Posts Tagged economics
The best argument that Julia Gillard seems to have come up with in defence of her carbon tax is that Abbott won’t be able to repeal it because Labor will block his attempt, as well as spruiking the pre-emptive bailouts her government has decided to give to everyone.
Well, there are also points like this:
Did you know the Chinese company Suntech, whose chief executive Zhengrong Shi was educated at the University of NSW, became the world’s largest producer of silicon solar modules in 2010? Or that in 2010 global investment in generating renewable energy such as solar and wind power overtook investment in generating energy from fossil fuels?
Well, fortunately for the Chinese government, it doesn’t have to spend much money developing companies like Suntech because it allows workers to be kept in on-site barracks and work 48-hours straight for less money than Gillard probably spends on breakfast. That makes Suntech a lot more viable than it would be in a country where joining a trade union wasn’t a good way to disappear of the face of the planet. But then, people my age don’t care about democracy anyway, so maybe the Chinese model is a good idea.
Let’s throw another company into the mix: Solyndra. Here’s a good piece from Juliet Eilperin in Wired a little while ago that describes that whole kerfuffle:
In 2005, VC investment in clean tech measured in the hundreds of millions of dollars. The following year, it ballooned to $1.75 billion, according to the National Venture Capital Association. By 2008, the year after Doerr’s speech, it had leaped to $4.1 billion. And the federal government followed. Through a mix of loans, subsidies, and tax breaks, it directed roughly $44.5 billion into the sector between late 2009 and late 2011. Avarice, altruism, and policy had aligned to fuel a spectacular boom.
Anyone who has heard the name Solyndra knows how this all panned out. Due to a confluence of factors—including fluctuating silicon prices, newly cheap natural gas, the 2008 financial crisis, China’s ascendant solar industry, and certain technological realities—the clean-tech bubble has burst, leaving us with a traditional energy infrastructure still overwhelmingly reliant on fossil fuels. The fallout has hit almost every niche in the clean-tech sector—wind, biofuels, electric cars, and fuel cells—but none more dramatically than solar.
That, right there, was what happens when the government artificially props-up an unviable industry. The government was committed to Solyndra, so had to keep pumping money into it, even when it started to become obvious that they were just never going to be as competitive as they had hoped. A few billion taxpayer dollars later and the now gigantic Solyndra imploded, leaving hundreds of people without jobs and an entire industry in ruin.
Now to pick-up on a point in today’s Australian editorial:
Given that Mr Abbott has subscribed to the same carbon reduction target as the government — cutting Australia’s emissions by 5 per cent by 2020 — the framing of the debate in this fashion pushes the onus on to him to produce more substance. His “direct action” policy relies on the government picking winners rather than the market seeking out least-cost abatement, so it is bound to be less efficient than a trading scheme, and therefore more costly on the economy. Mr Abbott should not escape by simply pledging to repeal the carbon tax. He must show how he can meet his target without creating a large burden on the budget. Scepticism about his ability to do this abounds, especially given he promises to provide tax cuts for families and business, while scrapping the carbon and mining taxes.
See, the Coalition’s “direct action policy” is not dissimilar from the policy the US was following when the whole Solyndra thing broke out. Tony Abbott is essentially arguing that the government should be funding carbon-saving ideas in order to reach the emissions target that he agrees we should have. The carbon tax is a prima facie tax, but the direct action scheme is an indirect tax. After all, someone has to foot the bill for the hundreds of millions of dollars that would actually be required to implement it, and no prizes for guessing who that is (hint: me and you).
Why the government hasn’t been using this as an argument is beyond me. Whatever flaws its policy may have, it’s vastly superior to the Coalition’s (and ironically, more in-line with the Coalition’s general ideology than the Coalition’s policy is).
Despite not being the “shadow CIA” that Julian Assange tried to pretend it was (mostly so that hacking them could seem like a big deal), strategic consulting company does provide some useful analysis.
In this week’s dispatch, Stratfor director George Friedman has analysed the strategy of Australia, trying to answer the question of why a country that seems both secure and wealthy would take part in so many wars that do not directly affect its security.
