Archive for May 2013

Giving the Middle Class a 5% Discount on Ferraris

Apparently, those comparisons that claimed California insurance rates were coming down under Obama were bogus, essentially comparing apples to oranges.

Except they're not cheaper than what's currently available, as Peter Suderman noted here yesterday. That directly relevant point is totally obscured by phony claims that “it is difficult to make a direct comparison of these rates to existing premiums in the commercial individual market."

The chart [below] is from Avik Roy at Forbes. Here's more:

“The rates submitted to Covered California for the 2014 individual market,” the state said in a press release, “ranged from two percent above to 29 percent below the 2013 average premium for small employer plans in California’s most populous regions.”

That’s the sentence that led to all of the triumphant commentary from the left. “This is a home run for consumers in every region of California,” exulted Peter Lee.

But this is fantasy baseball. As Roy explains, the Obamacare folks are comparing significantly different products: "[Lee is] comparing apples—the plans that Californians buy today for themselves in a robust individual market—and oranges—the highly regulated plans that small employers purchase for their workers as a group."

When you compare, say, the new catastrophic plans being offered to similar ones that are out there right now, the supposed Obamacare price advantage strikes out faster than Dave Kingman in the clutch.


Essentially what is going on here is that Obama is touting a 5% drop in the price for a Ferrari, and hiding the fact that the Ford Taurus is going to double in price.  Or worse, the Ford Taurus will not even be for sale, so middle class Taurus buyers will be forced to buy a Mercedes or Ferrari.   Health care buyers don't care that a package of features is going to be a bit cheaper if they don't want those features.   And recognize that the price increase for healthy young people who feel no need to buy a policy will be facing an infinite price increase, from zero to whatever he now has to pay.

Movie Critique

If I see another movie where it turns out the bad buy secretly wants to be captured by the good guys as part of a more elaborate infiltration plan (e.g. Avengers, the new Star Trek, the recent Die Hard, Skyfall) I think I am going to scream.

Site Fixed -- Come Back and Visit

For a second time in a month the MySql database became corrupted.  I am not sure why, but it now looks like it may be a systematic problem I have to tackle rather than a one-off.

Here is what you may have missed today

Three Cheers For Goldwater Institute Fighting Pension Spiking

Taking the Fifth, Because No One Can Pledge Confidentiality any More

Update on Climate Temperature Sensitivity (Good News, the Numbers are Falling)

Three Cheers For Goldwater Institute Fighting Pension Spiking

The Goldwater Institute is threatening to sue the City of Phoenix in order to stop pension spiking.  According to the Arizona Republic,

State law says “unused sick leave, payment in lieu of vacation, payment for unused compensatory time or payment for any fringe benefits” cannot be used as compensation to compute retirement benefits.

State law also says that only “base salary, overtime pay, shift differential pay, military differential wage pay, compensatory time used by an employee in lieu of overtime not otherwise paid by an employer and holiday pay” may be used to calculate pension benefits.

This seems pretty explicit.  The City admits to using sick leave, vacation pay, and fringe benefit values (e.g. cars and cell phones) in the pension calculation.  So this seems pretty cut and dried.  The city is breaking the explicit letter of the law.

That Goldwater has a good case can be judged from the fairly lame defenses of Phoenix practices by local unions.  None seem to address the basic legal issue, but instead accuse Goldwater of "wasting taxpayer funds if it forced Phoenix to defend itself in court", a fairly hilarious attempt to claim the moral high ground of fiscal responsibility.

In fact, it appears that public workers believe  (and I think this is a fairly common belief) that their collective bargaining agreements trump state law.

John Teffy, a Phoenix Fire Department captain, said Goldwater should stand down.

“It seems to me that if the Goldwater Institute took the time to understand how the city works and how contracts work, they would know there is a much simpler way to address this than with (threats of) frivolous lawsuits,” Teffy said.

I did not understand this statement at first, but what I think he is saying is that since the "Contract" in his mind supersedes all laws, then the way to deal with this is through a contract renegotiation.  I think public workers see the writing on the wall and know that pension spiking is illegal, so they are hoping to handle this through a contract negotiation that just shifts this lost spiked value to workers in some other more legal form.  A great strategy for them, but a terrible one for taxpayers, who should not have to pay for the union's past illegality.

Taking the Fifth, Because No One Can Pledge Confidentiality any More

Teacher John Dryden was absolutely correct in counseling his students to take the fifth rather than fill out a school drug use survey.  Three cheers for him

Yesterday John Dryden, the Illinois teacher who warned his students that they did not have to answer questions about alcohol and drug use on a survey distributed by their high school, got a warning of his own. The Kane County Chronicle reports that the Batavia School Board voted to issue "a written warning of improper conduct" to Dryden, who also was docked a day's pay. Batavia School Superintendent Jack Barshinger explained Dryden's offense this way:

In this case, district teachers, social workers, guidance counselors, psychologists and others worked together for over a year to select a data-gathering instrument that could be used to determine what social or emotional issues our high school students are experiencing, and whether individual students could benefit from new or increased supportive intervention by our staff. These purposes were shared with our parents and our teachers.

The issue before the board was whether one employee has the right to mischaracterize the efforts of our teachers, counselors, social workers and others; and tell our students, in effect, that the adults are not here to help, but that they are trying to get you to "incriminate" yourselves.

Barshinger seems to think it is inconceivable that there could be anything wrong with the survey, since people with good intentions worked on it for "over a year." Yet the survey forms that Dryden picked up from his mailbox 10 minutes before his first class on April 18 not only asked about illegal behavior; they had students' names on them, thereby destroying any assurance of confidentiality.

Forget for a minute whether or not the public school employees were trustworthy (which is a heroic assumption in and of itself).  But consider local law enforcement.  They get a tip that kids have admitted drug use on these forms.  What do they do?  Well in many jurisdictions (imagine our own Joe Arpaio in action here) the police would immediately pull out every legal stop (and a few illegal ones likely) to seize these surveys.

