Into the woods

So my wife has added a new website for her art business she is starting up. Not much there yet, but it will be growing shortly. Will be original prints and cards of her original artwork. Have a look at Into the Woods if you are interested. If there is not much there when you visit come back in a couple of weeks and have a look as there will be then.

Food politics

An interesting piece in The Economist discussing issues around, organic food, fair trade and ideas about embedded energy, or food miles. Some of these topics I’ve mentioned in earlier posts.

On the claim organic food is better for the environment:

Perhaps the most eminent critic of organic farming is Norman Borlaug, the father of the “green revolution”, winner of the Nobel peace prize and an outspoken advocate of the use of synthetic fertilisers to increase crop yields. He claims the idea that organic farming is better for the environment is “ridiculous” because organic farming produces lower yields and therefore requires more land under cultivation to produce the same amount of food… The more intensively you farm, Mr Borlaug contends, the more room you have left for rainforest.

On fair trade coffee:

The standard economic argument against Fairtrade goes like this: the low price of commodities such as coffee is due to overproduction, and ought to be a signal to producers to switch to growing other crops. Paying a guaranteed Fairtrade premium—in effect, a subsidy—both prevents this signal from getting through and, by raising the average price paid for coffee, encourages more producers to enter the market. This then drives down the price of non-Fairtrade coffee even further, making non-Fairtrade farmers poorer. Fairtrade does not address the basic problem, argues Tim Harford, author of “The Undercover Economist” (2005), which is that too much coffee is being produced in the first place…

But perhaps the most cogent objection to Fairtrade is that it is an inefficient way to get money to poor producers. Retailers add their own enormous mark-ups to Fairtrade products and mislead consumers into thinking that all of the premium they are paying is passed on. Mr Harford calculates that only 10% of the premium paid for Fairtrade coffee in a coffee bar trickles down to the producer. Fairtrade coffee, like the organic produce sold in supermarkets, is used by retailers as a means of identifying price-insensitive consumers who will pay more, he says.

Can we have nuclear power without bipartisan support?

The key sticking factor in developing a nuclear industry would seem to be the political risk. Would any company take on the risk of building a nuclear power plant while the likely alternate government is opposed to the plan?

With a construction lead time of 10-15 years, this is likely to encompass at least one change of government, and a likely 2 full rotations of the senate. Without significant financial guarantees it is difficult to see why any company would take on the risk of having a billion dollar venture, with a high likelihood of crashing down on change of government. As the report summary states on page 10:

An efficient and predictable regulatory process is an essential prerequisite for a nuclear power
industry. With its high capital costs, nuclear power is very sensitive to delays and uncertainty in obtaining approvals.

While this is mostly talking about governments altering the requirements, an opposition hostile to the very idea would seem to pose an even greater risk. This means the government initiating the deal would essentially need to tie some sort of financial guarantee into the project. While a policy reversal for the ALP once construction has begun would not be out of the question, the chance that they may decide to roll back these changes as well makes it a very risky regulatory environment.

Personally I think this is a shame, as we should have all options on the table to reduce CO2 emissions and nuclear is still one of the few viable base load power sources.

Update: Of course the political risk is not only federal but also regional, with several States already coming out and saying they would fight it in the courts, although given the recent WorkChoices decision it appears unlikley they would win according to this report.

Winds of change or just more hot air?

First it was Rupert Murdoch “The planet deserves the benefit of the doubt.”, then Peter Costello on insiders

I think the ground is changing. I think it is important that we bring new countries into this discussion. And I think, from Australia’s point of view, if the world starts moving towards a carbon trading system, we can’t be left out of that, that Australia has a role…

and now John Howard

JOHN HOWARD has yielded to pressure to consider a global carbon trading scheme, and business leaders say they are ready to take action against global warming.

As Brian has noted at LP, the release of the Stern review has coincided with a sudden shift in the political direction with respect to AGW policy. Previously the Australian government position has been completely intransigent on being involved with carbon trading, but with Peter Costello’s interview on insiders and now this announcement it seems there has been a large shift in government opinion. Even if this is not a complete reversal it is a serious concession that Australia and the rest of the world needs to do more.

Earlier in the year the government used a review of the tax system as a stepping stone on the way to reversing its previously stated opposition to cutting top tax rates. Here’s hoping this review is the same, a facing saving exercise before a policy reversal and not just more hot air.

Minimum wages

I’ve been thinking and reading recently about the value of minimum wages. From what I’ve read most economic theory is against minimum wages on the ground that it increases unemployment. There is a fairly obvious argument with regard the fact that a minimum wage will price out people who would otherwise be able to get a job at a lower wage because, while their labour still has value to an employer, its less than the minimum allowable by law and they are thus shut out of the market.

Under this rationale a minimum wage may mean that some workers may get paid more, but they do so at the expense of those who would otherwise work. The minimum wage therefore creates unemployment and makes poorer those who would otherwise work.

I’ve no doubt that there is truth in this. Certainly if you raised the minimum high enough then it would undoubtedly cause unemployment.

On the other hand even if you could pay people 1 cent per hour the real effective minimum wage is considerably higher than that due to the training/management/hiring costs in your own time not to mention getting a decent return on any capital you may have invested for the employee to use and this is even if there was no other regulations on employment. A minimum wage below a certain point is going to have minimal impact on unemployment.

