Club Troppo

Herewith my op ed from the Herald and Age today.

What is the good life and are we living it?

Assessing and measuring wellbeing has vexed us since ancient times. But a funny thing happened on the modern world’s way to the answer. The metric that economists used to dampen down the business cycle – Gross Domestic Product (GDP) – received such prominence that it ‘went viral’ as we say these days. It became the default measure of national progress.

But there’s lots wrong with GDP as a measure of economic wellbeing let alone more general wellbeing. Measuring gross activity, it ignores the growth and depreciation of assets – such as buildings, equipment, natural resources like farmland and mineral deposits, biodiversity and clean air. And that’s not to mention the greatest asset of all – our knowhow.

Moreover GDP is measured by money changing hands. So converting bread, mince and salad into a hamburger increases GDP in McDonalds but not at home. More starkly, an evening of passion and pleasure only adds to wellbeing as measured by GDP if it happens in a bordello! More broadly still, GDP takes no account of the distribution of income or of our physical or social wellbeing.

But considering how different all these phenomena are, how can we possibly measure their sum impact on national wellbeing in a single number? Because it would ‘dumb down’ complex issues, economics Nobel Laureate Amatya Sen initially refused to participate in the construction of a single index of human development to help guide development in poorer countries. But he relented because he appreciated that, however unsatisfactory a single wellbeing index might be, it was better than the alternative. Given the thirst for simple answers, the alternative is even more dumbing down as would occur if GDP yet again filled the vacuum. (Continued)

A friend of mine, and a great contributor to Australian public policy, Mike Waller, a man who sketched out Australian competition policy on a single page and fed it up the line as an FAS in PM&C in the late 80s (or perhaps it was 1990), has wrenched himself from the policy scene (though not entirely, as he keeps his hand in with consulting and other occasional gigs) and joined a few others in setting up a company which will initially import Baufritz homes and which will ultimately build quite a lot of them here.

Baufritz homes are about the most ecologically fine habitation one can buy. Extremely energy efficient, made without nasty emissions, emulsions and things like that, they are exceptionally comfy. They are also quite pricey, but what do you expect for comfort?

One of the things that excites Mike is the fact that Australian homes are still built according to the craft model, with people turning up on site and building the house. There’s more prefabrication in units (with the efficiency gains having been captured and then some by the unions), but in houses there should be a lot more factory pre-fabrication with the ultimate building resembling a barn raising. This can reduce cost, and improve the quality and efficiency of houses.

Houses will initially be largely imported from Germany but will be progressively displaced by Australian production as scale rises. So drop into the new site of MGW Homes and let MGW know if you’re interested in buying one.

I tend to get increasingly grumpy as I get to the fag end of final exam marking.  This morning provided a classic example.  I received in my email inbox a typically sanctimonious, patronising communication from someone in another School who is in the habit of sending frequent unsolicited “environmental sustainability tips” to the entire faculty bulk email list.  There is no way to unsubscribe.

I failed to resist the temptation to fire off a retaliatory email (addressed only to the Head of School who I know shares my views) titled “sustainability tips for the non-credulous”:

1. Don’t recycle domestic waste in Darwin.  It’s uneconomic.  Darwin City Council pays $47 million per year for “waste and recycling services”.  It’s unclear from their audited annual returns how much of that is paid to make it feasible for the recycling contractor to sort recyclables and transport them to somewhere where they actually have some economic value.   If it made sense the taxpayer wouldn’t have to pay anything at all.
2.  Don’t buy “fair trade” coffee or any other fair trade product.  Apart from the fact that it tastes dreadful, the only sustainable way to help third world prosperity is genuine free trade and Ricardian comparative advantage.
3.  Oppose the plastic shopping bag ban.  All it does is force people to buy expensive garbage bags instead of using shopping bags as free bin liners.  Moreover the Productivity Commission found that plastic bags don’t present a significant environmental threat anyway (the same report also debunked recycling – see 1. above).
4.  Don’t be skeptical about all carbon tax opponents.  A carbon price only makes sense if most other countries impose one, which currently looks quite unlikely.  In the absence of an international price in the next few years all we’ll be doing is exporting jobs in return for a warm inner glow of self-righteousness.