Don't believe me?   Back in 2003 Major League Baseball asked its players to take a super-confidential drug test whose results would never be released for the purpose of assessing the extent of steroid use in baseball (almost exactly the same purpose the school is claiming).  Eventually, the FBI, Congress, and every other government agency tried, and were eventually mostly successful, in obtaining these supposedly secret confidential tests.

Several years later, Frank Mitchell was asked by MLB to investigate the steroid issue.  He asked for players to speak to him "confidentially" about steroid use.  The Players Association took better care of its members than this particular school does of its students, counseling players:

...while Senator Mitchell pledges in his memo that he will honor any player request for confidentiality in his report, he does not pledge, because he cannot pledge, that any information you provide will actually remain confidential and not be disclosed without your consent. For example, Senator Mitchell cannot promise that information you disclose will not be given to a federal or state prosecutor, a Congressional committee, or perhaps turned over in a private lawsuit in response to a request or a subpoena.

This is EXACTLY the statement that could and should have been made to students about this drug survey -- three cheers for one brave teacher willing to do so.  Shame on the rest of the school for its naivete (at best) and callous disregard for the students (at worst).

Update on Climate Temperature Sensitivity (Good News, the Numbers are Falling)

I have not had the time to write much about climate of late, but after several years of arguing over emails (an activity with which I quickly grew bored), the field is heating up again, as it were.

As I have said many times, the key missing science in the whole climate debate centers around climate sensitivity, or the expected temperature increase from a doubling of CO2 concentrations in the atmosphere  (as reference, CO2 in the industrial age has increased from about 270 ppm to close to 400 ppm, or about half a doubling).

In my many speeches and this video (soon to be updated, if I can just find the time to finish it), I have argued that climate computer models have exaggerated climate sensitivity.  This Wikipedia page is a pretty good rehash of the alarmist position on climate sensitivity.  According to this standard alarmist position, here is the distribution of studies which represent the potential values for sensitivity - note that virtually none are below 2°C.


The problem is that these are all made with computer models.  They are not based on observational data.  Yes, all these models nominally backcast history reasonably correctly (look at that chart above and think about that statement for a minute, see if you can spot the problem).  But many an investor has been bankrupted by models that correctly backcast history.  The guys putting together tranches of mortgages for securities all had models.   What has been missing is any validation of these numbers with actual, you know, observations of nature.

Way back 6 or 7 years ago I began taking these numbers and projecting them backwards.  In other words, if climate sensitivity is really, say, at 4°C, then what should that imply about historical temperature increases since the pre-industrial age?  Let's do a back of the envelope with the 4°C example.  We are at just about half of a doubling of CO2 concentrations, but since sensitivity is a logarithmic curve, this implies we should have seen about 57% of the temperature increase that we would expect from a full doubling of CO2.  Applied to the 4°C sensitivity figure, this means that if sensitivity really is 4°C, we should have seen a 2.3°C global temperature increase over the last 150 years or so.  Which we certainly have not -- instead we have seen 0.8°C from all causes, only one of which is CO2.

So these high sensitivity models are over-predicting history.  Even a 2°C sensitivity over-predicts the amount of warming we have seen historically.  So how do they make the numbers fit?  The models are tuned and tweaked with a number of assumptions.  Time delays are one -- the oceans act as a huge flywheel on world temperatures and tend to add large lags to getting to the ultimate sensitivity figure.  But even this was not enough for high sensitivity models to back-cast accurately.  To make their models accurately predict history, their authors have had to ignore every other source of warming (which is why they have been so vociferous in downplaying the sun and ocean cycles, at least until they needed these to explain the lack of warming over the last decade).  Further, they have added man-made cooling factors, particularly from sulfate aerosols, that offset some of the man-made warming with man-made cooling.

Which brings us back to the problem I hinted at with the chart above and its distribution of sensitivities.  Did you spot the problem?  All these models claim to accurately back-cast history, but how can a model with a 2°C sensitivity and an 11°C sensitivity both accurately model the last 100 years?  One way they do it is by using a plug variable, and many models use aerosol cooling as the plug.  Why?   Well, unlike natural cooling factors, it is anthropogenic, so they can still claim catastrophe once we clean up the aerosols.  Also, for years the values of aerosol cooling were really uncertain, so ironically the lack of good science on them allowed scientists to assume a wide range of values.  Below is from a selection of climate models, and shows that the higher the climate sensitivity in the model, the higher the negative forcing (cooling) effect assumed from aerosols.  This has to be, or the models would not back-cast.aerosols2

The reasons that these models had such high sensitivities is that they assumed the climate was dominated by net positive feedback, meaning there were processes in the climate system that would take small amounts of initial warming from CO2 and multiply them many times.  The generally accepted value for sensitivity without these feedbacks is 1.2°C or 1.3°C (via work by Michael Mann over a decade ago).  So all the rest of the warming, in fact the entire catastrophe that is predicted, comes not from CO2 but from this positive feedback that multiplies this modest 1.2°C many times.

I have argued, as have many other skeptics, that this assumption of net positive feedback is not based on good science, and in fact most long-term stable natural systems are dominated by negative feedback (note that you can certainly identify individual processes, like ice albedo, that are certainly a positive feedback, but we are talking about the net effect of all such processes combined).  Based on a skepticism about strong positive feedback, and the magnitude of past warming in relation to CO2 increases, I have always argued that the climate sensitivity is perhaps 1.2°C and maybe less, but that we should not expect more than a degree of warming from CO2 in the next century, hardly catastrophic.

One of the interesting things you might notice from the Wikipedia page is that they do not reference any sensitivity study more recent than 2007 (except for a literature review in 2008).  One reason might be that over the last 5 years there have been a series of studies that have begun to lower the expected value of the sensitivity number.   What many of these studies have in common is that they are based on actual observational data over the last 100 years, rather than computer models  (by the way, for those of you who like to fool with Wikipedia, don't bother on climate pages -- the editors of these pages will reverse any change attempting to bring balance to their articles in a matter of minutes).  These studies include a wide range of natural effects, such as ocean cycles, left out of the earlier models.  And, as real numbers have been put on aerosol concentrations and their effects, much lower values have been assigned to aerosol cooling, thus reducing the amount of warming that could be coming from CO2.

