Posts tagged ‘Arizona’

"Water Is The Most Mispriced Commodity In The World". I agree

A few years ago there was a contest here in Arizona to see who could submit the best water conservation marketing campaign.   I submitted a picture of my water bill with the price photo-shopped so it was doubled.  Politicians here in Arizona subsidize the hell out of water, block or refuse to fund infrastructure projects that would produce more, and then blame consumers for shortages.

Anyway, Zero Hedge quotes a guy named Rick Rule, who I don't know, on a variety of commodities but his bit on water really struck me:

Following their discussion of nuclear energy and the future of uranium pricing, Townsend posed a much broader question: What will be the most important themes in the natural resources market in the coming years and decades.

Rule's answer might reinforce readers' anxieties over the availability of water - something that's already been widely discussed because of Cape Town's looming "Day Zero." Rule even went so far as to call water "the most mispriced commodity on Earth".

The third place – and this is very much more difficult to implement – is water. Water is the most mispriced commodity in the world. Because water is allocated politically. It is believed to be a right, as opposed to a commodity. The consequence of that – as an example, here in the US Southwest, we have taken sources of water, like the Colorado River, and we have allocated approximately 130% of the flow of the river to various claimants. This is sort of hard on the river. You have a circumstance where water flows uphill to votes rather than downhill for money. And you can’t allocate something that doesn’t exist.

And also because of the structure of the American water business. Because of the fact that most of it is delivered politically rather than via markets. The rents that go to water, while they are insufficient to maintain supply, go to municipalities. And they go to fund current political goals as opposed to maintaining the infrastructure for the production and distribution of water.

It is believed, on a country-wide basis, that we have deferred as much as 3 trillion dollars in sustaining capital investments in the water business. I can’t tell you when this theme comes home to roost. But when it does come home to roost, this might be one of the great resource themes of all time.

This is The Right Way To Encourage Local Investment: Regulation Reform, Not Subsidies

Via Zero Hedge:

Waymo, a unit of Alphabet, is set to launch a ride-sharing service similar to Uber, but with no human driver behind the wheel. Officials in Arizona granted Waymo a permit to operate as a transportation network company (TNC) across the state on Janurary 24, following the company’s initial application on Janurary 12, Bloomberg  reported.

The imminent release of a robotic fleet of fully autonomous Chrysler Pacifica minivans could be flooding the highways of Arizona, causing major headaches for Uber.

Since April of last year, Waymo has been experimenting with its self-driving fleet on the human guinea pigs of Phoenix, offering residents 24/7 access to the free ridesharing service. TNC status is a significant step for Waymo, because it now authorizes the company to start charging its passengers.

Waymo’s vehicles in the Phoenix area have driven more than 4 million miles on public roads. In November, the company said a portion of its cars in the Phoenix area were operating in fully autonomous mode, what’s known in industry parlance as level four autonomy.

My understanding is that Phoenix has become the world's center for testing and refining self-driving vehicles mainly by simply allowing it to happen when other municipalities threw up numerous regulatory hurdles (not just to self-driving cars but also, like Austin and Las Vegas, to ride-sharing companies).  I wish more business relocation competition among municipalities was on this basis rather than competing subsidy proposals.

I have seen driver-less Waymo vans a number of times around town, mostly around Tempe and Chandler.  They seemed to do fine once one gets over the shock of seeing the driver's seat empty.  I tried to sign up for their early rider program but apparently they are focusing on Phoenix's southeastern suburbs (e.g. Mesa, Tempe) right now.  I will try again as the program rolls out so I can publish a ride report here.  Probably I will hate it because the car will faithfully stay within the speed limit and thus drive me crazy.

I Saw a Lot of Arguments Against Immigration on Twitter Yesterday, But Most of Them Are Poor

Against my recent personal resolutions, I spent the last 24 hours active on Twitter.  My memory of the platform turned out to be largely correct -- it took only a little while on Twitter before I became a worse person, abandoning rational argumentation in favor of clever "gotcha" zings at people whose minds aren't going to be changed anyway. So I am going to respond to some of the things I saw here on the blog, rather than on Twitter.

Much of the traffic in my feed, the day after the President's State of the Union speech, centered around immigration.  As many of you know, I grew up an immigration restrictionist, but morphed over time into a largely open immigration supporter because I simply cannot come up with a moral justification for a free society restricting anyone's freedom of movement and association.  I became convinced (more on this in a second) that not only did immigration restrictions limit the rights of those trying to immigrate, but despite being native born, they limited my property and association rights.

Yes I have concerns and I think there are some valid arguments out there.  It is, for example, really hard to square open immigration with our current definitions of citizenship and various government benefit programs.  In addition, I am frequently concerned that we libertarians are being suckers on immigration, justifying immigration on the grounds of individual liberty and then having waves of immigrants who vote for things that limit personal liberty.  I see that already with "immigrants" moving from California to Arizona, who leave California because of the effects of the crazy regulation regime there and then come to Arizona and vote for all the same crazy stuff that ruined California.