Unfortunately the HoS didn’t resist the temptation to copy it to the entire School of Law and Business bulk email list.  I am keeping a watchful eye out for a Green Lynch Mob.

By calling it the greatest moral challenge of our generation, Kevin Rudd framed climate change as a moral issue. Now as Prime Minister Julia Gillard is putting a price on carbon. So why isn’t she getting credit from people who care passionately about the issue? The reason is the Knobe effect.

According to experimental philosopher Joshua Knobe, people are much more willing to blame a decision maker for bad side-effects than to praise them for good side-effects. And according to the conventional media narrative, Gillard’s decisions on carbon pricing a side-effect of her search for electoral advantage.

When the polls indicated that action on climate change was a vote winner Gillard supported Rudd’s plan for a carbon price. But when public opinion turned, Mark Arbib and Karl Bitar went to Rudd and told him to put the plan on ice. According to commentators like Gerard Henderson, Gillard supported this move. Now that her government’s survival depends on the Greens, Gillard is taking action.

Among those who see action against climate change as a moral imperative, Gillard is held responsible for stalling Rudd’s carbon pricing scheme in order to hold onto office. Then when she does decide to take action, her decision is discounted because it’s seen as an effort to hold onto office by appeasing the Greens.

Knobe tested his ideas on how people make moral judgments in a series of experiments. Here’s how he explains the results in The Edge:

(Continued)

Odd that a country like Oz in which economic reform has been such a buzzword, in which economists have, over the last generation had so much influence, have had so little impact on doing something so obviously sensible, which is to move as far as possible from the taxation of ‘goods’ to the taxation of ‘bads’.

It’s hard to detect any ideological patterns here. The Nordics do a bit better than the Anglosphere, if you correct for their larger than usual tax take (which would mean their green tax revenue would be a substantially higher proportion of GDP than suggested in the graph to the left).

There’s also a few of the more newly industrialising economies on the right hand (good) side of the graph – like Turkey and Korea and the Eastern European countries.  Perhaps they’ve got more advice from economists. Who knows?

But I wish we scored better than we do.

I’ve written a few times on measures of wellbeing on Troppo. For instance here and here. (In fact, reviewing it, I can’t find both of my articles for New Matilda on the Australia Institute’s GPI, so here they both are (pdf).) As ever Troppo was hip before the world caught up, but catch up it has and now everyone and their dog is getting a wellbeing index.

The French had a few Nobel Laureates drop in, the Canadians are off and running and the UK Conservatives (a tribute to Tony Blair as the Rudd/Gillard Govt has been a tribute to John Howard) want their index of wellbeing. And the OECD has just launched a very natty website where you can run the numbers on all the OECD countries over eleven thematic areas.

When you get into trying to set these indices up various things jump out at you.  The first is the mountain of literature on it all. Another is the many different methodologies you can employ – should you measure things ‘objectively’ or ‘subjectively’? Then there’s how they relate to each other – are the measures commensurate? And if you’ve got several measures of some aspect, how should they be aggregated and do they make sense together? It’s amazing how much the various indicators are just added up and given equal weight. Still it’s hard to think of any obviously superior approaches.

Anyway, the prompt for this post was reading the approach on the new OECD website to measuring health. The OECD have used the women’s clothing store Susan’s slogan “this goes with that”. They’ve slapped together two simple measures – and why not one objective one and one subjective one? The first is life-expectancy at birth and the second is self-reported health status. Sounds fair enough. The problem is that a predominant influence on self reported health status is age.  So those countries with older populations report lower health. There are other things going on of course, but ageing is obviously a large part of the self-reported health index. Japan which has the highest life expectancy at birth – a whopping 82 – and which has major ageing issues has the second lowest reported health status. By contrast, Australia has high life expectancy but relatively low ageing, at least compared with some of our OECD peers. The ageing Mediterranean countries are likewise high on the life expectancy index and low on the self-reported health index. I would have liked to see the self reported health index corrected for age.

Amongst developed countries, we’re nothing special, ranking 51st. This is from the Yale Environmental Performance Index. Though plenty of caveats need to be kept in mind, and the report itself is full of the implicit assumption that everything is always and everywhere better when it’s quantitatively measured (something that isn’t true), it seems to be about as thorough as these things can reasonably be.

