As for middle-class incomes in the USA, the picture is more complicated than it seems. For one thing, as I’ve noted, part of the issue is that in the USA most of the gains have been going to the better-off - to a large extent, the fact that the American middle class has been happy to let the uber-wealthy cream off the majority of the gains is a political issue. The second point is that some more libertarian bloggers have been arguing that these figures don’t include benefits - that is, employer-funded healthcare, I presume retirement benefits, and so on. When these are taken into account, the picture looks a bit better.

One other complicating factor is that inflation misses improvements in the quality of goods and services, so real income growth in some ways probably substantially understates how our standard of living improves.

#2 Bingo Bango Boingo:

You said: “Against Robert’s well-reasoned position we have a grab-bag of fashionable issues that together add up to not much by 2030 … By the way, the ‘nation’ is being ‘built’ all around you, Paul H, and routinely with the use of superannuation capital. You didn’t notice? Oh that’s right ‘nation building’ is big government projects dealing with big government problems. Please.”

Lovely manners mate! I never knew that my suggestion that “Garry Weaven with his clout in the industry superfund arena should start pushing his weight, which is potentially massive” is part of a “grab-bag of fashionable issues”. In fact, I’ve been looking in vain for suggestions that the superfunds, and particularly the industry funds, should start taking more of an interest in setting up investment vehicles over which they have more control and that are immune to the financial engineering and fee excesses of some of our more inventive merchant/investment banks. Who said I said anything about “government”? Should I now add “Please” as a rhetorical flourish? Please.

I don’t see much nation-building going on here BBB: most of what I see is Australians continuing down the usual road of spending disproportionate amounts on their homes, increasingly on McMansions/large houses in the wrong places. A friend of ours turned up the other day, disconsolate that his superfund share portfolio contained Allco, ABC Learning and Babcock & Brown Power! What a trifecta!, all selected and managed for him by one of the mostly highly-regarded mob of financial advisers in this town! Good to see super capital employed to such wonderful effect! (Didn’t affect his adviser’s fees though.)

#3 Katz and other posters on the minutiae of the bet

I think we’ve got inflation factored into the bet. I’m relaxed about paying up if it is a close call. If it is a close call, then I regard Robert as having won the bet: and please let’s not have a discussion about what “close” means.

#8 Peter:

Sure, there is an extraordinary amount of invention, but only within the last few days the Bush administration’s Bureau of Land Management issued a 2 year moratorium of approvals for solar farm developments on US federal land. Don’t underestimate the power of the status quo to preserve their patch or to confuse the living daylights out of public opinion in considering alternatives to fossil fuels.

#13 Adrian:

Thanks for the hooray. I suspect there is something missing in Robert’s analysis that fails to distinguish between “imperial growth” / “winner growth” and “world growth”. I think I remember something in Indian Studies at Melbourne Uni in 1966 that looked at the Indian textile industry in the 1830s or thereabouts and how the Lancashire mills snuffed the Indians out.

Sorry, this is very vague and tangential, but I think maybe I’m suggesting something like “Can everyone be winners at the same time?” I think the answer is Not necessarily, and only by clever diplomacy and a new Realpolitik. I don’t think successfully clever diplomacy will happen. I think Australia will be marginalised as an insignificant player in these games. I suspect Rudd’s grand Asia-Pacific initiative earlier this month may have been based on a perception of risk similar to mine. At least, I hope it was! Maybe some LP bloggers can shed some light on this for me.

Whatever, we are in for the ride of our lives – and all we seem to have are focus-group-driven politicians at the helm. Time for some leadership (and bipartisanship? instead of this assinine comic book crap from Nelson and Greg Hunt.). Dr James Henson, the pre-eminent climate scientist suggested last week that CEOs of fossil fuel companies should be tried for crimes against humanity and the planet. I suggest that we put our politicians on notice that we’ll refer them to Henson unless they seriously commandeer every best brain in Australia to try to figure out our best way forward!

#24 Tony of South Yarra

Wow! That was SO illuminating! Time, methinks to institute a code for bloggers called “The blog impact statement”. If you’ve got nothing to say, then don’t say it.

#30s and thereabouts: Jack Strocchi and Mercurius

Enjoyed and respected your comments but they’ll take time to think about. By the time I’ve digested them, LP will probably have moved on if it hasn’t already. This is the fundamental weakness of these blogs – no time for generating considered responses, or at least it is for people like myself who prefer to try to put my brain ahead of my typing fingers.

The term of this bet is 22 years. Joseph Stiglitz was recently reported in the Guardian that “In the US, real middle-class incomes have not yet recovered to the levels attained before the last recession in 1991”. That’s 17 years and I suspect they won’t be rising in the next few years.

Cheers

We depend on nationalised, large-scale fundamental resourcing. THese industries look like dinosaurs as city dams dry up, the Murray-Darling food bowl withers and brown-coal gets carbon-priced to the max.

Down-sizing and localising reduces transport costs but also reduces economies of scale. The market will eventually realise that we have been dissipating our ecological capital when there is a reduction of income flows from these industries, reflected in a major write-down of natural values.

Evidently many cities and rural areas will there will be a trend towards stand-alone local self-sufficiency in resources at a smaller scale and local location. eg backyard or roof top gardens, rainwater harvesting tanks and solar-powered generators.

It might be possible to minimise the higher costs of food and water by shipping or piping it in from areas where it is more abundant. But this will increase energy costs. How much wealth will be lost depends on the possibility of re-forming power stations to run on alternative energies either nuclear, solar or hydro.

So the economics of adapting to climate change very much depend on the development of cheap, renewable, non-carbon based energy systems. This means nothing less than an energy revolution comparable to that which occurred with the introduction of electricity at the end of the 19th c.