PNG’s Foreign Aid

This threat by the PNG government to suspend government aid they were receiving is quite remarkable and potentially telling.

PAPUA New Guinea is threatening to dramatically reduce the money it receives from Canberra, suspend all official visits by Australians or impose onerous travel restrictions, and recall its high commissioner.
…
If no satisfactory response is forthcoming, PNG will retaliate, instituting a range of measures that promise to create havoc for Australia’s $300 million annual aid program to PNG.

The most serious step being contemplated is the suspension of significant elements of Australian aid deemed not essential to PNG, the Herald understands.

Normally its a threat to not pay aid, rather than not receive it, which kind of suggests that PNG thinks Australia regards the influence they are getting as more valuable than the aid money. Rather than charity it is money spent in the national interest. It will be interesting to see how the Australian government reacts to such a threat and whether it is a massive misjudgement on the PNG government side.

Of course it should be noted, that the aid could still be good for the people of PNG, even if the government rejects it because they resent the influence it grants to Australia.

The Stern Review

By now its been all over the news and some discussion at other sites. Still for my own and other’s references here I will briefly discuss some things about what it says about AGW. Firstly the full report can be seen here. As well as the full document there are long and short summaries. I hope to get around to discussing some of the meat about emissions markets and so forth later.

The main conclusion can be seen in this extract taken from the short summary.

Climate change will affect the basic elements of life for people around the world – access to water, food production, health, and the environment. Hundreds of millions of people could suffer hunger, water shortages and coastal flooding as the world warms.

Using the results from formal economic models, the Review estimates that if we don’t act, the overall costs and risks of climate change will be equivalent to losing at least 5% of global GDP each year, now and forever. If a wider range of risks and impacts is taken into account, the estimates of damage could rise to 20% of GDP or more.

In contrast, the costs of action – reducing greenhouse gas emissions to avoid the worst impacts of climate change – can be limited to around 1% of global GDP each year.

The policy outlined in the full executive summary advocates three main policy directions as necessary to properly tackle the problem. Carbon pricing, investment in technology and measures to assist in behavioural change including labelling for energy efficiency. I’ve discussed most of these before although I have been less positive about the role of government in the technology investment.

Congestion Charging

Harry Clarke has an interesting piece on the need for congestion charging, how it might be done equitably and the importance of paying for curbside parking in this. I have an excerpt below but I suggest people read the whole thing for themselves.

For pricing to be politically feasible governments must demonstrate that tolls are not a tax grab. Governments must show that all groups are advantaged with efficient pricing. Economists know that with appropriate compensations they can be but this needs to be spelt out to those affected. Tolling charges can be explicitly linked to tax savings elsewhere or to ear-marked infrastructure improvements, such as improved public transport, that benefit transport consumers.

The net benefit of a revenue-neutral switch to congestion pricing roads in the cities stems from the ‘double dividend’ green tax advantages of such charges. Congestion charges yield a revenue dividend but target a social ‘bad’ congestion rather than other taxes which target work effort or savings.

Government plays Enviro-Santa

The government announced yesterday $75 million dollars for a 154 MW concentrated solar power plant to be built in rural northern Victoria. Although the Peter Costello claims its going to cost $280 million, the company building the project Solar Systems, say it will cost $420 million. An additional $50 million is being contributed by Victoria. Perhaps PC is talking about the private costs and has missed $15 million?

The company describes the technology like this.

The power station will use technology known as ‘Heliostat Concentrator Photovoltaic’ (HCPV). It will consist of fields of heliostats (sun-tracking mirrors) focusing sunlight on receivers. The receivers house photovoltaic (PV) modules, which consist of arrays of ultra high-efficiency solar cells that convert the sunlight directly into electricity. Photovoltaic literally means ‘electricity-from-light’. The heliostat control system, PV modules and cooling system are patented by Solar Systems.

Solar Systems has collaborated with US company Spectrolab (a Boeing company) to optimise ultra high efficiency space technology for earth based power stations. The resulting photovoltaic cell arrays are three times more efficient than typical solar panels. Further cell efficiency improvements are underway.
….
This is a new generation of solar technology,” Mr Lasich said. “The secret is to be able to make a solar power module work about 1500 times harder than typical solar panels. If you can do this at high efficiency using low cost materials, you have the recipe for an infinite supply of clean energy at an affordable price. “This new power station will demonstrate these principles and produce the most affordable solar energy yet generated.”

More on the Guns Study

Andrew Leigh’s thread continues to generate interesting comments on the recent study on gun deaths, including this one by Christine where she analyses the data. In particular she examines the log return (ie. percentages) rather than the absolute return which the study focused on, and finds firstly there is close to a break in the trend in 2004 if you consider the log return, and comments that the finding appears to be closer to “there is no definite effect” rather than there “was no effect”.

Don Weatherburn has an op-ed in the SMH where he discusses the study and the effect of the laws saying:

It doesn’t follow, however, that restrictions on firearm ownership should be dropped. The gun buyback may not have had any effect on the rate of firearm homicide but any policy that permitted large increases in the supply of guns in the community could still produce untoward effects.

The Port Arthur massacre graphically demonstrated the catastrophic effects that result when the wrong people get hold of guns. This is dangerous ground and we need to tread carefully.

Also Andrew has another post examining the study’s interpretation of the analysis of suicide by firearm.