Recent studies based on observational approaches are coming up with much lower numbers.   ECS, or equilibrium climate sensitivity numbers (what we would expect in temperature increases if we waited hundreds or thousands of years for all time delays to be overcome) has been coming in between 1.6°C and 2.0°C.  Values for TCS, or transient climate sensitivity, or what we might expect to see in our lifetimes, has been coming in around 1.3°C per doubling of CO2 concentrations.

Matt Ridley has the layman's explanation

Yesterday saw the publication of a paper in a prestigious journal,Nature Geoscience, from a high-profile international team led by Oxford scientists. The contributors include 14 lead authors of the forthcoming Intergovernmental Panel on Climate Change scientific report; two are lead authors of the crucial chapter 10: professors Myles Allen and Gabriele Hegerl.

So this study is about as authoritative as you can get. It uses the most robust method, of analysing the Earth’s heat budget over the past hundred years or so, to estimate a “transient climate response” — the amount of warming that, with rising emissions, the world is likely to experience by the time carbon dioxide levels have doubled since pre-industrial times.

The most likely estimate is 1.3C. Even if we reach doubled carbon dioxide in just 50 years, we can expect the world to be about two-thirds of a degree warmer than it is now, maybe a bit more if other greenhouse gases increase too….

Judith Currey discusses these new findings

Discussion of Otto, one of the recent studies

Nic Lewis discusses several of these results

This is still tough work, likely with a lot of necessary improvement, because it is really hard to dis-aggregate multiple drivers in such a complex system.  There may, for example, be causative variables we don't even know about so by definition were not included in the study.  However, it is nice to see that folks are out there trying to solve the problem with real observations of Nature, and not via computer auto-eroticism.

Postscript:  Alarmists have certainly not quit the field.  The current emerging hypothesis to defend high sensitivities is to say that the heat is going directly into the deep oceans.  At some level this is sensible -- the vast majority of the heat carrying capacity (80-90%) of the Earth's surface is in the oceans, not in the atmosphere, and so they are the best place to measure warming.  Skeptics have said this for years.  But in the top 700 meters or so of the ocean, as measured by ARGO floats, ocean heating over the last 10 years (since these more advanced measuring devices were launched) has been only about 15% of what we might predict with high sensitivity models.  So when alarmists say today that the heat is going into the oceans, they say the deep oceans -- ie that the heat from global warming is not going into the air or the first 700 meters of ocean but directly into ocean layers beneath that.  Again, this is marginally possible by some funky dynamics, but just like the aerosol defense that has fallen apart of late, this defense of high sensitivity forecasts is completely unproven.  But the science is settled, of course.

Film Production -- The Strangely Favored Industry

My son and I were watching a TV show and at the end there was a blurb about it being made in Georgia.  I said to him "I guarantee that "filmed in Georgia" translates to "subsidized by Georgia."  He did not believe me, and could not understand why anyone would subsidize film production.  After all, we can argue about whether any government subsidized jobs make sense or just cannibalize investment in other areas, but film jobs are the most temporary and fleeting of all jobs.

Turns out I was right (I followed a web link from the credits):

Georgia production incentives provide up to 30% of your Georgia production expenditures in transferable tax credits.

The program is available for qualifying projects, including feature films, television series, commercials, music videos, animation and game development. With one of the industry’s most competitive production incentive programs, the Georgia Film, Music & Digital Entertainment Office can help you dramatically cut production costs without sacrificing quality.

Highlights from the Georgia Entertainment Industry Investment Act include the following:

  • 20% across the board, transferable flat tax credit with a minimum of $500,000 spent on qualified production and post production expenditures within Georgia
  • Additional 10% tax credit if a production company includes an imbedded Georgia promotional logo in the qualified feature film, TV series, music video or video game project
  • Provides same tax credits to all instate and out-of-state labor working in Georgia, plus standard fringes qualify
  • No limits or caps on Georgia spend; no sunset clause
  • For commercials and music videos, a production company may group multiple projects together to meet the $500,000 minimum spend on qualified expenditures

This is just insane.  WTF is the state doing subsidizing 30% of the cost of making commercials?  What could possibly justify this, except that this is a sexy business and it gives politicians a chance to rub shoulders with film people?   Why are Georgia business people taxed in order to hand money film producers?   What makes film production a "good" industry and, say, campgrounds a bad one?

Well, I suppose it could be argued that filming in Georgia would help advertise Georgia by showing scenes filmed on location in the state.  Except that the show we were watching was Archer, an animated series about spies based in New York City.  Not one second of the TV show has ever shown or ever will show a live image of Georgia, and I am almost all the way through the second season and not one location in the state of Georgia has been mentioned  (though they might have mentioned the one in Asia).


European Auster-Yeti

There are people who will swear to this day that, despite all evidence to the contrary, Bigfoot exists and they have seen it.  Paul Krugman similarly is just sure he has seen European austerity.  The rest of us are left scratching our heads for the evidence -- he doesn't even have a blurry photo or footprint.  Just tales from a friend of a friend, who is not only sure there has been austerity, but that it caused an old lady to dry her cat in a microwave and that if you swim 20 minutes after eating you will get cramps.

The official Keynesian story is that the PIIGS of Europe (Portugal, Italy, Ireland, Greece and Spain) have been devastated by cutbacks in public spending. Austerity has made things worse rather than better – clear proof that Keynesian stimulus is the answer. Keynesians claim the lack of stimulus (of course paid for by someone else) has spawned costly recessions which threaten to spread.  In other words, watch out Germany and Scandinavia: If you don’t pony up, you’ll be next.

