Daily Archives: March 6, 2019

Jokes that teach economics – David Friedman

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Victoria’s Victims: Wind & Solar Obsession Sees 60,000 Families Cut From the Grid After (Another) 16% Power Price Hike

STOP THESE THINGS

An obsession with chaotically intermittent wind and solar has sent Victorian power prices through the roof: a 16% increase in 2018 follows a 12% increase the year before that.

Given its Labor government’s push for a 50% RET, Victorians will soon catch up with their neighbours in Australia’s wind and solar capital, South Australia – the place that suffers the world’s highest power prices.

The relationship between heavily subsidised and inherently unreliable wind and solar and spiralling power prices is pretty clear: see above the graphic from Dr Michael Crawford.

Making it evident that ‘green’ energy virtue signalling is a rich man’s sport, RE zealots still trumpet the purportedly ‘inevitable’ transition to an all wind and sun powered future: to hell with the cost, and to hell with those who can no longer afford electricity.

With power prices rocketing out of control, no end in sight, there are already

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On Revolutions

The Everyday Economist

A paper that I wrote with Alexander Salter entitled, “A Theory of Why the Ruthless Revolt” is now forthcoming in Economics & Politics. Here is the abstract:

We examine whether ruthless members of society are more likely to revolt against an existing government. The decision of whether to participate can be analyzed in the same way as the decision to exercise an option. We consider this decision when there are two groups in society: the ruthless and average citizens. We assume that the ruthless differ from the average citizens because they invest in fighting technology and therefore face a lower cost of participation. The participation decision then captures two important (and conflicting) incentives. The first is that, since participation is costly, there is value in waiting to participate. The second is that there is value in being the first-mover and capturing a greater share of the “spoils of war” if…

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The Everyday Economist

In my previous post, I discussed what I called the sleight of hand of an Olson-approach to political economy. The basic idea of that post was that Olson’s theory of concentrated benefits and dispersed costs is often used to malign policies deemed to be inefficient. The sleight of hand aspect is as follows. First, the economist deems a particular policy to be inefficient using a standard theoretical model. Second, the economist hypothesizes that the reason we have such an inefficient policy is due to special interests getting what they want because the costs are dispersed. Third, the economist examines either in historical detail or through regression analysis the role of special interests in getting the policy implemented. Fourth, if special interests are found to have had an effect on the policy being put into place, the economist concludes that the reason we have this inefficient policy is due to special…

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“The 30 billion dollar whim”

croaking cassandra

A week or two back I foreshadowed a forthcoming paper by my former colleague Ian Harrison reviewing the Reserve Bank’s proposals under which the banks would have to greatly increase the volume of capital simply to carry on doing the business they are doing now.

Like me, Ian spent decades at the Reserve Bank.  But much of his time was spent specifically in the area of banking regulation and bank supervision, including leading much of the modelling work done a few years ago as part of the Basle III process, which resulted in something like the current bank capital requirements.   He knows the detail in this area, has consulted on this sort of stuff since leaving the Bank, and has invested a great deal of time and effort over the last couple of months in getting to grips with the Bank’s proposals, reviewing the various papers they’ve published, and…

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