But I actually saw neither of these arguments made all day.  Instead, I saw one form or another of these four arguments:

1.  There are individual examples of immigrants who did bad things. Trump's invocation of the MS-13 gang certainly set the tone for this, but I saw it all day.   This is a classic Conservative civilization-barbarism argument and tends to have immense appeal in that community.  But here is what is funny to me.  Conservatives (rightly in my opinion) oppose using tail-of-the-distribution individual weather events to "prove" climate change.  But those same Conservatives sure like to use rare individual acts of criminal behavior to "prove" immigration is dangerous.  Tied in with this is an observer bias -- the media only presents us with the extreme examples.  When the media only puts the weather on the news when it is extreme, it leads to a false impression that the weather is becoming more extreme.  When Fox News fills the news with crimes committed by immigrants, rather than say crimes committed by natives or acts of kindness committed by immigrants, it leads to a false impression that immigrants are all criminal barbarians making us less safe.  Which leads to #2:

2.  Immigrant crime is 100% preventable because we could just have kept them out.  This is a variation of the Skittles immigration meme that went around before the election, asking if one would voluntarily eat from a bowl of 1000 Skittles if one knew 2 or 3 were poisonous.  An example I saw of this yesterday was this:

I suppose this is correct on its face.  Because in any group of 10,000 randomly-selected human beings some will be criminals, such that banning any group from the country would also ban some criminals.  But the problem is that you could make this argument for any group.  Heck, you could use this equally well as an advertisement for abortion, because every 10,000 births you prevent will likely eliminate some criminals.  Because this argument is equally valid for any group one might ban from the country, it is not a valid argument against immigration.  You still have to say why you want to pick on immigrants vs. some other group.  The first thing Conservatives would say is, "Because they are illegal!" and I will deal with the rule of law argument below in #4.  But the other thing they might say is that immigrants commit crimes at a higher rate than natives, an impression formed by wall-to-wall Fox News coverage over every alleged immigrant crime (see #1 above).  But this impression is simply not the case.  Study after study shows that immigrants commit crimes at a lower rate than native born Americans.  If you really care about crime, immigrants are the last group you want to send away.  Here is one such study from Cato, but there are many.

3.  You lock the front door of your house, don't you?  An example of this argument is here:

The first problem with this argument is that it is fundamentally socialist.  Only in a socialist country is the entire country one entire single block of property.

I really hate the house analogy but if you simply have to use it, then don't think of the country as a house, think of it as a giant apartment building with 100 million apartments.   Each apartment has its own door and then there is a door into the building itself.  When people talk about immigration restrictions, they are talking about limiting who I can and cannot buzz into the front door to come up and visit me.

Bad analogy?  Well, I wasn't the one who started the whole stupid building analogy. Anyway, the correct way to put it is that if I want to hire someone from Mexico in my business, and I want to rent that person a place to live on my property, why do you get to lock the door barring that person from doing these things with me?  That is why I said above that immigration restrictions don't just limit the rights of immigrants, they limit my association and property rights as a native-born American.  I can't hire anyone I want.  I can't have anyone I want come visit me.  I can't rent my property to anyone I like.  I can only do all those things with a person who has been licensed by the Federal government to be able to interact with me in this country.  And those licenses are very scarce and hard to get.

4.  They're illegal!

I will admit the rule of law argument is seductive, but I have a couple of thoughts on it.

First, do you file and pay state use tax whenever you buy things over the Internet that have not had sales tax applied?  Do you pay all the proper employment taxes for your household help, or if they are contractors, file 1090's for what you paid them each year?  Do you always stay under the speed limit and come to a full and complete stop at every red light and stop sign?  Do you always have your dog on a leash in public areas that require it?  If the answer is "no", then stop lecturing me on the rule of law.

I know that the answer to the queries above is typically that those things are all trivial sh*t compared to breaking immigration laws.  Hmm, maybe or maybe not -- they are all basically victim-less, often paperwork crimes.  But here is another way to think of it.  You are breaking the law for some trivial reason, because you want to get to work 30 seconds faster or can't be bothered with an hour of paperwork.  Illegal immigrants are often breaking the law for life and death reasons.  Which of you is more admirable?  More than anything else about the immigration system, I hate that it takes people with qualities we generally admire -- they are trying to improve themselves, trying to make a better life for their kids, trying to find better jobs and schools -- and we turn them into criminals.  Trump is right about one thing -- many of these countries have been turned into sh*tholes by their governments.  I would like to think that if I were born in one, I would be doing everything I could to get out, laws or no laws.

Finally, I would observe that the statement "I am not against immigration, just illegal immigration" is just a cover for most people who say it.  If that were really true, we could fix it in a second -- just make it legal.  But few on the Conservative side are suggesting any such thing.

Hmm, I Think the Elephant in the Room on this Business Relocation is Being Ignored

Apparently some hot new auto company called Nikola Motors (in the class of companies to my mind like Tesla and Fiskar that have a sexy idea and a lot of cash burn) is relocating to the Phoenix area.  Ugh.  You know what that probably means:

Arizona Governor Doug Ducey and Nikola Motor Company today announced the company has selected Buckeye, Arizona for its Nikola Motor Company hydrogen-electric semi-truck manufacturing headquarters facility. The new 500 acre, one million square foot facility will be located on the west side of Phoenix and will bring more than $1 billion in capital investment to the region by 2024.

"After 12 months, nine states and 30 site locations, ArizonaGovernor DuceySandra Watson and Chris Camacho were the clear front runners. Arizona has the workforce to support our growth and a governor that was an entrepreneur himself. They understood what 2,000 jobs would mean to their cities and state," said Trevor Milton, CEO and founder, Nikola Motor Company. "We will begin transferring our R&D and headquarters to Arizona immediately and hope to have the transition completed by October 2018. We have already begun planning the construction for our new zero emission manufacturing facility in Buckeye, which we expect to have underway by the end of 2019."

Nikola Motor Company designs and manufactures hydrogen-electric vehicles, electric vehicle drivetrains, vehicle components, energy storage systems and hydrogen stations. The company is bringing the nation's most advanced semi-trucks to market with over 8,000 trucks on preorder.