Erber finds fault with this Keynesian narrative. The official figures show that PIIGS governments embarked on massive spending sprees between 2000 and 2008. During this period, their combined general government expenditures rose from 775 billion Euros to 1.3 trillion – a 75 percent increase. Ireland had the largest percentage increase (130 percent), and Italy the smallest (40 percent). These spending binges gave public sector workers generous salaries and benefits, paid for bridges to nowhere, and financed a gold-plated transfer state. What the state gave has proven hard to take away as the riots in Southern Europe show.

Then in 2008, the financial crisis hit. No one wanted to lend to the insolvent PIIGS, and, according to the Keynesian narrative, the PIIGS were forced into extreme austerity by their miserly neighbors to the north. Instead of the stimulus they desperately needed, the PIIGS economies were wrecked by austerity.

Not so according to the official European statistics. Between the onset of the crisis in 2008 and 2011, PIIGS government spending increased by six percent from an already high plateau.  Eurostat’sprojections (which make the unlikely assumption that the PIIGS will honor the fiscal discipline promised their creditors) still show the PIIGS spending more in 2014 than at the end of their spending binge in 2008.

As  Erber wryly notes: “Austerity is everywhere but in the statistics.”

Environmentalist vs. Environmentalist

The confrontation may be coming soon in the environmental community over wind power -- it certainly would have occurred already had the President promoting wind been Republican rather than Democrat.  I might have categorized this as "all energy production has environmental tradeoffs", but wind power is so stupid a source to be promoting that this is less of a tradeoff and more of another nail in the coffin.  As a minimum, the equal protection issues vis a vis how the law is enforced for wind companies vs. oil companies are pretty staggering.

“It happens about once a month here, on the barren foothills of one of America’s green-energy boomtowns: A soaring golden eagle slams into a wind farm’s spinning turbine and falls, mangled and lifeless, to the ground.

Killing these iconic birds is not just an irreplaceable loss for a vulnerable species. It’s also a federal crime, a charge that the Obama administration has used to prosecute oil companies when birds drown in their waste pits, and power companies when birds are electrocuted by their power lines.”

“[The Obama] administration has never fined or prosecuted a wind-energy company, even those that flout the law repeatedly. Instead, the government is shielding the industry from liability and helping keep the scope of the deaths secret.”

“Wind power, a pollution-free energy intended to ease global warming, is a cornerstone of President Barack Obama’s energy plan. His administration has championed a $1 billion-a-year tax break to the industry that has nearly doubled the amount of wind power in his first term. But like the oil industry under President George W. Bush, lobbyists and executives have used their favored status to help steer U.S. energy policy.”

“The result [of Obama energy policy] is a green industry that’s allowed to do not-so-green things. It kills protected species with impunity and conceals the environmental consequences of sprawling wind farms.”

“More than 573,000 birds are killed by the country’s wind farms each year, including 83,000 hunting birds such as hawks, falcons and eagles, according to an estimate published in March in the peer-reviewed Wildlife Society Bulletin.

Nervous in the Market

No particular point to this post - just thinking out loud.  As a warning, the best way to make a million dollars with my investment advice is to start with 2 million.  I know others are in the same boat so perhaps this is just commiseration

This is an odd stock market.  To me, and to many others, stock price increases have outpaced the economic recovery, and are being driven now in large part by huge injections of printed money by the Fed via ongoing quantitative easing.

First and foremost, quantitative easing has been a savior for bank income statements.  Much of the new money ends up in banks, which shows up as increasing excess deposits.  Even at fractional interest rates, a trillion dollars of new deposits does wonders for bank profitability.  It's an odd sort of bank bailout, cheap if someday the Fed can unwind its balance sheet gracefully, very expensive if not.

Second, though, this money has also found its way into the securities markets, inflating what many people fear may be a bubble in equity and bond prices  (and perhaps even into a newly-reignited bubble in real estate, as house flippers again make their presence felt in California and Arizona home markets).  I have a friend at a party the other night who shook his head in remorse that he had missed the recent run-up in equity prices.  But, unlike many personal investors, he is too smart to jump in now.

I have stayed in the market, though at a reduced mix of my assets, having been convinced by others that you don't fight the Fed and as long as the Fed was injecting money into the financial markets, that security prices would rise almost irregardless of the fundamentals.

Which raises this problem:  I am as certain as one can be in such things that in the next 6-12 months the stock market will be lower, at least 10-20% lower, than it is today.   I am also fairly certain there is some positive run left before the bubble deflates  (you can see that today -- the market is up about a percent as I write this).  So I stay in, ready to skedaddle at a moments notice.

My fear is that almost everyone in the market has the same plan, so that the skedaddling will happen so quickly and so in mass that it will be hard for me as a casual investor to stay ahead of it.  As a result I am slowly liquidating, willing at some point to just miss out on the last stages of the bubble.

The real question is liquidate into what?  Bonds are perhaps more overvalued than stocks, so I certainly tend to stay away from long-duration bonds and bonds that have enjoyed a big run up, such as high-yields, which are trading at some ridiculously small premium to government bonds.  I would not invest in Europe right now at the point of a gun, and I have been anticipating a bursting of the China bubble for a couple of years now.  Commodities are always a crap shoot -- gold is falling and if OPEC does not act soon oil will be falling soon too.  Right now I have decided to sit for a while in short duration bonds, checking my greed at the door and accepting a low return.

Bringing Skepticism (and Math) to Electric Vehicle Fuel Numbers

Frequent readers of this blog will know that I am enormously skeptical of most fuel and efficiency numbers for electric vehicles.  Electric vehicles can be quite efficient, and I personally really enjoy the driving feel of an electric car, but most of the numbers published for them, including by the government, are garbage.  I have previously written a series of articles challenging the EPA's MPGe methodology for electric cars.

