contrast, Michaels wants an equally expansive conspiracy with tens of thousand of particpants (including lots of rightwing governments), whose object is – the establishment of an emissions trading scheme?

Before denouncing QAnon, libertarians ought to take some responsibility for their own leading role in the campaign against reality.

{ 33 comments }

This is a tribute for Waheed Hussain, who passed away on January 30th, 2021, by the Members of the Economic Ethics Network, of which some CT-ers are part.

Waheed Hussain was a political philosopher whose work addressed some of the central questions faced by citizens living in contemporary capitalist societies. He thought and wrote about a wide range of topics at the intersection of moral and political philosophy, economics and business ethics, developing insightful work on issues from the ethics of consumption and competition to the nature and justification of the corporation. Across all of the rich and nuanced work that he produced was an underlying concern to address one fundamental question: how best can people live free, autonomous lives, relating on fair terms with their fellow democratic citizens, given the mystifications and constraints generated by a market economy? [click to continue…]

{ 8 comments }

WallStreetBets and financialised capitalism

by John Quiggin on February 3, 2021

It’s been hard to miss the chaos that’s arisen from a bunch of Reddit users (on sub-reddit WallStreetBets) getting together to squeeze shortsellers on stocks including GameStop and AMC Theatres. Most of the attention has been confined to the stockmarket action, but I was struck by this piece in The Bulwark[1], making the point that the process has enabled AMC to issue high-priced shares, repay debt and thereby stave off impending bankruptcy.

I don’t have a view on whether AMC should go bankrupt or not, but this is the kind of decision about capital allocation that is driven, in large measure by stockmarkets. The efficient markets hypothesis says that stockmarkets do the best possible job of estimating the value of assets, and thereby guides the allocation of capital. In the absence of the WallStreetBets push, it appeared that the market judgement was that it would be better to steer capital away from AMC, and into some other activity. Now, it’s the opposite.

One possible response is that WallStreetBets is an episode of craziness that will soon pass. But once you strip away newsworthy bits like the role of Reddit and the scale of the price movement, this kind of squeeze (or conversely, short-selling raid) is available, and potentially profitable, to any group of traders who can mobilize the necessary few billion (using options, those billions can be magnified a fair way). That’s part of the reason why stock prices are far more volatile than would seem justified by the arrival of new information relative to future earnings.

If stock prices are more volatile than underlying value, the two must differ most of the time. That undermines the claim that financial markets do a better job of allocating investment capital than would, for example, a central planning board. Even if you don’t want to go that far, there’s no obvious reason why limiting stock trading to (say) once a week would impair the allocation of capital to an extent that would outweigh the savings from cutting the financial down to a small fraction of its present size.

fn1. A Never-Trump website, well worth a look.

{ 34 comments }

All politics is global

by John Quiggin on February 2, 2021

Reading about the recent military coup in Myanmar, I’ve seen the view that Biden’s criticism of the coup is undermined by the fact that the pretext for the coup, a supposedly stolen election, was exactly the same as that raised by Trump and the Republican Party in response to Biden’s 2020 election victory.

There’s a problem in this reasoning which is easy to see, but harder to resolve. It makes intuitive sense to say that the United States should not point fingers at other countries when it has the same problems itself. But it seems strange to say that, having just defeated an attempt to overturn a democratic election in his own country, Biden is in some way disqualified from criticising a similar attempt in Myanmar.

The answer to this question is to recognise that Biden does not speak for “the United States”, but for the party he leads. To the extant that his party supports democracy in the US, it is naturally aligned with supporters of democracy everywhere, and against supporters of dictatorship, both at home and abroad. Conversely, Trumpists in the United States are naturally aligned with dictators everywhere and opposed to democrats (with both small and capital “D”).

[click to continue…]

{ 33 comments }