Nikola Motor Company selected Buckeye, Arizona due to numerous factors including the state's pro-business environment, engineering schools, educated workforce and geographic location that provides direct access to major markets.

How much do you want to bet that the number 1 reason for moving to Phoenix was left off the list: taxpayer subsidies.  Yep, I have not seen the deal, but my guess is that yet another company is going to get a piece of my profits transferred over to them because they make a better photo op and press release for politicians.  I am pretty sure that the statement "[arizona] understood what 2,000 jobs would mean to their cities and state" is code for "they offered us a pile of cash".

Postscript: By the way, I do like their idea of a hydrogen truck better than Musk's all-electric truck -- that is, if they can figure out how to scale up a hydrogen distribution system.

Great Moments in Public Spending

Our two largest Arizona public colleges are spending over $18 million in public funds just to get rid of their football coaches.

I use the words "public funds" knowing exactly what I am saying.  The schools dispute this, saying:

...no tuition dollars nor public money will fund the buyouts. Both universities have self-sustaining athletic departments

But this is total cr*p.  Money is fungible.  They can pretend that this money comes from athletic program revenues, just as certain electricity customers pay extra to say that their undifferentiated kilowatts from the grid came from a particular solar plan or windmill, but its not true in either case.  Marginal spending is paid for in the end by the marginal source of funds, and the marginal source of funds for universities is tax money.  That is $18 million that could have been spent for about anything in these public education institutions but was prioritized towards trying to upgrade the football coach.

The Government Loves to Make Us All Criminals

Here in Phoenix, we use our fireplace pretty much once a year -- on Christmas Day, more as an aesthetic aid to the atmosphere and festivities rather than out of any real need for added warmth.  I bought a box of fire logs several years ago and there are still three left.

So of course the Arizona government, for seemingly the hundredth year in a row, has banned fires on Christmas Eve and Christmas Day.  They always have some story about some special weather condition or whatever, but oddly enough year-in and year-out these special conditions only seem to occur on Christmas.  Clearly, the ban is in place on these days because the government knows these are the only days people are interested in making fires, but the media every year credulously reports the situation like it is a total coincidence.

Most Depressing Thing I Read Today

On the Dell web site, at the head of a no-export agreement I had to sign:

The U.S. government views exporting as a privilege, not a right.

Of course, my home state of Arizona considers every commercial transaction to be a privilege, not a right.

Yep, I Was Right. Opioid Proposals Going Forward With No Discussion Of Their Effect on Legitimate Users

A few weeks ago I wrote:

If you want to convince me of the need for restrictions on any substances, such as narcotics, you have to convince me of three things:

  1. That incarcerating users is somehow better for them than their addiction
  2. That ethically abusers of the substance are more worthy of our attention and intervention than legitimate users who benefit from the substance and whose access will likely be restricted
  3. That the negative social costs of the substance's use are higher than the inevitable social costs of the criminal black market (including the freedom-reducing policing laws implemented in response) that will emerge when its use or purchase is banned

Think in particular about point #2 when reading this:

Arizona would limit all initial opioid prescriptions to five days for new patients under sweeping guidelines recommended Wednesday by Gov. Doug Ducey's administration.

The plan also would limit maximum doses for pain medication, implement steps to taper down pain medications and require pain prescriptions to be filed electronically, rather than on paper, to limit diversion of drugs.

Consider that many legitimate users will need more than the legal maximum dosage to control their pain, and thus the issue becomes whether we want to essentially torture innocent sick people by forcing them to remain in excruciating pain in exchange for (possibly) reducing the number of accidental deaths from abusers of these drugs (I say possibly because over the last 40 years the government war on drugs has had such a super stellar track record in reducing narcotic usage).

To me the answer to this tradeoff is obvious but I am willing to admit it is a tradeoff subject to debate.  But the article linked has no debate.  There is not a single mention of any downsides to the rules, or any potential harm to legitimate users.

Well, The World Polarizes Just A Bit More

In my mailbox today is a press release some firm in town called Spectrum Experience.  This press release begins:

 The Tempe-based communications firm, Spectrum Experience, released an email statement yesterday informing clients the firm will no longer work with companies, candidates or causes that are unwilling to publicly state: Black lives matter. Spectrum works with dozens of political candidates and legislators in Arizona, as well as nonprofits and corporations throughout the US; the firm said it does not wish to provide communications support to these clients if they shield White supremacy.

Hmm.  I am pretty sure that the specific phrase "Black lives matter" has become loaded with a lot of political baggage such that failing to entirely endorse it is not the same as shielding white supremacy.  Sort of like refusing to say "I'm with Her" is not really the same as shielding misogyny.  But I will say that this is beautifully representative of the flavor of politics today.  One wonders how a company that claims on its website to "craft innovative strategies for companies, causes, and campaigns dedicated to changing the world" does so while refusing to engage with anyone who disagrees with them.

My take on BLM is here, which is critical of it as I share many of their goals but think their tactics have devolved into unproductive virtue-signaling at the expense of actual progress (sort of exactly like this email).

$150 Million in Lost Tax Money Later, Another Sorry Tale Of Government "Investment" Hopefully Comes to An End

Years ago I wrote about the Sheraton hotel the city built:

For some reason, it appears that building hotels next to city convention centers is a honey pot for politicians.  I am not sure why, but my guess is that they spend hundreds of millions or billions on a convention center based on some visitation promises.  When those promises don't pan out, politicians blame it on the lack of a hotel, and then use public money for a hotel.  When that does not pan out, I am not sure what is next.  Probably a sports stadium.  Then light rail.  Then, ?  It just keeps going and going....