In just a bit, I am going to challenge some numbers in a recent WSJ article on electric vehicles, but first let me give you an idea of why I don't trust many people on this topic.  Below is a statement from, which bills itself as the official government source for fuel economy information (this is a public information, not a marketing site).  In reference to electric vehicles, it writes this:

Energy efficient. Electric vehicles convert about 59–62% of the electrical energy from the grid to power at the wheels—conventional gasoline vehicles only convert about 17–21% of the energy stored in gasoline to power at the wheels

The implication, then, is that electric vehicles are 3x more energy efficient than cars with gasoline engines.  I hope engineers and scientists can see immediately why this statement is total crap, but for the rest, here is the problem in short:  Electricity has to be produced, often from a fossil fuel.  That step, of converting the potential energy in the fuel to use-able work, is the least efficient step of the entire fuel to work process.  Even in the most modern of plants it runs less than a 50% conversion efficiency.   So the numbers for the gasoline cars include this inefficient step, but for the electric vehicle it has been shuffled off stage, back to the power plant which is left out of the calculation.

Today I want to investigate this statement, which startled me:

Factor in the $200 a month he reckons he isn't paying for gasoline to fill up his hulking SUV, and Mr. Beisel says "suddenly the [Nissan Leaf] puts $2,000 in my pocket."

Yes, he pays for electricity to charge the Leaf's 24-kilowatt-hour battery—but not much. "In March, I spent $14.94 to charge the car" and a bit less than that in April, he says.

This implies that on a cost-per-mile basis, the EV is over 13x more efficient than gasoline cars.  Is this a fair comparison?  For those who do not want to read a lot of math, I will preview the answer:  the difference in fuel cost per mile is at best 2x, and is driven not by using less fossil fuel (the electric car likely uses a bit more, when you go all the way back to the power plant) but achieves its savings by using lower cost, less-refined fossil fuels  (e.g. natural gas in a large power plant instead of gasoline in a car).

Let's start with his estimate of $14.94.  Assuming that is the purchased power into his vehicle charger, that the charger efficiency is 90%, and the cost per KwH in Atlanta is around $0.11, this implies that 122.24 use-able KwH are going into the car.  Using an estimate of 3.3 miles per KwH for the Leaf, we get 403 miles driven per month or 3.7 cents per mile in electricity costs.  This is very good, and nothing I write should imply that the Leaf is not an efficient vehicle.  But its efficiency advantage is over-hyped.

Now let's take his $200 a month for his Ford Expedition, which has an MPG around 15.  Based on fuel prices in Atlanta of $3.50 a gallon, this implies 57 gallons per month and 857 miles driven.  The cost is 23.3 cents per mile.

Already we see one difference -- the miles driven assumptions are different.  Either he, like a lot of people, don't have a reliable memory for how much he spent on gas, or he has changed his driving habits with the electric car (not unlikely given the shorter range).  Either way, the total dollar costs he quotes are apples and oranges.  The better comparison is 23.3 cents per mile for the Expedition vs. 3.7 cents a mile for the Leaf, a difference of about 6x.  Still substantial, but already less than half the 13x difference implied by the article.

But we can go further, because in a Nissan Leaf, he has a very different car from the Ford Expedition.  It is much smaller, can carry fewer passengers and less cargo, cannot tow anything, and has only 25% of the Expedition's range.   With an electric motor, it offers a very different driving experience.   A better comparison would be to a Toyota Prius, the c version of which gets 50MPG.  It is similar in most of these categories except that it has a much longer range, but we can't fix that comparison, so just keep that difference in mind.

Let's look at the Prius for the same distances we calculated with his Leaf, about 403 miles.   That would require 8.1 gallons in a Prius at $3.50, which would be $28.20 in total or 7 cents a mile.  Note that while the Leaf still is better, the difference has been reduced to just under 2x.  Perhaps more importantly, the annual fuel savings has been reduced from over $2200 vs. the Expedition that drove twice as many miles to $159 a year vs. the Prius driving the same number of miles.  So the tradeoff is $159 a year savings but with much limited range  (forgetting for a moment all the government crony-candy that comes with the electric car).

$159 is likely a real savings but could be swamped by differences in long-term operating costs.  The Prius has a gasoline engine to maintain which the Leaf does not, though Toyota has gotten those things pretty reliable.  On the other hand the Leaf has a far larger battery pack than the Prius, and there are real concerns that this pack (which costs about $15,000 to manufacture) may have to be replaced long before the rest of the car is at end of life.  Replacing a full battery pack after even 10 years would add about $1200 (based on discounted values at 8%) a year to operating costs, swamping the fuel cost advantage.

Also note that a 2x difference in fuel costs per mile does not imply a 2x difference in fuel efficiency.  Gasoline is very expensive vs. other fuels on a cost per BTU basis, due to taxes that are especially high for gasoline, blending requirements, refining intensity, etc.)  Gasoline, as one person once said to me way back when I worked at a refinery, is the Filet Mignon of the barrel of oil -- if you can find a car that will feed on rump steak instead, you will save a lot of money even if it eats the same amount of meat.    A lot of marginal electric production (and it is the margin we care about for new loads like electric cars) is natural gas, which is perhaps a third (or less) the cost of gasoline per BTU.   My guess is that the key driver of this 2x cost per mile difference is not using less fuel per se, but the ability to use a less expensive, less-refined fuel.

Taking a different approach to the same problem, based on the wells-to-wheels methodology described in my Forbes article (which in turn was taken directly from the DOE), the Nissan Leaf has a real eMPG of about 42 (36.5% of the published 115), less than the Prius's at 50.  This confirms the findings above, that for fossil fuel generated electricity, the Leaf uses a bit more fossil fuels than the Prius but likely uses much less expensive fuels, so is cheaper to drive.  If the marginal electrical fuel is natural gas, the Leaf also likely generates a bit less CO2.

Electric Vehicle Welfare Queen

No, we are not talking today about Elon Musk (though the name fits) but about this electric car buyer profiled in the WSJ:

Bronson Beisel, 46, says he was looking last fall for an alternative to driving his gas-guzzling Ford Expedition sport utility around suburban Atlanta, when he saw a discounted lease offer for an all-electric Nissan Leaf. With $1,000 down, Mr. Beisel says he got a two-year lease for total out-of-pocket payments of $7,009, a deal that reflects a $7,500 federal tax credit.

