William Paul Bell Queensland University Researcher

Why is mainstream economics not a social science but ideological mathematics?

Posts Tagged ‘sociology

Inclusive growth and climate change adaptation and mitigation in Australia and China: Removing barriers to solving wicked problems

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acc_logo_strip_col_bannerThis reports aims to assist the Sino-Australian bilateral relationship adapt to meet China’s new policies and to facilitate a smoother transition to a low carbon future.  Southwest University of Finance and Economics (SWUFE), Chengdu, China and the University of Queensland, Brisbane, Australia held a workshop at SWUFE to develop a guide to China’s low-carbon policies and their implications for the Sino-Australian energy trade and sectors.  This report results from the workshop.  Chapter 3 contains the guide to China’s low emission policies and discusses market-based experiments within China’s command-and-control electricity sector.  Chapter 4 discusses Australia’s poorly implemented neoliberal policies within its energy sector and provides an informative market-based case study for China on what to avoid.  Chapter 2 discusses the implications of Australia and China’s low emission policies. Chapter 5 discusses barriers to the transition to a low emissions economy.

Climate change is one of the world’s major challenges.  Others include increasing inequality and poor economic growth, creating a decline in inclusive growth.  Declining inclusive growth and climate change are interrelated wicked problems.  Their solution is technically and economically viable given appropriate investment but the absence of a price on carbon in Australia is a major obstacle to directing investment consistent with a low emissions future.

Australia is transitioning from a mining to a more service orientated economy.  However, Australia’s uncoordinated energy and climate change policy and poorly implemented neoliberal policies in the energy sector are undermining investment confidence and hindering both inclusive growth and the transition to a lower emissions economy.  Energy and climate change policies need bring together to restore investment confidence within the electricity sector.  The Integrated Systems Plan has gone some way to address this problem.  Similarly, Australia’s uncoordinated growth and climate change policies are hindering inclusive growth and the transition to a lower emissions economy.  Growth and climate change policies need bringing together to engender confidence and direct investment compatible with a low emissions future.  Notably, Infrastructure Australia has gone some way to address this issue at the national level but the lack of transparency and independence in other jurisdictions undermines Infrastructure Australia’s effectiveness.

Poor policy coordination is also hindering solutions to a host of other interrelated wicked problems.  These wicked problems include massive increases in retail electricity prices, private school fees and private health insurance, the inability to undertake major tax reform, such as introducing a tax on sugar or carbon or introduce road user charges to replace the declining revenue from fuel excise duty.  There is ample and sound evidence-based research to solve these wicked problems but there is an inability to enact policy in the interest of the electorate.

The key findings of this report are four common barriers to enacting policy to solve these wicked problems.

(1) Political donations present a conflict of interest.

(2) Adversarial politics and political wedging reduce the ability to address complex problems.

(3) There is an absence of academic economists informing the public debate to provide impartial advice.

(4) Unrealistic models of the economy and human behaviour are misinforming policy.


G8 or G20 Protests and Computable General Equilibrium (CGE) modelling and its Dual Instability Problem

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This article discusses why Computable General Equilibrium (CGE) models are important to the G8 or G20 protests and why CGE models are unsuitable for policy analysis for the following two reasons, CGE lacking microfoundations and the dual instability problem.

First, why are CGE models important to the G8 or G20 protests?  An example of a global CGE model is the Global Trade Analysis Project (GTAP 2009) coordinated by the Centre for Global Trade Analysis, Department of Agricultural Economics, Purdue University.  GTAP (2009) claims that their model provides a common language for global economic analysis; they cite the use of GTAP in three of the five quantitative studies at the 1995 conference of the WTO’s Uruguay Round Agreement and in virtually all the quantitative work for the 1999 Millennium Round of Multilateral Trade.  This example indicates the credibility and perceived importance of CGE. Read the rest of this entry »

EU acknowledges the failure of traditional economics to predict so adopts agent based modelling

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“This long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.”
— John Maynard Keynes
A Tract on Monetary Reform (1923), 80.

Traditional economics has failed to predict the knock on effects of the financial crisis says the EU. The Eurace project is designed to remedy this failure, which uses an agent based modelling methodology as an alternative to the rational representative agent model that is a cornerstone of neoclassical economics.  The post Progressing from game theory to agent based modelling to simulate social emergence further discusses agent based modelling.   Read the rest of this entry »

GDP as a proxy for well being misses the mark

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The report prepared for the President of France, Nicolas Sarkozy, by two Nobel prize-winning economists, Joseph Stiglitz and Amartya Sen, has proposed ways of improving our measurement of economic performance and social progress (Gittens 2009).  GDP measures the production of an economy.  There are at least three problems with GDP as a proxy for well-being.  First, this proxy may hold for countries outside the OECD membership, where the basics such as shelter, food, access to medical services, and clean water and sanitations are lacking.  Second, what is measured becomes a policy target, in this case a misguided target in OECD countries.  Third, GDP becoming a target circumvents the important discussion of what are suitable measures for well-being.  Equating the level of GDP to the level of well-being reduces the study of economics to an optimisation problem, allowing neoclassical economics the pretence of being scientific.  My post ‘The G8 protests and the logically inconsistent foundations of neoclassical economics’ further discusses this scientific pretence.

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