When Phoenix leaders opened the Sheraton in 2008, they proclaimed it would be a cornerstone of downtown's comeback. They had one goal in mind: lure big conventions and tourism dollars. Officials argued the city needed the extra hotel beds to support its massive taxpayer-funded convention center a block away.

Finally, we may be at an end, though politicians are still hoping for some sort of solution that better hides what a sorry expenditure of tax money this really was

Phoenix has entered into exclusive negotiations to sell the city-owned Sheraton Grand Phoenix downtown hotel —the largest hotel in Arizona — for $255 million.

The city signed a letter of intent with TLG Phoenix LLC, an investment company based in Florida, to accept the offer and negotiate a purchase contract, city officials announced Tuesday evening.

But the deal faces criticism from some council members concerned about the loss to taxpayers. The city also attempted, unsuccessfully, to sell the hotel to the same buyer for a higher price last year.

If Phoenix ultimately takes the offer, the city's total losses on the taxpayer-funded Sheraton could exceed $100 million.

The city still owes $306 million on the hotel and likely would have to pay that off, even after a sale. That would come on top of about $47 million the city has sunk into the hotel, largely when bookings dropped due to the recession.

...

In addition to taking a loss on the building, Phoenix would give the buyer a property-tax break — the city hasn't released a potential value for that incentive — and transfer over a roughly $13 million reserve fund for hotel improvements.

By the way, the hotel -- after just 9 years under city ownership -- will require a $30 to $40 million face lift from the owner.  Why do I suspect that part of the sales price problem is that the government, like with every other asset it owns, did not keep up with its regular maintenance?

Update:  Phoenix is in the top ten US cities in terms of hotel room capacity, so city government of course detects that there is a market failure such that the city ... needs more hotel rooms, so it gets the government in the business of building more.  Good plan.

Business Ethics Discussion Topic -- Public Accommodation and the Sex Offender Registry

My company operates campgrounds on public lands under contract with various public agencies.  Over the past several years, there has been a lot of discussion about public accommodation (e.g. can a private photographer choose not to serve a gay wedding).  This has never really been a big issue for me in my business, both due to my personal tolerance of just about anyone and the fact that we operate on public lands, which gives us an extra responsibility for broad accommodation.

Yesterday a sheriff's deputy in Arizona comes by one of the campgrounds we operate and gave a flyer to our manager.  It says that so-and-so, we will call him Mr. Smith, is in the area and is registered as a level 3 high-risk sex offender ("level 3 is the highest level and considered the highest risk to reoffense").  The deputy lets my folks know that it would be better not to do business with this guy.

Now personally, I have a lot of skepticism for the sex offender registry.  These lists sweep up a lot of people whose crimes are trivial (e.g. teenagers who had sex together or texted pictures with their girlfriends).  They assume high risk of recidivism without evidence.  Their existence dates back to a variety of molestation panics that were grossly exaggerated, and play on what I think are irrational public fears.  They can act as a substantial extra punishment beyond what they might have been charged with in court.  And they can be harsh, making it nearly impossible for someone to try to live a normal life in any community.

So the dilemma arises because this gentleman was staying in our campground at the time we received the notice.  My female manager wanted him out, as did most of my employees.  My guess is that if I polled the guests, most of them would want this guy out.  Because many people in a campground are in tents without any door or lock, they can feel particularly vulnerable.  I had never really thought about this much until we added cabins with locking doors to a campground and the early customers were disproportionately single women and women on their own with their kids.  They liked the lock.

My most telling problem is one of liability.  The state of Arizona has officially notified me that in the state's opinion this person is high-risk (whatever I might suspect his true risk may be).  If some incident were to happen, this notification would be exhibit one in the trial suing me into bankruptcy, arguing that I callously and knowingly allowed this risk to remain when I had it in my power to remove it.  I suppose one could argue that I probably always have people on the sex offender list in one of our campgrounds almost every day since there is no reasonable way to check on such things.  But in this case I have been notified in writing by an agent of the state that this person is considered high risk -- this knowledge gives me added responsibility.

I made my decision already, because part of the joy of running a 24/7/365 service business with 2.5 million customers a year is that I have many decisions like this and I have to make a choice and move on.  But I am curious what your decision would be.  Discuss.

Update:  wow, the discussion here is just tremendously useful.   The commenter who observed that I could probably be sued either way successfully captured the flavor of my frustrations trying to run a business in the modern legal environment.

It struck me later that I might not even have a decision to make.   The Forest Service which owns the land may not even allow such folks to be excluded from public lands.  If this is the case, I can get that in writing and do what I prefer (ie not participate in the further punishment of this gentleman) but have some coverage against legal liability in the future.

Another Reason to Discuss Government-led Local Business Development

I have written many times about my frustration with cronyist business relocation incentives handed out by most local and state governments.  I have always considered these government incentives to be insanely unproductive spending, often taking taxpayer money to move a company as little as a few miles to get it over some artificial border.  One issue I have not considered in these critiques is whether the sorts of companies selected for relocation are really in the long-term interest of the local community at all.

Almost by definition, most relocation subsidies go to large, well-known companies.  This is for a couple of reasons.  First, large companies have the clout to lobby and demand such subsidies, clout smaller businesses do not have.  Second, politicians are handing out these subsidies in order to get re-elected.  The actual product of these subsidies is a press release and a blurb on the politician's campaign website.  A press release saying that your faithful governor has gotten Joe Smith's Widgets to move to Arizona is a lot less powerful than saying he got a branch of General Electric to move to Arizona.  In fact, the sexier the name the better, which is why politicians fall all over themselves to get Google and Apple and Tesla to come to town (despite the fact that in my observation, it is the staid old companies like Honeywell and Wells Fargo and such that tend to invest a lot more in their local communities).   We have a plant in the Phoenix area that has already had two subsidized sexy companies in it (First Solar and an Apple screen manufacturing partner) and now is empty yet again waiting for the next sexy crony.  Apparently, the state has agreed to subsidize Apple again to use it for a data center, though the move-in may be delayed as there was a large fire at the building when the solar panels on the roof caught fire.  Three sexy press releases for Arizona politicians for the same building!