As Friedman details, the answer is that Australia must contribute to our strategic alliance with the Us in order to guarantee US support in our own region. As I have pointed out, the maritime routes in the South Pacific are not quite as secure as they seem, and will probably be the subject of some conflict over the coming decades.
Australia’s Strategy | Stratfor.
This leads to Australia’s strategic problem. In order to sustain its economy it must trade, and given its location, its trade must go by sea. Australia is not in a position, by itself, to guarantee the security of its sea-lanes, due to its population size and geographic location. Australia therefore encounters two obstacles. First, it must remain competitive in world markets for its exports. Second, it must guarantee that its goods will reach those markets. If its sea-lanes are cut or disrupted, the foundations of Australia’s economy are at risk. …
Australia is in a high-risk situation, even though superficially it appears secure. Its options are to align with the United States and accept the military burdens that entails, or to commit to Asia in general and China in particular. Until that time when an Asian power can guarantee the sea-lanes against the United States — a time that is far in the future — taking the latter route would involve pyramiding risks. Add to this that the relationship would depend on the uncertain future of Asian economies — and all economic futures are now uncertain — and Australia has chosen a lower-risk approach.
This approach has three components. The first is deepening economic relations with the United States to balance its economic dependencies in Asia. The second is participating in American wars in order to extract guarantees from the United States on sea-lanes. The final component is creating regional forces able to handle events in Australia’s near abroad, from the Solomon Islands through the Indonesian archipelago. But even here, Australian forces would depend on U.S. cooperation to manage threats.
Once again, Australia is secure because we have played our strategic hand very well over the past century, but this may not necessarily be the case in future. Reducing our military — and especially naval — capabilities by cutting defence spending, as the Government is, is a huge mistake.
There is no shortage of Government projects that could be cut back instead of defence . We can start with some of these ridiculous middle class welfare/pork-barrelling measures that my favourite treasurer has just introduced, or that useless bid for a seat on the UN Security Council that has been our top foreign policy endeavour since 2009.
What is the point of having a vote in the Security Council when we are a military non-event?
At least, according to this graph:
Been worried about technology taking away jobs? Here’s Walter Russel Mead to put you straight:
We must fight the perversity, the blindness, and the gibbering pessimism that tells us that this is a bad thing. It is like getting so caught up in the financial problems of Social Security that we lose sight of the big picture: that Social Security is in trouble because we are living longer and healthier lives. It is like crying about the problem of what to do with all the people who no longerhave to cut sugar cane in the hot sun now that the mechanical harvesters are taking those jobs away. It is like worrying about how bored and deprived the ten-year-old chimney sweeps will become once we find ways of heating our homes that don’t require naked urchins to shimmy up and down narrow pipes in cancer-causing tar.
There has been a lot of fascinating coverage in the Atlantic over the past couple of years regarding the impacts that the GFC have had on men in the workforce — most famously, Hannah Rosin’s 2010 cover story ‘The End of Men‘.
Today, Jordan Weissmann is arguing that the neologism coined in response — “mancession” — is misplaced, since men are always the gender to be more adversely affected by a recession.
Perhaps it’s finally time to retire the phrase “mancession.”
During the past few years, that grisly portmanteau has become a popular shorthand for the way men seemed to suffer a special degree of misfortune during the Great Recession. Male-dominated industries, particularly construction, had been at the heart of the housing bust and the ensuing downturn, and their job prospects diminished more as a result. Hence, a new turn of phrase was born.
And it is accurate. Men’s employment did indeed crash further than women’s. But here’s why we might want to consider putting “mancession” on ice: It turns out men have gotten the brunt of every economic downturn for the past thirty years. In other words, every recession has been a “mancession.”
On the other hand, Tanya Gold in The Guardian argues that the current recession (and the Tory Government) is affecting women far more.
