Posts tagged economics

The failure of the NZ Emissions Trading Scheme, or not

Everyone’s been slagging off the Emissions Trading Scheme for failing to reduce emissions.

PCE: Returned ETS bill a failure
University of Canterbury: Greenhouse gas emissions trading scheme more or less dead
Labour: National’s ETS will mean burning more coal; failure to reduce emissions

And here’s the NZ carbon price collapse:

Market prices from Carbon Commtrade

I think they’re missing a critical point – the ETS is doing exactly what it is supposed to do. People are assuming that the ETS is a tool for reducing emissions. Not quite – it is a tool for matching the incentive for emissions reductions with the desire for emissions reductions. Let’s see how this works

Airlines don’t make profits

Over the last forty years, airlines have not been profitable. Despite the massive and ongoing growth in air travel, the whole industry has manged to return an average of about 0.1% on revenue, which is as close to zero as makes no difference. So what happened and what’s going to happen when airlines start getting serious about their carbon emissions? Continue reading Airlines don’t make profits

In the Innovation Garden – Thoughts from the Transit of Venus Conference

I spent last week out in Gisborne at the Transit of Venus conference, where the local community made us most welcome and we spent our days talking about how to turn NZ into the kind of smart, knowledge-intensive nation. Both the debate about innovation and the debate about sustainable farming had a strong parallel, in that everyone recognises that we need new thinking and that new thinking is all about ecosystems. Or at least, that’s the buzzword everyone is waving around. I don’t think we’ve quite worked through what that means, so I stood up and made a comment aimed at digging more deeply into what an ecosystem approach might mean.

Here’s what I said (or rather the notes I spoke from and tidied up afterwards):

“We’ve been talking about the need for deep structural change in NZ innovation, in our economy, and our society. Deep changes are changes in thinking and changes in metaphor. We need new metaphors for thinking about post-normal science, post-normal innovation, post-normal economies,post-normal societies. Let’s face it, we’re facing post-normal everything.

We’ve had the linear model of science: put some researchers in a box, an idea appears, it is taken through a rigid development pipeline, capital is added in fixed stages, and the goal is profitable growth. This is a finite system, with fixed boundaries. It is normal. But this is the Twenty-First Century and we know it doesn’t work like that any more.

We’ve had the same model for farming, of factories for commodities. Control the inputs, optimise for one factor – maximised production, intensify. It is short-timescale thinking and looks great if all you care about is GDP. It is normal. But this is the Twenty-First Century and we know it doesn’t work like that any more.

This is the Twenty-First Century and we need to do better. We need new metaphors, paradigms, models. We’ve spend the day hearing about ecosystems, whether natural or of technological innovation. When we say “ecosystem”:
• we recognise the complexity of systems, where we cannot know or control all the interactions between parts of the system;
• we recognise we have to work with a range of outside forces, whether those are weather and pests or the whims of overseas markets or investors;
• we recognise that is hard to draw sharp boundaries around what is or isn’t in the system;
• we have to optimise for a range of co-benefits, not a single goal; and
• we have to think short- and long-term, about what we leave for the next generation.

Whether we are innovative farmers and land managers caring for biodiversity and gaining higher prices for doing so or we are innovators in high-tech manufacturing, partnering with researchers and customers across cultures and nations, then we are trying to work with ecosystems.

It’s all very post-normal.

So what metaphors do we have to help us think about how to work with ecosystems? The best I can think of is to stop thinking factories and start thinking gardens, and to think of ourselves as gardeners.

We all know what we want from a garden. We want to grow our fruit and veg; we want to hear the tui and kaka flying overhead; we want a safe space for our kids to grow up, run around, fall over, skin their knees, and get up again; and at the end of the day we want to sit down with a glass of wine and be proud of what we have created.

So I suggest to the innovators and science system managers, you should sit down with the ecologists, the farmers, the conservation managers, and think deeply about what an ecosystem model means for innovation, and what a gardeners approach would be for working with this system.”

And you can watch my comment, complete with wavy hands and shiny head, on Youtube.

The long run

This is the US’s economic growth, per person, over the past two hundred years. The curves for the rest of the West are similar. They all go up, endlessly, relentlessly up. Yeah, there’s some wiggles. We’re having one right now. It’s just a wiggle.

When you’ve got a system with behaviour like this, that’s so consistent over the long run, then the explanation for the behaviour is most likely to be outside of the system. Mainly, growth isn’t caused by finance or investment, or by this law or that law, or by regulation or less regulation. It’s caused by technological progress, purely and simply.

1.8% productivity growth per year, year on year, for centuries. The wealth of our civilisation doubles every 39 years. It shows no sign of stopping.

It wasn’t doing what I thought it should. This continued for quite some time. So, gasp shock horror, I asked someone. And richdrich said “they’re bipolar inputs”, and I went “eh?”, and he said “put a resistor just there”, and then it worked.

So the sound input circuit is working enough* that it can be tested using external inputs. To the right of the test setup you’ll see one such external transducer.

And in other news, tunes, contempory dance, sunshine, training, cartwheels, arms like noodles, gelato, sleeping. Like usual.

And Charlie Stross is on fine form today, pointing out the downright weirdness of having “ Taikonauts space-walking overhead while the chairman of the Federal Reserve is on his knees?“. But it’s happening right now. Still, I’m not sure that I agree with his conclusion that this is the collapse of the American empire. Space walks and financial crises are just part of progress, the difference being that nations gorw out of the space walk stage and on to more useful things. Financial crises are a recurring part of the adult stage of the empire lifecycle, like parties and hangovers, and empires can survive through quite a few of them.

* – where “working enough” means, as usual, still needing pfaffing with, but working more than it was before.

Wanted – John Maynard Keynes, Jr

is ploughing through “Godel, Escher, Bach”; I’m plouging through Polanyi’s “The Great Transformation”. It about how England became a market economy and a market society, the answers being the creation of markets, and the creation of insitutions and regulations to manage the social effects of those markets. That’s a hot topic right now, what with the general awareness that globalisation and the Washington consensus of “free markets good, regulation bad” didn’t work that well.

However, this is nothing new. Polanyi’s book was written in the 1940s and was one of the theoretical underpinnings of the policies of the 1950s and 60s – Keynesian, markets under government control. And let’s face it, the 50s and 60s were a great time to be alive, massive economic growth and radical social transformation. Unfortunately, those policies brought us to the cul-de-sac of the 1970s. The way out of the cul-de-sac was the butchery of the market reforms of the 80s and 90s.

So what now? What next? If the policy pendulum swings back to more restraint on markets then yes, we can expect less social damage but we’ll be storing up economic damage to erupt again in a decade or two. Is economic policy just a pendulum swinging between those two options?

Don’t look at me, I dunno. We need a new kind of thinking about economics, about growth, about national policies and about international systems. We haven’t got it yet. But I’m quite liking what Dani Rodrik has to say about the debate (articles, blog).

Anyways:

from B3ta, of course