Anyway, I was thinking about this when I read the piece below from Scott Sumner

This reminded me of a very interesting study that compared two cities in Michigan, Flint and Grand Rapids:

In 1946, sociologist C. Wright Mills and economist Melville Ulmer concluded the fortunes of two of Michigan's largest cities, Flint and Grand Rapids, were headed in opposite directions.Seventy years later, their predictions are getting new notice from academics.

The researchers warned Flint was overly dependent on its big employers even though its workers made 37 percent more than the national average at the time.

The warning seemed out of place. By 1950, Flint was labeled "the happiest city in Michigan" and the "epicenter of the American Dream," thanks to its thriving auto industry.

Grand Rapids, whose economy was defined by its numerous small businesses, was less flashy. But it offered its citizens more mobility and opportunity for its middle class that would help it survive tough times, the researchers concluded.

Flint was still booming in the late 1960s, so it looked like this 1946 prediction was wrong. But then the prediction suddenly came true. Flint's metro population fell from 445,589 in 1970 to 410,849 in 2015. In contrast, Grand Rapids has been booming, with its metro population soaring from 539,225 in 1970 to 1,038,583 in 2015. And both of these places are in the rustbelt state of Michigan.

Losing the Prisoner's Dilemma Game: Economic "Development" Incentives are a Total Waste of Money

From today's WSJ:

The race to woo companies has intensified as state and local governments struggle with a slow economic recovery, sluggish new business formation and job losses resulting from automation. Many older industrial cities see tax incentives as one of the few levers they can pull.

The fight to attract and retain companies “is probably as competitive as it has ever been in the 30 years I have been doing this type of work,” said Lawrence Kramer, managing partner with Incentis Group, the consulting firm that helped Riddell with incentive negotiations.

Economic-development tax incentives more than tripled over the past 25 years, offsetting about 30% of the taxes the companies receiving incentives would have otherwise paid in 2015, compared with about 9% offset in 1990, according to an analysis of incentives covering more than 90% of the U.S. economy.

By 2015, the total annual cost of these incentives was $45 billion, according to the analysis, by Timothy Bartik, a senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich. The study looked at 47 cities in 32 states plus the District of Columbia.

Total incentives are likely higher because the analysis didn’t include some used by cities, including Elyria, such as city income tax rebates for companies.

Seriously, how absolutely pointless is this:

When Elyria Mayor Holly Brinda learned that Riddell Inc. was looking to leave this small city in northeast Ohio, she came up with a $14 million package of tax incentives and offered to lease land to the company for $1 a year.

It wasn’t enough. Riddell, which makes the football helmets used by many NFL and college players, decided to move its roughly 320 employees just over 2 miles down the road to a neighboring town, which offered its own bundle of incentives and lower corporate and individual income-tax rates.

You can't even argue you are trying to save jobs for local people, because the same people are working, just with a 2 mile delta in their commute.

One of the very earliest posts on this blog, waaaay back in 2005, was to compare local economic development spending to a prisoner's dilemma game:

politicians who are approached by a company looking for a handout for business relocation face what is called the prisoner's dilemma.  Many of you may know what that is, but for those who don't, here is a quick explanation, via the Stanford Encyclopedia of Philosophy:

Tanya and Cinque have been arrested for robbing the Hibernia Savings Bank and placed in separate isolation cells. Both care much more about their personal freedom than about the welfare of their accomplice. A clever prosecutor makes the following offer to each. "You may choose to confess or remain silent. If you confess and your accomplice remains silent I will drop all charges against you and use your testimony to ensure that your accomplice does serious time. Likewise, if your accomplice confesses while you remain silent, they will go free while you do the time. If you both confess I get two convictions, but I'll see to it that you both get early parole.  If you both remain silent, I'll have to settle for token sentences on firearms possession charges. If you wish to confess, you must leave a note with the jailer before my return tomorrow morning."

The "dilemma" faced by the prisoners here is that, whatever the other does, each is better off confessing than remaining silent. But the outcome obtained when both confess is worse for each than the outcome they would have obtained had both remained silent.

I hope you can see the parallel to subsidizing business relocations (replace prisoner with "governor" and confess with "subsidize").  In a libertarian world where politicians all just say no to subsidizing businesses, then businesses would end up reasonably evenly distributed across the country (due to labor markets, distribution requirements, etc.) and taxpayers would not be paying any subsidies.  However, because politicians fear that their community will lose if they don't play the subsidy game like everyone else (the equivalent of staying silent while your partner is ratting you out in prison) what we end up with is still having businesses reasonably evenly distributed across the country, but with massive subsidies in place.

Of course, garnering positive press releases for politicians' re-election campaigns is part of the equation as well.  Actually, the game is worse than a prisoner's dilemma game because politicians playing it enjoy all the positive benefits while the price is paid by others (taxpayers).

It would be great to ban this stuff entirely.  But you know what, Arizona already did!  In its Constitution no less.  And we still can't stop this BS.  Our Constitution reads that neither the state nor any municipality in it may “give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation.”  This seems pretty definitive, but as I wrote here

This has been interpreted by the courts as meaning that if a state or municipal government gives money to a private company, it must get something of value back - ie it pays money to GM and gets a work truck back.  But politicians will be politicians and have stretched this rule in the past out of all meaning, by saying that they are getting "soft" benefits back.  In other words, they could subsidize the rent of a bookstore because reading is important to the community.