I will type until my fingers bleed; these are the worst of times for women, and the best of times for inequality, which is not a buzzword to be mocked but a phenomenon that is paid for in human tears. At a TUC event last month we lamented: we are going backwards. Women are leaving the workforce in ever greater numbers, to meet the usual fate of women who don’t work in a shrinking state divesting itself even of free access to the Child Support Agency and legal aid – poverty, and indifference to poverty. When the current vogue for retro style rolled in – cupcakes and Mad Men and Julian Fellowes’s reactionary fantasies – I thought it was a trend. I didn’t realise it was a prophecy, hung with other assaults on women’s needs, such as protesters standing like righteous zombies outside British abortion clinics. (Be pregnant, is their message. Be grateful).
I do want to note that while Gold offers some compelling figures, she also said this:
the long-hours macho working culture that thrills business because it enables men’s psychological dominance
Right. That sounds like the reason businesses would want people to work more. I think you nailed it there Ms Gold…
There are some interesting questions being raised though: why is the recession affecting men more in the US and women more in the UK? Is that, in fact, the truth? Was the GFC sexist? Does Gold refuse to work long hours because it is “macho” or because she is lazy?
Reviewing the “Heartland affair”, Robert Murphy notes how one climate scientist did not think that the actual evidence against Heartland was enough and decided to forge a more “damning” document; and how gleefully the rest of the climate change movement began adopting this clearly forged document with no skepticism whatsoever:
Now to be sure, climate science isn’t the same thing as politics and the blogosphere. Just because these climate alarmists showed ridiculously bad judgment when it came to the Heartland affair, doesn’t necessarily mean that they are wrong about the trajectory of global temperatures in the absence of mitigation strategies.
However, I do think this episode—and the reaction of the skeptic community during Climategate—are quite illustrative of the two camps’ approaches to the actual science. Back when the Climategate emails were first spreading around the Internet, I distinctly remember many people in the comments at blogs such as ClimateAudit warning their peers by saying things like, “Guys, remember, we’re skeptics. This is too good to be true. Let’s not jump up and down on this, because it might be a trap to make us look gullible.”
In contrast, the major players on the other side—when Heartland was “caught” saying things that were far more absurd than what the Climategate emails revealed—jumped with glee. For example…
Walter Russell Mead posits his analysis of the incentives leading to distortions in the climate debate:
- The climate movement’s proposals (above all, the global carbon treaty that in theory will subject the economic output of every country on earth to global controls) are radical, costly and virtually certain to fail.
- To be enacted, these unpromising measures require an unprecedented degree of consensus, as every major country on earth would have to accept, ratify and then enforce the climate treaty the movement seeks.
- The climate movement must therefore be, in Dean Acheson’s words, “clearer than truth” in order to stampede public and elite opinion around the world into a unique and unparalleled act of global legislation.
- Because many in the climate movement believe that this treaty is literally a matter of life and death for the human race, the moral case both for stretching the evidence and attacking critics of that agenda as aggressively as possible looks strong to weak minds.
- The absence of any central authority or quality control in the climate movement (and the tendency of unbalanced foundation execs and direct mail contributors to provide greater support to those ready to take more aggressive action and espouse more alarming ideas) gives more radical and less responsible voices undue prominence and entangles the whole movement in dubious claims.
- The increasing obstacles encountered by such a poorly conceptualized and poorly advocated agenda cause the embittered and alarmed advocates to circle the wagons and become both more extreme in their rhetoric and less guarded in their claims when precisely the opposite approach would work better.
I must say that I have a lot of sympathy for this position, although I do not think the phenomenon is limited to the “the world is ending” side of the debate; the other side is just as irrational and just as selective in its facts/deliberately deceptive for policy reasons.
What we essentially have is a political debate posing as a scientific one. The best example of this is the fact that the most commonly cited reason to believe in the climate change alarm is the supposed “scientific consensus” shown through petitions like this one — the idea being that if 31,487 scientists agree with something, it can’t possibly be wrong.
The very idea makes a mockery of Read the rest of this entry »
Andrew Sullivan linked to Forbes’ Timothy Lee citing a “study” called The Sky is Rising that claims to prove that the entertainment industry is not suffering.
