Comments on Christopher Pearson “Cabinet leaks show depth of Gillard's problems”, 31/.07/2010, http://www.theaustralian.com.au/national-affairs/polling-centre/cabinet-leaks-show-depth-of-gillards-problems/story-fn5asavh-1225899248390
It is not wrong or problematic to announce a new climate change policy by a new prime minister, given that Rudd and his government had been in serious trouble by his ETS retreat.
However, what has been announced is a problem. Instead a convincingly effective and practical policy, she announced almost no change to her predecessor’s policy. Worse still, adding a talkfest - a citizens' assembly.
Given that they were prepared to go with the/a mining tax, what she could have done is a modest carbon levy/tax with redistribution to consumers, i.e. all residents to offset the effects of the levy/tax.
That could have distinguished her from Rudd's policy and recapture the support of the majority of the public.
So two of the 3 issues she identified at the time of her prime ministerial address have not been satisfactorily dealt with by her even though the handling of the mining tax wasn't too bad.
Of course, if those leaks are true her political judgement may be an issue for her leadership as prime minister in the longer term.
2010-07-30
East Asia likely to be another pillar
Comments on Amy King “China and the lessons of the past”, 29/07/2010, http://www.eastasiaforum.org/2010/07/29/china-and-the-lessons-of-the-past/
While obviously it is Japan that determines and will continue to determine its foreign policy, how China behaves will also be an important factor that may have a bearing on Japan's choice.
It is in every country's interest that the Northeast Asian countries, namely China, Japan and Korea become the cornerstone of a successful East Asian community, given the sizes of their economies.
If China can't get the Northeast Asian countries close to a successful regional community, how can it become an effective and responsible global leader in the future? It has to consider what the best long term strategy should be for its position as a world leader to be consistent with its growing economy.
The idea of zero sum game by any of the key players will be unhelpful to the interests of the Northeast Asian countries.
Closer relations and further economic integration of the region is likely to become another pillar to complement the North America and Europe Union as the three most important pillars in global affairs in the 21st century.
PS: I have suggested in the past that a federation model for the reunification China and Taiwan under which each would choose its own political system. Hong Kong and Macau could be given special status under that federation. The federation's role is to strengthen the common interests of all members as a federation by coordinating matters related to national defence, external security and foreign affairs, but leave its members to run virtually almost all its internal affairs.
The model for East Asia regional organisation could be between those of the United Nations and the European Union. The European model seems to have an undesirable feature in terms of another layer of bureaucracy.
While obviously it is Japan that determines and will continue to determine its foreign policy, how China behaves will also be an important factor that may have a bearing on Japan's choice.
It is in every country's interest that the Northeast Asian countries, namely China, Japan and Korea become the cornerstone of a successful East Asian community, given the sizes of their economies.
If China can't get the Northeast Asian countries close to a successful regional community, how can it become an effective and responsible global leader in the future? It has to consider what the best long term strategy should be for its position as a world leader to be consistent with its growing economy.
The idea of zero sum game by any of the key players will be unhelpful to the interests of the Northeast Asian countries.
Closer relations and further economic integration of the region is likely to become another pillar to complement the North America and Europe Union as the three most important pillars in global affairs in the 21st century.
PS: I have suggested in the past that a federation model for the reunification China and Taiwan under which each would choose its own political system. Hong Kong and Macau could be given special status under that federation. The federation's role is to strengthen the common interests of all members as a federation by coordinating matters related to national defence, external security and foreign affairs, but leave its members to run virtually almost all its internal affairs.
The model for East Asia regional organisation could be between those of the United Nations and the European Union. The European model seems to have an undesirable feature in terms of another layer of bureaucracy.
A simple way to reduce carbon emissions is better
Comments on David Hetherington “Market design may define PM's green legacy”, 30/07/2010, http://www.theaustralian.com.au/news/opinion/market-design-may-define-pms-green-legacy/story-e6frg6zo-1225898687883
While market design, if done properly, may overcome some market failures, it should be noted that the best way to deal may not be as that complex as David thinks or implies.