The Goldwater Institute in AZ keeps filing suit and has been pretty successful in blocking some of the most egregious subsidies, but it takes constant vigilance, and at the end of the day, if politicians want to throw money at private companies in order to help their re-election chances, they are going to do it.

 

Progressive Narrative Fail: Why Are Low Income Workers and the Unemployed Running from High Minimum Wage States to Low Minimum Wage States?

I think many folks are aware of how certain wealthy neighborhoods use zoning to keep out the lower-income people they don't want around  (e.g. minimum lot sizes, minimum home sizes, petty harassment over home and lawn maintenance, etc.)  If you think of California as one big rich neighborhood, many of their labor and housing laws have this same effect of keeping lower income people out.

From the Sacramento Bee

Every year from 2000 through 2015, more people left California than moved in from other states. This migration was not spread evenly across all income groups, a Sacramento Bee review of U.S. Census Bureau data found. The people leaving tend to be relatively poor, and many lack college degrees. Move higher up the income spectrum, and slightly more people are coming than going.

About 2.5 million people living close to the official poverty line left California for other states from 2005 through 2015, while 1.7 million people at that income level moved in from other states – for a net loss of 800,000.

...
The leading destination for those leaving California is Texas, with about 293,000 economically disadvantaged residents leaving and about 137,000 coming for a net loss of 156,000 from 2005 through 2015. Next up are states surrounding California; in order, Arizona, Nevada and Oregon.

Wow, I am totally lost.  The minimum wage currently in California is $10.50 an hour, going up to $15 over the next 5 years.  The minimum wage in Texas is the Federal minimum at $7.25.  If I understand it right from progressives, minimum wages are a windfall for workers that raise wages without any reduction in employment.  So why are the very people California claims it is trying to help leaving the state in droves?  For unenlightened Texas, of all places.

Of course the reason is that minimum wages do indeed have employment effects.If you think of California as one big rich neighborhood, minimum wages act as a zoning plan to keep the "unwashed" out.  Setting a minimum wage of $15 is equivalent to saying, "if your skills and education and experience are low enough that your labor is not yet worth $15 an hour or more, stay out."

Of course, there are a lot more problems for jobs in California than just minimum wages.  At every turn, California works to make operating a business difficult and hiring unskilled workers more expensive.  And then there is the cost side.  With its building restrictions and environmental rules, most California cities have artificially inflated housing costs, just another way to tell lower income  people to keep out.

Well-paid new arrivals in California enjoy a life that is far out of reach of much of the state’s population. Besides Hawaii and New York, California has the highest cost of living in America.

During the past three years in Sacramento, median rent for a one-bedroom apartment has risen from about $935 a month to $1,230 a month, according to real estate tracking firm Zillow.com. A single mother working 40 hours a week at $15 an hour would spend nearly half of her gross income to afford an apartment at that price. She would pay about 10 percent less for a one-bedroom rental in Houston or Dallas.

Sacramento remains relatively affordable compared to other California markets. Median rent for a one-bedroom apartment in Los Angeles is about $2,270 a month. In San Francisco, $3,700. Without subsidies, those prices are unreachable for a single parent making $15 an hour.

The key to attacking poverty is creating more jobs, not artificially raising the rates of entry-level jobs.

Quest Complete, Achievement Unlocked

About a year and a half ago when I was in Asia, I saw a lot of folks has laundry racks that were essentially lifts, where one could put the laundry out to dry and then lift it up out of the way.  I thought this would be awesome for our laundry room, which unusually for a laundry room has a 12 foot ceiling.   Since we live in Arizona, I hand a lot of things like my cotton shirts to dry, it reduces the wrinkles and in our 4% humidity it tends to be bone dry after just a few hours.

But it was impossible to find one in the US.  I even had a contest on this web site to try to find one, with no real luck.  So after nearly a year of searching, multiple false starts, language issues, shipping issues, disappearing orders, and a general contractor who had absolutely no idea how to install the thing, we finally meet with success:

It is awesome for us -- lowers to about 5 feet above the ground to make it easy to hang things on it, and then raises high enough that the laundry clears me head.  Down & Up:

      

I'd buy the US distribution rights for this thing if I thought anyone else had similar applications for it over here.

Professional Sports Leagues Are Sucking Maws for Subsidies

Forbes produces an annual list of the market value of various sports franchises.  If I were a grad student, a great study would be to try to figure out what percentage of these valuations came from public funds (free stadiums, tax abatements, direct subsidies, etc).  I bet the number would be high.

In the case of the Phoenix Coyote's hockey team, the percentage would actually be over 100%.   The team is worth barely $100 million, at best, but has received hundreds of millions in subsidies.  About 13 years ago the city of Glendale, AZ (pop: 250,000) built them a $300 million stadium.  Almost immediately after that, the team started to threaten to leave, and the pathetic city of Glendale city counsel voted subsidy after subsidy, paying the team $10 million a year in direct subsidies.  When the Goldwater Institute successfully sued to end this practices, the city found creative ways to hide the subsidy, for example giving the team a management contract for the stadium whose price was inflated by the amount of the subsidy (the contract was for $15 million a year but when it was finally competitively bid, it came in at $5 million).

After all that, the team apparently has no shame is coming back to the trough yet again:

The Arizona Coyotes and National Hockey League Commissioner Gary Bettman on Tuesday threatened to move the franchise out of Arizona if the Legislature does not approve $225 million in public financing for a new arena in downtown Phoenix or the East Valley.