Mike Masnick (who, full disclosure, has paid me to contribute to his Techdirt blog in the past) has a great new study out today about the growth of the entertainment industry. Driven by complaints from a handful of large movie studios and record labels, there’s been a tremendous amount of discussion of the negative effects of the Internet—specifically, illegal file-sharing—on content companies. In a new study funded by the Computer and Communications Industry Association (which frequently locks horns with content companies over copyright issues), Mike nicely illustrates that if you look beyond the largest firms, the entertainment industry is in great shape by almost any measure.
Masnick himself had some very optimistic-sounding words and some impressive-looking statistics to back them up, as well as a pretty infographic to explain what he is saying.
Yet, what we find when looking through the research — from a variety of sources to corroborate and back up any research we found — is that the overall entertainment ecosystem is in a real renaissance period. The sky truly is rising, not falling: the industry is growing both in terms of revenue and content.
This “study” is a great example of why you should never trust people with a clear agenda when they tell you what their research has proven. I took the step of actually downloading Masnick’s “study” and, to be blunt, it’s a load of bullshit.
I’m not sure what makes Masnick think that he is convincing, but he was obviously banking on no one who knows what they are talking about actually reading his study. He has a decent graphics designer, but even any first-year maths/economics student could tell you that his “study” is an extended polemic and not much else. For those of you out there who have never studied in this field, here’s a few of the many reasons why you should not trust a word in The Sky is Rising (aside from the fact that it’s called that, obviously):
According to who?
Take a look at this:
More recently, the movie industry has also been dubbed recession proof, due to the box office ticket sales that have held up rather well in comparison to other industries. In 2008, DreamWorks Animation CEO Jeffrey Katzenberg said, “Both traditionally as well as recently, we have seen that our product is, at worse, recession-resistant and, more optimistically and historically, has actually been recession-proof.” Additionally, according to the MPAA, total worldwide box office ticket revenues have increased by 25%, from $25.5 billion in 2006 to $31.8 billion in 2010.
According to PwC reports that include movie revenues beyond just box office ticket sales, the film industry has grown worldwide by almost 6% over the five-year period from 2005 to 2010, exceeding approximately $82 billion in value. For an industry that claims to be plagued by piracy, this steadfast level of growth during the Great Recession appears to justify the boastful statements of being recession proof.
The “PwC” referred to is presumably international accounting firm Pricewaterhouse Coopers, the issue here is that the “study” has not even said this, let alone provided a way to see the PwC data. What we do have is a nice-looking chart that doesn’t really say anything.
But wait, what about ..?
We can intimate that we are seeing the MPAA box office revenues from 2006-10, but there is a lot of information missing:
- Obviously, the US market has been quite stagnant while the international market has been steadily growing, why is that?
- Where has the growth been? We are told that other countries have high ticket sales, but not how they changed over the same time period.
- How have films been doing relative to the wider world? (i.e. if Nigerian films are booming, is that a sign of films doing well or of Nigerians doing well?)
Other films that deserve to be mentioned are independent films that don’t generate mainstream box office ticket sales. In 2011, the Sundance film festival received around 4,000 entries, and independently-financed films are being produced with renewed vigor as production costs have dropped.
- How have production costs dropped? What are these costs? What were they before and what are they now?
- Why don’t “independent films” achieve box office sales? Obviously they achieve some, how many do they actually get and why is it so much less than “non-independent”?
- For that matter, what do you define as “independent”? Does that include everything outside of the major US studios? Does it exclude big Bollywood productions?
Oh, it’s obvious is it?
Probably the biggest error that Masnick makes repeatedly is that he simply states facts that are “clear” without any evidence to substantiate them. I have picked a few examples out, but this happens again and again (emphasis added):
In 2001, Forbes published an estimate that assumed around 13,000 video releases were created every year and pegged the entire US porn industry to be valued at less than $4 billion. The widespread piracy of these types of movies is putatively ubiquitous, but despite this copyright infringement, predictions for the demise of the adult film market seem to be dismissed easily, given that the demand for adult entertainment seems to be going strong.
It “seems to be going strong”??? According to who? You can just “feel it”? Because the people making the movies definitely seem to think that their industry has taken a massive hit and, by the way, this has led to a competition to see who can be more “extreme” in order to capture the shrinking number of guys who actually pay for porn. This “fact” needs to have some substance, i.e. “which seems to be growing strong, as we can see from the increase in sales reported by [x]”.