Carbon emissions, for example, represent a market failure and can be best addressed by simply levy a carbon emissions tax to reflect their true costs, as opposed to complex market designs involving carbon trading.
A key issue is what to do with the tax revenue. Given that it is the consumers who bear the ultimate costs of emissions trading, the best option is to distribute the revenue to every resident.
Another way to consider it is that people are the owners of the climate environment, so they should be compensated for the costs to it.
Why do we have to design complex things while in fact simple things can work better?
Let's not overstate the role of "market design" and adopt the most appropriate policy response for each case where there is a need.
While market design, if done properly, may overcome some market failures, it should be noted that the best way to deal may not be as that complex as David thinks or implies.
Carbon emissions, for example, represent a market failure and can be best addressed by simply levy a carbon emissions tax to reflect their true costs, as opposed to complex market designs involving carbon trading.
A key issue is what to do with the tax revenue. Given that it is the consumers who bear the ultimate costs of emissions trading, the best option is to distribute the revenue to every resident.
Another way to consider it is that people are the owners of the climate environment, so they should be compensated for the costs to it.
Why do we have to design complex things while in fact simple things can work better?
Let's not overstate the role of "market design" and adopt the most appropriate policy response for each case where there is a need.
2010-07-28
Stiglitz was wrong on government wastes
Comments on “Troubles ahead for world economy”, an interview of Joseph Stiglitz by Kerry O’Brien, ABC’s 7.30 Report program, 27/07/2010, http://www.abc.net.au/7.30/content/2010/s2965891.htm
Joseph Stiglitz is a Nobel Prize winner and well known and respected American economist. He has made outstanding contributions to public economics. He commands my highest regard and respect.
I agree with most of what he said during that interview. However, I found a particular point a bit hard to agree to, when he was answering the following question:
“There's been a lot of criticism of waste in the way some of Australia's stimulus money was spent. Is it inevitable if you're going to spend a great deal of government money quickly that there will be some waste and can you ever justify wasting taxpayers' money?”
His answer:
“If you hadn't spent the money, there would have been waste. The waste would have been the fact that the economy would have been weak, there would have been a gap between what the economy could have produced and what it actually produced - that's waste. You would have had high unemployment, you would have had capital assets not fully utilised - that's waste. So your choice was one form of waste verses another form of waste. And so it's a judgment of what is the way to minimise the waste. No perfection here. And what your government did was exactly right. So, Australia had the shortest and shallowest of the downturns of the advanced industrial countries. And, ah, your recovery actually preceded the - in some sense, China. So there was a sense in which you can't just say Australia recovered because of China. Your preventive action, you might say pre-emptive action, prevented the downturn while things got turned around in Asia, and they still have not gotten turned around in Europe and America.”
The issue I have is that it is not an issue of binary waste as Stiglitz put it, unless he meant the waste associated with government expenditure is any deadweight loss in its normal understanding. But Kerry O’Brien’s question was clearly about different wastes.
Stiglitz either missed the point of the question or he was defending the wrong thing, that is, avoidable wastes in Australian government’s expenditures in its stimulus packages.
Some wastes may have not been completely avoidable, but clearly some of the wastes could have been avoidable if the government had done properly and/or responded quickly when reports raised issues of wastes and rip offs in those programs, such as the building the education revolutions program – the often labelled school halls program.
Government has a duty to be diligent in spending taxpayers’ money and ensure “value for money” in any expenditure. Government must be prudent.
Managing the economy including emergency responses to financial or economic crisis is not green light for waste and should never justify reckless spending and wastes.
Stiglitz’s misunderstanding of those wastes implied in that question and framing it as an unavoidable trade off with waste of alternative economic recession was unfortunate.
It is not the binary or bipolar case of extremes, either this or that. Successful governments can and should use fiscal policy prudently to achieve both economic and budgtary goals.
Joseph Stiglitz is a Nobel Prize winner and well known and respected American economist. He has made outstanding contributions to public economics. He commands my highest regard and respect.
I agree with most of what he said during that interview. However, I found a particular point a bit hard to agree to, when he was answering the following question:
“There's been a lot of criticism of waste in the way some of Australia's stimulus money was spent. Is it inevitable if you're going to spend a great deal of government money quickly that there will be some waste and can you ever justify wasting taxpayers' money?”