As a resident of Georgia, Mr. Beisel is also eligible for a $5,000 subsidy from the state government. Now, he says, his out-of-pocket costs for 24 months in the Leaf are just over $2,000. Factor in the $200 a month he reckons he isn't paying for gasoline to fill up his hulking SUV, and Mr. Beisel says "suddenly the car puts $2,000 in my pocket."

Yes, he pays for electricity to charge the Leaf's 24-kilowatt-hour battery—but not much. "In March, I spent $14.94 to charge the car" and a bit less than that in April, he says. He also got an electric car-charging station installed at his house for no upfront cost.

"It's like a two-year test drive, free," he says.

I hope you all enjoy Mr. Beisel's smug pride a driving a car using your money.

In my next post, I am going to dive deeper in the operating cost numbers here.  By the article, Mr. Beisel has cut his monthly fuel costs from $200 to $14.94, a savings of over 90%.  If these numbers are real, why the hell do we have to subsidize these cars?  Well, while it turns out that while the Leaf is a nice efficient vehicle, these numbers are way off.  Stay tuned.

Government-Enforced Pre-Paid Medical Plans

What she said

The banning of catastrophic-only plans infuriates me the most. Those are the only plans that are actually financially sensible for a healthy individual to purchase. Everything else on the market is a perverse by-product of the employer-based insurance system.

Worst case scenario with a catastrophic-only plan is you end up with $10,000 in debt. That’s a debt load many times smaller than what the Federal government thinks students should take out to get a college degree. We’ll let you borrow $100,000 to get a sociology degree but, we think that $10,000 is an unconscionable amount to pay for medical expenses? So unconscionable that we have to FORCE YOU to buy a plan with more extensive coverage?

Of course, we all know the real reason for this. it’s meant to force healthy young people to subsidize healthcare for older sicker people. Just force them to pay more for insurance than they ought to, and force them to buy more extensive coverage than is rational.

Pronouns, "Quotation Marks," and Punctuation (oh my)

Dr. Mercury at Maggie's Farm supports my use of "they" as the gender-neutral third person pronoun English needs but does not have (though he includes a tasteless picture of a family member in distress).   But he wants to make it clear that I am 20 years late in joining the revolution.  So be it.   I will add that I am also on board with putting punctuation outside of "quotation marks".  For anyone who has done a lick of computer programming, in which resolution order of mathematical symbols is a key part of early training, putting sentence punctuation inside of quotation marks makes no sense.  Quotation marks are like parentheses in math, holding together one coherent expression, and so putting sentence punctuation inside them (as I did in the title) is, to me, the equivalent of this:   (2 + 4 x) 8 = 48

There was a great little book a while back called the Professor and the Madman, discussing the origins of the Oxford English Dictionary.  While the French dictionary is constructed top-down by a few folks to describe what French should be, the OED was constructed bottom-up from actual examples of usage, describing English as it is actually used.

By the way, for those of you who are horrified by the grammatical mistakes on this site (I know my friend Tom in Seattle pulls his hair out over this), they come mainly from my inability to proof, not lack of knowledge or concern.  I have some sort of mental dyslexia that can read right over horrible typos and gaffes, even four or five times, without spotting them.

PS:  Looking back at my title, I suppose we could even get into an Oxford comma argument too.

Totally Awesome

These are totally awesome.  What we might get if we had a real major party based on liberty rather than two parties debating slightly different priorities for government coercion.  Via JD Tuccille

gay-rights-and-gun-rights-post   gay-rights-and-gun-rights-post-1

Screwed Up Speech Law

I am not sure the WSJ has the law right (I don't really trust the media any more to get basic facts correct), but assuming for a moment they know what they are talking about, this caught my attention vis a vis the IRS scandal:

Officials explained that the unit had made the change [to their targeting criteria] because it was receiving many applications for groups that focused on lobbying, which is a permitted activity, and that weren't involved in political activity, which is restricted.

So its OK to kiss a Senator's ass but not OK to advocate for his defeat in the next election?  They may screw everything else up, but Congress is really good at making sure it takes care of itself.

Licensing and Cronyism

This is a depressing but all too familiar story of crony protections for incumbent operators

Only one company is competing for Tempe’s lucrative contract for ambulance services to support the Fire Department.

The Tempe City Council chose to allow only Professional Medical Transport to compete for the contract because city officials believe that the state’s approval last year of Rural/Metro Corp.’s purchase of that company effectively ended competitiveness in the market.

Indeed, the Ambulance market used to be competitive. State law makes it nearly impossible to start an ambulance company, or for an existing company to get access to the Arizona market. However, this used to be ok, because there once were a handful of companies competing in the market. That meant that having a statute that artificially blocked new entrants wasn't a huge problem.

Then a strange thing happened...Rural Metro bought all the other companies. Then they hired a team of the best lobbyists in the state in order to prevent the law from being changed. Frankly, it's a brilliant move.

This session, I worked with a client that wants to break into the inter-facility transfer market. Inter-facility transfers are scheduled transports of stable patients who aren't able to ride in cabs, private cars or stretcher vans. They are by definition, non-emergency transfers, but they still require an ambulance. And that ambulance has to be licensed as an "ambulance". The problem is that it is statutorily impossible to break into the market...which like I said, was fine until Rural Metro bought the other companies.

Our bill to open up the market to competition didn't even get a hearing.

The one disagreement I have is that it was somehow "OK" to prevent competition when there were three competitors but not when there is one.  This reminds me of why Republicans can't be trusted to make a case for free market capitalism.  New competitors can bring just as much to the table in already crowded markets as they can to monopolies.  Were we "OK" when there were just 3 major networks, or are we better off with competition from 600 cable channels?  Were we "OK" with just the big 3 auto makers or are we better off with Toyotas and Kias as choices?