Here’s their map of the world. If you’re keen on the environment head to Scandinavia (with France being an honorary Scandinavian for these purposes)  and better still North West Scandinavia (Iceland), which also seems to be making a better fist of recovering from it’s GFC meltdown than other countries (hint: if things get too bad, default). Antarctica and Greenland are also in pretty good shape, though I hear they can get quite cold.

The latest situation with damaged Japanese nuclear power plants seems if anything more potentially dire and apocalyptic than what prompted my comment on Don Arthur’s post:

Seems to me that whatever now happens the nuclear power option is almost certainly a dead duck in all western nations with free media. Whatever may be the wholly utilitarian risk/benefit analysis, the images and sense of Armageddon we’re seeing coming out of Japan will be imprinted on people’s minds permanently, meaning that politicians from now on simply won’t be able to propose nuclear power solutions without facing terminal electoral consequences.

The images coming out of Japan mean that it’s game, set and match to the Greens on the nuke power issue and we need to get on and develop other sustainable, low carbon baseload power options.

However, it appears that currently feasible non-nuclear and non-fossil fuel baseload power options (i.e. commercially deployable in the near future) are by no means obvious.

Nuclear pebble bed reactors seemed to hold some hope of cheaper nuclear options that didn’t carry the risk of overheating and meltdown so evident in Japan. However, trial reactor programs have largely been abandoned as unpromising.

Hydrogen fuel is fraught with problems that haven’t been solved, mostly related to its volatility, lightness and very low energy/volume ratio.  Compressing or liquefying it are both extraordinarily expensive.

Solar thermal might be capable of development to something approaching baseload constant availability with storage of energy generated during the day (e.g. superheated water) but certainly isn’t ready to be deployed on a large scale.  Moreover cost appears almost prohibitive:

Due to the nature of technology and the electricity market, says BZE, the carbon price would need to be above $70 a tonne before it could begin to have benefits for any new form of renewable energy generation. Between $70 and $200 a tonne, the signal is for extra growth in wind power combined with (what Wright calls) ”fossil gas”. More than $200 a tonne is needed to make baseload solar thermal viable at current prices.

“Clean coal” is almost certainly an expensive fantasy at least in most parts of the world, because very large underground storage caverns for the Co2 extracted to make “clean” coal just don’t exist.

So what else is there?  I’d be most interested in readers’  thoughts.

I note that the Green lobby is arguing that you really don’t need any baseload power sources at all, and that enough continuous electricity can be delivered by a patchwork of renewable but non-continuous sources, perhaps supplemented occasionally by reserve LNG plants.  Mark Diesendorff is a leading local proponent of that approach, and a retired scientist Dr David Mills claims that the US could meet all its current electricity needs with such a patchwork approach and without relying on either nuclear or fossil fuels.  Somehow I have my doubts, but again I’d be interested in readers’ thoughts (especially those with some relevant knowledge/expertise).

* Below is a guest post written by Ken G, a long-time Darwin resident and media/IT professional.  Ken discussed his ideas not only with Darwin “storm chaser” enthusiasts but with Darwin residents who went through Cyclone Tracy.  It’s a keen amateur perspective on a frightening weather event but well worth reading in my opinion.

Cyclone Yasi was a big and scarey storm system.  Media and politicians continue to refer to it as a Category 5 cyclone with winds nearing 300 kmh near its centre, the largest cyclone ever to hit a populated area in Australia.  But is that really true?  A fairly obscure story on Australian Geographic website points out that “the full force may never be known because there are no gauges where the monster storm made landfall” and an engineer interviewed on last Friday’s 7:30 Report suggested that available data indicated Yasi was probably a small to medium Category 4 system with winds a bit over 200 kmh.  But that’s just about the full extent of any questioning of Yasi’s actual strength and destructive force.  What does the evidence actually tell us?

Don’t get me wrong; it did seem like it was going to be a very large event and government authorities were well justified in taking the steps they did to encourage residents to take it very seriously.  Looking at the Bureau of Meteorology site and at the radar images you could see this was a very nasty storm that was going to hit the coast.  Moreover, even if it WAS “only” a small-medium Category 4 cyclone that’s still a very large storm with frightening and lethal destructive force.

(Continued)