Similar for these:
However, outside of advertising budgets, consumers are still willing to subscribe to television services in significant numbers even when free over-the-air broadcasts are widely available.
… These digital distribution methods for movies and shows are still in their infancy, but the convenience for viewers creates valuable services — which appear to be in growing demand as traditional television networks are beginning to provide their own online video strategies.
… A TV show or movie can be produced for a fraction of the cost compared to a decade ago, so many more kinds of shows can be developed with less risk.
What are these “significant numbers”? What is the demand for digital distribution? What fraction of the costs of a decade ago is production at now? This is actually a nice segue into my next point:
Volume published doesn’t mean anything
“Production costs” are relative, but what have undeniably dropped are distribution costs – mostly because they have gone from something (i.e. the cost of creating a physical product to distribute) to nothing (the cost of distributing a digital file). As a result, the volume of units has increased dramatically in film, publishing and music. This does not say anything about the number of people watching them or, most importantly, their quality (I have already argued that the quality of music being produced has been declining recently).
Here’s Masnick’s take:
With the cost of both production and distribution falling dramatically, different options for watching movies are more widely available than ever before, which creates an environment where a low budget film can potentially become enormously popular. Examples like Paranormal Activity, The Blair Witch Project and El Mariachi might be rare, but they also demonstrate the very real possibility for moviemakers to produce incredibly profitable films without a $200 million budget. There may be some exaggerations regarding movie budgets, but memorable (and profitable) storytelling doesn’t necessarily require an Avatar-sized budget.
Here are some numbers for you: according to IMDB, these three films, released in 2009, 1999 and 1993 have grossed $444,045,819 to date with combined budgets of $295,000 (most of which was for El Mariachi). Avatar, on the other hand, had a budget of $237,000,000 but grossed $2,782,275,172 in two years. Even factoring in the budgets, Avatar grossed six times as much in two years than those three films did in a combined 35.
What does this say? Whatever you think about “memorable storytelling”, Avatar-style productions are immensely more profitable than their smaller, cheaper counterparts and a lot more people are willing to pay for them. If the movie industry can no longer produce the Avatars of this world, that is a problem.
Now here’s where piracy comes in: people will not be thinking long-term about the problem because we inevitably choose short-term rewards (watching Avatar for free!) over long-term ones (more Avatars being made) – see hyperbolic discounting. Ultimately, however, if we all stop paying to watch Avatar there will not be another James Cameron movie made ever.
… The line between amateur and professional video is even becoming difficult to define, as the children from the viral video “Charlie Bit My Finger” have gone on to become minor celebrities — earning enough income for Charlie’s family to afford a new house.
I only just saw this meme, but I’m pretty blown away by it. It makes it all so beautifully clear.
“We are Wall Street. It’s our job to make money. Whether it’s a commodity, stock, bond, or some hypothetical piece of fake paper, it doesn’t matter. We would trade baseball cards if it were profitable. I didn’t hear America complaining when the market was roaring to 14,000 and everyone’s 401k doubled every 3 years. Just like gambling, its not a problem until you lose. I’ve never heard of anyone going to Gamblers Anonymous because they won too much in Vegas.
Well now the market crapped out, & even though it has come back somewhat, the government and the average Joes are still looking for a scapegoat. God knows there has to be one for everything. Well, here we are.
Go ahead and continue to take us down, but you’re only going to hurt yourselves. What’s going to happen when we can’t find jobs on the Street anymore? Guess what: We’re going to take yours. We get up at 5am & work till 10pm or later. We’re used to not getting up to pee when we have a position. We don’t take an hour or more for a lunch break. We don’t demand a union. We don’t retire at 50 with a pension. We eat what we kill, and when the only thing left to eat is on your dinner plates, we’ll eat that.
For years teachers and other unionized labor have had us fooled. We were too busy working to notice. Do you really think that we are incapable of teaching 3rd graders and doing landscaping? We’re going to take your cushy jobs with tenure and 4 months off a year and whine just like you that we are so-o-o-o underpaid for building the youth of America. Say goodbye to your overtime and double time and a half. I’ll be hitting grounders to the high school baseball team for $5k extra a summer, thank you very much.