One of the great under-reported stories of the health care field has been the certificate of need process for hospitals which, in most communities, has prevented construction of competing hospitals.  So then, like in this example, all the hospitals in a local community buy each other, and an instant monopoly is created.  Capitalism is blamed, but in fact the resulting high prices are a result of government action.

This Shouldn't Be Necessary, But Here Is Some Information on CO2 and Tornadoes

Well, I have zero desire to score political points off the tragedy in Oklahoma, but unfortunately others are more than eager to do so.  As a result, it is necessary to put a few facts on the table to refute the absurd claim that this tornado is somehow attributable to CO2.

  1. I really should not have to say this, but there is no mechanism by which CO2 has ever been accused of causing tornadoes except via the intervening step of warming.  Without warming, CO2 can't be the cause (even with warming, the evidence is weak, since tornadoes are cause more by temperature differentials, than by temperature per se).  So it is worth noting that there have been no unusually warm temperatures in the area of late, and in fact the US has had one of its coolest springs in several decades.
  2. I should also not have to say this, but major tornadoes occurred in Oklahoma at much lower CO2 levels.


  3. In fact, if anything the trend in major tornadoes in the US over the last several decades is down
  4. And, this is actually a really, really low tornado year so far.  So its hard to figure an argument that says that global warming reduced tornadoes in general but caused this one in particular



Much more at this link

Update:  In 1975, tornado outbreaks blamed in Newsweek on global cooling

Florida Reduces Yellow Light Times to Generate Red Light Camera Revenue

Via Crony Chronicles

The 10 News Investigators found a number of communities shortened their already-safe intervals to the new minimums. In some cases, FDOT mandated longer yellow lights, but seemingly only at intersections that hadn’t been in compliance for years.  Around Greater Tampa Bay, the yellow interval reductions typically took place at RLC intersections and corridors filled with RLC cameras.

FDOT’s change in language may have been subtle, but the effects were quite significant. The removal of three little words meant the reduction of yellow light intervals of up to a second, meaning drastically more citations for drivers. A 10 News analysis indicates the rule change is likely costing Florida drivers millions of dollars a year.

When I lived near Denver, the government (not sure if city, state or county) reduced the speed limit and messed up the traffic light timing of a free road that paralleled a new toll road to try to generate more money for itself and its private toll operator.

Privatization and Private vs. Public Profits

My new column is up at  A sample:

The most frequent argument I hear is that "its wrong to make a profit on public lands."  Most recently, I heard this from a manager of a large campground and lakefront day use area who works for a federal agency.  I was not normally in my usual diplomatic mood, and I snapped "so you work for free?"

If my company operated that park for the federal agency, a park that nets about $300,000 a year in visitor revenue, my company would probably make $15,000 or $20,000 a year in profit doing so, if all goes well, which it seldom does (this is a very low margin business).  I have no idea what that park manager makes in salary and benefits, but I would be surprised if it were less than $55,000 plus benefits, and probably more.  Why is his $55,000  "clean" but my $15,000 for the same task "dirty"?  Particularly when the increase in his and his staff's salaries and their increases in benefits has left the park financially tottering and on the brink of closure?

Go read it all.

Update:  I have added some comments on privatization design on the Privatization blog

"Incivility" Defined: It Means Criticizing Obama

I have had hard time parsing exactly what the intelligentsia means by "incivility."  On the one hand, they often call for more civil discourse and lament the lack of incivility in government nowadays.  But on the other hand, people like Obama very frequently argue by ad hominem attack, preferring to question the motives of the NRA or climate skeptics rather than engage their criticisms of gun control or CO2 limitations.

This has confused me, because I have always defined civility in discourse as the willingness to accept your opponent as a person of good will who merely disagrees or is misguided.  But if this is civility, why the frequent "othering" of political opponents by the same folks calling for civility?

Well, it turns out I have been using the wrong definition of civility.  As Donna Brazille makes clear, "incivility" means criticizing the President or attempting to hold him accountable for missteps of those who report to him.  She actually beings by defining civility in a way with which I mostly agree:

A government of, by, and for the people requires that people talk to people, that we can agree to disagree but do so in civility. If we let the politicians and those who report dictate our discourse, then our course will be dictated.

But then she goes on to say

We, the people, need to stay focused on facts, causes and solutions. Let's begin with the findings of the Treasury's inspector general who uncovered it: That it was bureaucratic mismanagement, but that there was no evidence of any political motivation or influence from outside the IRS.

And that, according to acting Commissioner Steven Miller, who just resigned, the problem started because the Supreme Court's Citizens' United decision created a surge of requests by political groups for tax-exempt status.

LOL - don't let politicians dictate our course - but everyone needs to shut up and take the word for two IRS officials that there is no scandal here (noting that we know from the IRS's own data that the last statement she urges us to accept in the name of civility is definitely false).    Further, she says

Why am I alarmed? Because two "scandals" -- the IRS tax-exempt inquiries and the Department of Justice's tapping of reporters' phones -- have become lynch parties. And the congressional investigation of Benghazi may become a scandal in itself.

So let's of course all be civil, and civility means calling folks criticizing a black President "lynch mobs."

By the way, a bit off-topic, but this paragraph is a textbook example of tricks editorial writers use

The IRS scandal has sparked bipartisan outrage that should require a bipartisan solution. The director who oversaw this was a Bush appointee who was confirmed by a Democratic Congress. Even Watergate reporter Carl Bernstein says he doubts very much that Obama was involved

Each sentence here as a master-stroke of the spinmeister's pen trying to defend her guy in the White House.