It is possible that resource owners and managers may conclude that re-forming the energy industry is too hard and will be too little too late. THen comes the hell-in-a-high-water-handbasket scenario where resource controllers aim to maximise financial capital accumulation and insulate themselves from ecological capital dissipation.

I wouldnt put it past them.

For some people, the sense that we’re living in “the last of days” lends special meaning to their lives - whether their vision is apocalyptic, Manichean, or just plain gloomy, some people feel that life is more special if it’s under imminent threat of spectacular collapse.

For other people, the sense that “things can only get better” lends special meaning to their lives - whether it’s a belief in the better angels of human nature, or just dumb hope based on the empirical fact that, hitherto, humans have always been up to the task of solving the myriad problems we create for ourselves. Otherwise we wouldn’t be here to fret and fuss over the next tranche of doom that’s slouching towards Bethlehem…

Either way, we believe whatever we need to believe to get us out of bed in the morning. But I’m in the latter camp. I believe the future will be better and I, for one, welcome our coming robot overlords!

I also note in passing that this thread is pretty good evidence to counter the RWDB flying-monkey argument that left-leaning folk are doomsayers and panic-merchants who use fear of future disaster as a means of present political control. I’d direct that canard more to the RWDB “we must tap your phones to protect you from terrsts” camp.

All you have to do is look at the behaviour of financial markets, which have been correctly predicting high rates of global economic growth for the past generation. The overall trend of financial market asset valuation remains strongly positive, even with the knowledge of the higher costs of a carbon economy being slowly factored in.

That process of asset accumulation is only going to continue, if not accelerate, as giga-countries like China, India, Brazil and Indonesia get on the growth bandwagon. Their economies will compete to produce more and better quality goods which will raise overall global income. AUS will get a slice of that action, from export demand, immigration, innovation and investment.

The fly in the ointment is our economies growth path is the undervaluation of the raw material world: the cost of overusing our geological endowments as a source of wherewithal and the cost of overusing our metereological environment as a sink for waste. The true cost of the ecologic elements of the economic system is much
higher than we thought.

By the same token intellectual property is also undervalued by financial markets due to its free availability of easily reproducible digital goods. The massive digital commons should count as “mental commonwealth”, just as parks and beaches count as “material commonwealth”, even though both do not have conventional market values.

However AUS is well placed to capitalise on the coming global shortage of adequate material sources and sinks. We could make a lot of money out of the global carbon trading economy.

It is likely that AUS’s mineral endowments will increase in value ie improved terms of trade. This is likely to occur even if coal was banned or massively carbon-levied. Also, AUS could utilise its large common area to sequester carbon or re-forest clear land.

No doubt the ecological crisis will tilt the composition of wealth back from the mental to the material. But the progress of AI will see more of the economy converted from material to mental transactions ie actual to virtual.

On balance I think that the accumulation in epistemological capital will greatly outweigh the dissipation of ecological capital. Therefore the net growth in general capital will be strongly positive.

Also, by 2030 Robert (and I if there are any takers) will be richer by the value of this bet.

BBB

I’m not sure that his allusion to ‘promising stuff’ was an allusion to alternative liquid-based fuels, and I’m almost certain he wasn’t talking about biofuels

Well I don’t know what else “promising stuff coming down the pipe that doesn’t require edibles for feedstock” could possibly mean. Please enlighten me!

BBB

You’ve got to keep up. There are several well funded startups with promising stuff coming down the pipe that doesn’t require edibles for feedstock.

Nonsense. If biofuels ever contribute more than 10% of the world’s liquid fuel needs I’d be astonished. There are vastly more efficient ways to capture the sun’s energy than growing crops, harvesting and refining them into liquid fuels, and distributing the fuel in tankers to a network of service stations.

Photosynthesis is 0.2-0.5% efficient. Internal combustion engines are about 30% efficient. God knows what the losses are in the sowing, harvesting, refining and distribution processes.

Solar PV is already 30% efficient. Transmission losses from the grid are about 7%. The charging cycle of modern batteries is about 90% efficient, as are electric motors.

Yes we have a lot invested in the current liquid fuels infrastructure, but it all depends on the stupendous energy return from conventional crude. If we try to keep the current infrastructure running on biofuels, the processes are so inefficient we’d need several extra planets.

Or, with sufficient cheap electricity (cough orbital solar cough nuclear cough), you can brute force the creation of liquid fuels using air and water.

Of course, but it would be far more sensible to use that “sufficient cheap electricity” to recharge electric vehicles.

Will Robert win his bet? Probably. By 2030 I’d say we’d be through the worst of it and may be slightly ahead. Is anyone taking bets on the 2010-2020 period?

But the idea that oil is such a unique commodity that no substitutes exist is totally fallacious.

True, but anyone who thinks the transition will be easy and without pain is delusional.

Its sounds like a no-brainer to me. Nearly every generation has left the next one better off than theirs. Are there any other suckers astute investors who would like to bet on the alternative position? I wouldn’t mind some of that action.

So do I.

Katz, note that the statistical measure is ‘mean real equivalised disposable household income’. The ‘equivalised’ bit means that the data is “adjusted by equivalence factors to standardise the income estimates with respect to household size and composition”.

So those factors you mention will be compensated for by the ABS, and should not affect the outcome of the wager.

Unfortunately history is littered with civilisations that thought that they were invincible, and continued to believe that a miracle solution would be found to overcome the intractible problems that they faced.

Well put. May I just make one small adjustment?

Unfortunately history is littered with civilisations that didn’t have science and capitalism.

BBB

I think my statement above just about covers it IMHO, your tired and irelevantly patronising comments notwithstanding.