So now that we’re going to be making $85k a year without upside, Joe Mainstreet is going to have his revenge, right? Wrong! Guess what: we’re going to stop buying the new 80k car, we aren’t going to leave the 35 percent tip at our business dinners anymore. No more free rides on our backs. We’re going to landscape our own back yards, wash our cars with a garden hose in our driveways. Our money was your money. You spent it. When our money dries up, so does yours.
The difference is, you lived off of it, we rejoiced in it. The Obama administration and the Democratic National Committee might get their way and knock us off the top of the pyramid, but it’s really going to hurt like hell for them when our fat a**es land directly on the middle class of America and knock them to the bottom.
We aren’t dinosaurs. We are smarter and more vicious than that, and we are going to survive. The question is, now that Obama & his administration are making Joe Mainstreet our food supply…will he? and will they?”
These “occupy” idiots don’t seem to think about what it really takes to become a Wall Street executive. Whatever you want to say about Wall Street, they fight to get where they are and they work bloody hard to stay there. People complain about inequality, but the elites are pulling longer hours than ever, knowing that with the wrong decision they could lose everything at any moment, while the “99%” demand their “right” to a 35-hour work weeks with benefits.
For more on how the West has lost its worth ethic, see this TED talk by Niall Ferguson:
A friend of mine recently argued to me that Egypt showed that police power is not enough to prevent a revolution, therefore the Arab countries that have not yet seen widespread protests must be doing something right. Not so my friend – Egypt and Tunisia were very different cases to the rest of the region.
Tunisia is the most modern, and most secularised Arab country, with the highest level of economic development out of all of them. Egypt has a 6,000-year history as a proud nation and the Egyptian army is made of Egyptians, who are patriotic and love their country, their people and their nation. This is why Egypt’s military response to the protests was muted, despite Mubarak’s best efforts; even though he was a military leader originally, he did not have the sufficient influence over his army to make it brutal enough to stamp-out the unrest that his country was seeing.
Contrast this with Libya. Gaddafi was not a patriot and he was not about making his country great, he has always been concerned with power and power alone. He changed the flag and changed the army – relying less on Libyan recruits and more on imported mercenaries to make-up his military and his secret police. These are not loyal Libyans serving their country; they are career thugs, loyal only to the man who pays them. This is why they have few qualms about firing indiscriminately on “their” own people and why more is needed than just protests to take Gaddafi down.
It is obvious now that “people power” was not enough to depose Gaddafi, and those opposing him have realised this. Having taken a significant chunk of the Libyan coast, they have begun forming and training a militia in order to pose a challenge to Gaddafi’s private army.
Subtle details in the media’s language says everything in a story like this. Originally, the Libyans filling Benghazi’s centre were “anti-government protesters” or “demonstrators”, similar to Egypt and Tunisia, as well as Bahrain, Yemen and all of the other countries seeing unrest. One month on, the Egyptians and Tunisians are “revolutionaries” – having protested their governments down. In Libya, they are now “Libyan rebels”.
WASHINGTON — President Obama said Friday that he would appoint a special representative to Libya’s rebel leaders and that the Treasury Department had placed sanctions on nine more family members and friends of Col. Muammar el-Qaddafi in an effort to force the Libyan leader to resign.
What’s the significance of this? Revolutions have revolutionaries, and Libya is no longer seeing a revolution. Rebels belong to a different class of event: a civil war. The “demonstrators” have become a bona fide militia and are now battling Gaddafi’s forces for territory, taking the country city-by-city and struggling to hold on to what has been gained. Unfortunately, people power is not enough to overcome a true dictatorship – what has yet to be seen is whether or not the West needs to step-in and help drive Gaddafi’s forces out of Tripoli*.
*Or if you’re Paul McGeough, whether the Zio-Crusader Empire is going to occupy Libya like it did Iraq, Afghanistan and Palestine…
Photos: from this awesome photoessay in The Atlantic.