  1. Note the effort in the first sentence to shift this to a bipartisan issue.  Both sides are upset.  It is a good government issue.    The implication we are supposed to draw is that this no longer can be a critique of this particular administration.  It has transcended.  This is how red-blue team political invective works.  If the outrage is coming from just one party, it should not stick to the President because because it is petty partisanship.  If it comes from both sides, it should not stick because it is a larger issue for all of us that transcends this particular Administration.  In fact, through the article, she actually makes both arguments simultaneously.  Brilliant!
  2. It's Bush's fault.  This is just so well-worn that Obama officials simply cannot help themselves.   How can a man the Left thought to be so stupid and incompetent still be directing affairs four and half years after he left the building?
  3. This one is really funny.  Is, as implied by the structure of this sentence and the world "even", Carl Bernstein the least likely imaginable person to excuse Obama of such a charge?    I think I am going to start writing this way.  Even Warren Meyer thinks climate change has been exaggerated.  Even Kim Kardashian thinks its important to get a lot of PR.  Even Tia Carrere says its OK to make a bad movie once in a while.  Hey, this is fun.

By the way, as I wrote before, it is unlikely Obama gave a specific order to harass the tea party.  However, he has created a strong culture of "othering" his political enemies and impugning their motives as evil, sending a strong signal to his supporters such that actual orders were unnecessary.  No one ordered from the top that Princeton students harass Yale at every opportunity (or even better, Penn).  The culture takes care of it.

Making Money in a Declining Business

One of the lessons we learned at business school is that there can still be money to be made in a declining business.  Today's case in point:  AOL.  The butt of much Internet-related humor, did you know that AOL still has 3.9 million US subscribers?  To give a sense of scale, that makes its subscriber base about as large as Charter Communications, a not insignificant 6th place player in the cable TV market.  Its income statements are a total mess, cluttered with enough special charges and unusual income items to scare me off from touching the stock, but it looks like it is still making about $50 million a quarter on about $500 million in sales.  Not what it once was, but not an awful business either.

A company like this run for cash flow could do well for quite a while for shareholders.  Of course, companies like that are seldom run for cash flow -- that is not how corporate management incentives work.  Corporate managers are going to want to take the cash flow from the declining business and try to build some new kind of empire on the corpse of the old one.  Shareholders can reasonably ask why they are not just dividended the cash to make their own reinvestment, but insiders benefit much more if the cash is reinvested within the company.  And sure enough, AOL seems to be buying a ton of small companies.

Health Care and Prices

Kevin Drum is lauding the transparency an Oregon health insurance exchange which was initiated some apparently welcome price competition into a market for now standardized products.  My response was this:

I applaud any effort by this Administration and others to improve the transparency of pricing in the medical field.  I would have more confidence, though, if all of you folks were not pushing for 100% pre-paid medical plans that will essentially eliminate price-shopping by individuals, and in so doing effectively eliminate the enormous utility of prices.  Prices will soon be meaningful for one thing -- insurance -- in the health care field and absolutely meaningless for everything else in the field.

By the way, at the same time you are improving competition on price, you are eliminating by fiat all competition on features (e.g. what is covered, what deductible I want, etc).  This "success" is like the government mandating one single cell phone design, and then crowing how much easier shopping is for consumers because there is now only one choice.  A simple world for consumers is not necessarily a better world.  I am sure Medieval peasants had a very simple shopping experience as well.

Genetics, Race and IQ

Brink Lindsey has an great article discussing race, genetics and IQ.  It's hard to excerpt, but here is a bit of it:

A study of twins by psychologist Eric Turkheimer and colleagues that similarly tracked parents' education, occupation, and income yielded especially striking results. Specifically, they found that the "heritability" of IQ - the degree to which IQ variations can be explained by genes - varies dramatically by socioeconomic class. Heritability among high-SES (socioeconomic status) kids was 0.72; in other words, genetic factors accounted for 72 percent of the variations in IQ, while shared environment accounted for only 15 percent. For low-SES kids, on the other hand, the relative influence of genes and environment was inverted: Estimated heritability was only 0.10, while shared environment explained 58 percent of IQ variations.

Turkheimer's findings make perfect sense once you recognize that IQ scores reflect some varying combination of differences in native ability and differences in opportunities. Among rich kids, good opportunities for developing the relevant cognitive skills are plentiful, so IQ differences are driven primarily by genetic factors. For less advantaged kids, though, test scores say more about the environmental deficits they face than they do about native ability.

I have been struggling to articulate my issues with IQ for a long time.  I have always been frustrated with the nature vs. nurture arguments on intelligence, because I have always thought the answer is both.  But Brink's article get's me thinking along the lines of this simple model:


In this model, intelligence is not a product that works straight out of the box, so to speak.  It's an engine with some inherent potential that requires a lot of fine-tuning and a long break-in period to reach that potential. Let's say in the US suburbs our kids have a development percentage of 0.9 (we have to leave room for future Flynn Effect -- it would be awesome if it turned out we were only at 0.5).  I assume education is an exponential rise to a limit, where early gains are easy but incremental gains at the margin are harder and harder to achieve.


If this is the case, then US suburban kids are probably pretty tightly clustered around that 0.9 (say from 0.88 to 0.92).  This cluster seems tight but again remember in an exponential rise to a limit, the effort and expense to take a kid from 0.88 to 0.92 might be very very large**.  In this situation, measured IQ is going to be driven mainly by genetics, with a wide bell curve in native intelligence dwarfing the effect of a much tighter bell curve around development.  Small improvements in educational development in this model both come at a high price and have little effect on measured IQ.

In a different sort of society, say in rural Mexico, kids might be much lower on the development scale, say around 0.6, due to cultural factors, educational opportunities, even diet.  In this case, large changes can occur in measured intelligence even from small changes in education (the steep part of the curve) and difference in education and development might be at least as important as the genetic contribution.

** Postscript:  Some may object that differences in education seem to be much larger than these in US schools, but we have to make sure we are talking about the same output.   Here we are solely talking about the ability to improve IQ as measured by IQ tests.  There are many other things education does than just polish native intelligence and cognitive ability.  It teaches skills.  For example, it teaches one to write.   I would agree that there are huge differences in schools in their ability to produce kids that can write good 5-paragraph essays, or complete a calculus problem, or understand how to analyze a historical document.

Reject These Voices....


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