His answer:
“If you hadn't spent the money, there would have been waste. The waste would have been the fact that the economy would have been weak, there would have been a gap between what the economy could have produced and what it actually produced - that's waste. You would have had high unemployment, you would have had capital assets not fully utilised - that's waste. So your choice was one form of waste verses another form of waste. And so it's a judgment of what is the way to minimise the waste. No perfection here. And what your government did was exactly right. So, Australia had the shortest and shallowest of the downturns of the advanced industrial countries. And, ah, your recovery actually preceded the - in some sense, China. So there was a sense in which you can't just say Australia recovered because of China. Your preventive action, you might say pre-emptive action, prevented the downturn while things got turned around in Asia, and they still have not gotten turned around in Europe and America.”
The issue I have is that it is not an issue of binary waste as Stiglitz put it, unless he meant the waste associated with government expenditure is any deadweight loss in its normal understanding. But Kerry O’Brien’s question was clearly about different wastes.
Stiglitz either missed the point of the question or he was defending the wrong thing, that is, avoidable wastes in Australian government’s expenditures in its stimulus packages.
Some wastes may have not been completely avoidable, but clearly some of the wastes could have been avoidable if the government had done properly and/or responded quickly when reports raised issues of wastes and rip offs in those programs, such as the building the education revolutions program – the often labelled school halls program.
Government has a duty to be diligent in spending taxpayers’ money and ensure “value for money” in any expenditure. Government must be prudent.
Managing the economy including emergency responses to financial or economic crisis is not green light for waste and should never justify reckless spending and wastes.
Stiglitz’s misunderstanding of those wastes implied in that question and framing it as an unavoidable trade off with waste of alternative economic recession was unfortunate.
It is not the binary or bipolar case of extremes, either this or that. Successful governments can and should use fiscal policy prudently to achieve both economic and budgtary goals.
Forget people's assembly and get on with carbon pricing
Comments on Robert Gottliebsen “Why carbon consensus won't work” 28/07/2010, http://www.businessspectator.com.au/bs.nsf/Article/Climate-the-heat-is-on-pd20100728-7RTSE?OpenDocument&src=rot
It is correct to say that the community consensus is unlikely to work. So the government is either playing delaying tactics or does not understand it.
It should not be too difficult to solve the issues involving mainly the distribution of proceeds from either a carbon tax or caps you identified, through the following measures.
1. Adopt an explicit carbon price on emissions.
2. Distribute the revenue to residents/consumers on an equal per capita basis, because they cannot pass the higher costs associated with the carbon price, unlike businesses that can at least partially do that. Such a scheme should purely be a mechanism to change the relative price and revenue neutral.
3. No revenue should be pocketed by the government.
4. Give no or little subsidies to businesses including power generation companies. It is gradual process and most businesses should be able to adjust. No favour and special treatment to any businesses. Any subsidies should come from a reduction in renewable expenditure by the government.
5. Impose a carbon equalisation tax on imports and reimbursement on exports, but do it in a simple fashion.
6. Return the department of climate change business to Environment and remove redundant personnel.
It is correct to say that the community consensus is unlikely to work. So the government is either playing delaying tactics or does not understand it.
It should not be too difficult to solve the issues involving mainly the distribution of proceeds from either a carbon tax or caps you identified, through the following measures.
1. Adopt an explicit carbon price on emissions.
2. Distribute the revenue to residents/consumers on an equal per capita basis, because they cannot pass the higher costs associated with the carbon price, unlike businesses that can at least partially do that. Such a scheme should purely be a mechanism to change the relative price and revenue neutral.
3. No revenue should be pocketed by the government.
4. Give no or little subsidies to businesses including power generation companies. It is gradual process and most businesses should be able to adjust. No favour and special treatment to any businesses. Any subsidies should come from a reduction in renewable expenditure by the government.
5. Impose a carbon equalisation tax on imports and reimbursement on exports, but do it in a simple fashion.
6. Return the department of climate change business to Environment and remove redundant personnel.
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