Bettman sent a three-page letter to state Senate President Steve Yarbrough and House Speaker J.D. Mesnard encouraging them to push through a public-financing bill that is stalled in the Senate amid a lack of support from lawmakers. The struggling NHL franchise wants out of Glendale, saying it's not economically viable to play there even though that West Valley city financed its 13-year-old Gila River Arena specifically for the Coyotes.

"The Arizona Coyotes must have a new arena location to succeed," Bettman wrote. "The Coyotes cannot and will not remain in Glendale."

Good God, what brass!

Postscript:  I was immediately embarrassed to see that I had use maw's instead of maws.  I make stupid grammar mistakes but this generally is not one of them I make that often.  Unfortunately, on the road, I had no way to fix it. Fixed now.

California: Easy to Love, Impossible to Do Business In

California is beautiful.  Many parts have great weather.  There are a lot of smart people there and some good schools.  Both my kids live there right now, though it is really expensive given the state and local governments' propensity to take many steps to limit the supply of housing.

But it is simply impossible to do business in.  Every single legislative session brings a series of new time-consuming and expensive regulatory requirements.  Despite California having some of the best recreation spots in the world, we have systematically reduced our business in California by 50%, and I have a moratorium in place on accepting new business (I won't even look at RFP's and proposals to avoid being tempted.)  I wrote about this process a number of times, including here.

This week, Hans Bader covers this ground and more in his article about businesses fleeing California to places like Texas.

It does not surprise me that service industries, particularly those that provide high-margin services to the wealthy, stay in California -- service businesses have to be close to their customers.  But it always blows me away when I see anyone manufacturing in California.  Why?  Move over the border into Nevada or Arizona or Mexico and costs go down a lot without any real increase in logistics costs.  California does not even want you there -- I am convinced they achieve most of their environmental goals merely by chasing folks over the border, exporting these issues rather than solving them.

In Case You Were Tempted To Have Any Respect for Arizona's State-run Universities: Professor Says Human Extinction in 10 Years is "A Lock"

From New Zealand:

There's no point trying to fight climate change - we'll all be dead in the next decade and there's nothing we can do to stop it, a visiting scientist claims.

Guy McPherson, a biology professor at the University of Arizona, says the human destruction of our own habitat is leading towards the world's sixth mass extinction.

Instead of fighting, he says we should just embrace it and live life while we can.

"It's locked down, it's been locked in for a long time - we're in the midst of our sixth mass extinction," he told Paul Henry on Thursday.

....

"I can't imagine there will be a human on the planet in 10 years," he says.

"We don't have 10 years. The problem is when I give a number like that, people think it's going to be business as usual until nine years [and] 364 days."

He says part of the reason he's given up while other scientists fight on is because they're looking at individual parts, such as methane emissions and the melting ice in the Arctic, instead of the entire picture.

"We're heading for a temperature within that span that is at or near the highest temperature experienced on Earth in the last 2 billion years."

Instead of trying to fix the climate, Prof McPherson says we should focus on living while we can.

"I think hope is a horrible idea. Hope is wishful thinking. Hope is a bad idea - let's abandon that and get on with reality instead. Let's get on with living instead of wishing for the future that never comes.

Minimum Wages and Price Increases To Customers: A Real World Example Today in Arizona

Our company operates a number of public campgrounds and parks, including about 35 in Arizona.  This is a letter I sent early this morning to the agencies we work with in Arizona

It appears that the ballot initiative for a higher Arizona minimum wage is going to pass, raising minimum wages as early as January, 2017 from $8.05 to $10.00. This is an increase of 24%, and comes on very short notice.

Currently, about half of our total costs are tied to wage rates (both payroll taxes and workers compensation insurance premiums are directly tied to wages and go up automatically by the same amount wages go up). Because of this, a 24% increase in wage rates will result in our costs going up on average by 12%.

It had been my intention to keep fees to customers flat in 2017, but that is now impossible in Arizona. This 12% expense increase is about twice the amount of profit we make -- there is no way we can absorb it without a fee increase. I apologize for the late notice, but I have never, ever had a minimum wage increase imposed on such short notice.

We will have to look at our financials for each permit, but my guess is that on average, we are talking about camping fee increases of $2 and day use fee increases of $1. This range of fee increases will actually not cover our full cost increase, but we will try to make up the rest with some reductions in employee hours.

When You Come Here, Please Don't Vote for the Same Sh*t That Ruined the Place You Are Leaving

From the WSJ:

Americans are leaving the costliest metro areas for more affordable parts of the country at a faster rate than they are being replaced, according to an analysis of census data, reflecting the impact of housing costs on domestic migration patterns.

Those mostly likely to move from expensive to inexpensive metro areas were at the lower end of the income scale, under the age of 40 and without a bachelor’s degree, the analysis by home-tracker Trulia found.

Looking at census migration patterns across the U.S. from 2010 to 2014, Trulia analyzed movement between the 10 most expensive metro areas—including all of coastal California, New York City and Miami—and the next 90 priciest metro areas, based on the percentage of income needed to pay a monthly mortgage on a typical home.

I can't tell you now many people I know here in Arizona that tell horror stories about California and how they had to get out, and then, almost in the same breath, complain that the only problem with Arizona is that it does not have all the laws in place that made California unlivable in the first place.  The will say, for example, they left California for Arizona because homes here are so much more affordable, and then complain that Phoenix doesn't have tight enough zoning, or has no open space requirements, or has no affordability set-asides, or whatever.  I am amazed by how many otherwise smart people cannot make connections between policy choices and outcomes, preferring instead to judge regulatory decisions solely on their stated intentions, rather than their actual effects.

Why I Don't Donate To My University Anymore -- A Recent Letter to Princeton President Christopher L. Eisgruber

Christopher L. Eisgruber
1 Nassau Hall
Princeton University
Princeton, NJ 08544

Mr. Eisgruber:

The other day I received a call from a Princeton student calling to encourage me to participate in annual giving this year. I was in a hurry, and I feel bad that I gave the student a rushed answer, but I told him that I thought universities were lost and that I no longer had any desire to donate money to any of them. The word “lost” is admittedly imprecise, but it was the best I could to summarize my concerns in a brief call.

When I was at Princeton, we used to laugh at those crotchety alumni who wrote angry letters about Princeton letting in women, or integrating the all-male eating clubs, or whatever else. I never imagined that someday I would find myself writing one of those “I can't donate to Princeton any more” letters, yet here I am doing just that.

Continue reading ‘Why I Don't Donate To My University Anymore -- A Recent Letter to Princeton President Christopher L. Eisgruber’ »

This is A First: Our Local Paper Actually Questions Movie Tax Incentives

I find that the local newspaper in most towns is generally a strong supporter of most every business relocation subsidy or tax incentive that comes along -- whether it be for Apple or an NHL team or a movie production, the local paper benefits from having more newsworthy activity in town.

But the AZ Republic actually ran an article this weekend questioning movie tax incentives, perhaps the only government subsidy dumber than buying sports stadiums for billionaires

States, including Arizona, that don't offer movie and television tax breaks usually are smart not to do so, a researcher contends.

Nearly all states have lured Hollywood productions at one time or another with special tax incentives, but a University of Southern California professor says such spending fails to deliver the long-term economic benefits promised by industry lobbyists and lawmakers.

“The subsidies are a bad investment," said Michael Thom, an assistant professor in USC's Price School of Public Policy, in a prepared  statement. "States pour millions of tax dollars into a program that offers little return."

Arizona doesn't currently offer tax incentives for the industry but spent $23.7 million on subsidies between 2005, when the program started, and 2010, when incentives ended amid a state budget crisis.

Thom, who has led two recent studies on the topic, looked at job growth, wage increases, entertainment-industry output and other factors for each state.  "On average, the only benefits were short-term wage gains, mostly to people who already work in the industry," he said. "Job growth was almost non-existent. Market share and industry output didn’t budge.”

Matt Yglesias Summarizes the Public Parks Opportunity in One Paragraph

A two-fer!  This is from Yglesias's very good article on passenger rail also quoted in the previous post.  In discussing why Amtrak is generally uninterested in making incremental improvements on the Northeast Corridor, he writes:

The way Amtrak is currently set up, there's no real incentive to undertake incremental improvements. The Northeast Corridor already generates an operating profit, which simply defrays losses elsewhere in the system. Making it run better doesn't generate any wins for the people who would have to do the work, and would plausibly just lead Congress to reduce subsidies. If the NEC were spun off as an independent entity — perhaps even a private company — then it could internalize the gains from improved service and seek private financing to make cost-effective investments.

Long-time readers will know that my company privatizes the operation (but not the ownership) of public parks.  I will make two-hour presentations to parks agencies about how we can improve operations quality while cutting costs by 30-50% or more, and the near-universal response is, "well, if you reduce costs, then the legislature will just reduce our appropriations."  More efficient park operations, and at the margin better visitor service, don't create any wins for agency employees given their incentives.  In fact, if the parks are improved and more people show up, their job is just harder.  I had the manager of Arizona's premier state park tell me, absolutely in all seriousness, that he had the best job in the world if it wasn't for all the visitors.  Can you imagine a McDonald's franchise manager saying that?   As I have always said, government is not populated with bad people, it is populated with perfectly normal people who have terrible incentives.

When agencies choose how to spend incremental funds, they will almost always try to route these to the agency staff, in the form of more headcount and/or more pay.  When money is actually spent to make investments in the parks themselves, projects are chosen not by return on investment or customer priorities, but based on which ones will create the most prestige for the agency and its leaders.  This latter is one reason the Washington Metro is the mess it is, as the agency and the politicians who make appropriations will always prioritize system expansions over capital maintenance and sensible incremental improvements.

Wrapped Around the Axle

This is home repair day, so I am working from home while a variety of repair people show up (none of whom has yet shown up in their promised arrival time window).

Anyway, the A/C guy was here first and was diagnosing why my condenser didn't seem to be running.  He found this on the cooling fan motor (dead):

DSC_0257 (1)

Life in Arizona.

Denying the Climate Catastrophe: 4b. Problems With The Surface Temperature Record

This is the part B of the fourth chapter of an ongoing series.  Other parts of the series are here:

  1. Introduction
  2. Greenhouse Gas Theory
  3. Feedbacks
  4.  A)  Actual Temperature Data;  B) Problems with the Surface Temperature Record (this article)
  5. Attribution of Past Warming;  A) Arguments for it being Man-Made; B) Natural Attribution
  6. Climate Models vs. Actual Temperatures
  7. Are We Already Seeing Climate Change
  8. The Lukewarmer Middle Ground
  9. A Low-Cost Insurance Policy

In part A of this chapter, we showed that the world had indeed warmed over the past 30-100 years, whether you looked at the surface temperature record or the satellite record.  Using either of these metrics, though, we did not see global warming accelerating, nor did we see warming rates that were faster than predicted.  In fact, we saw the opposite.

One story I left out of part A, because it did not affect the basic conclusions we drew, is the criticisms of the surface temperature record.  In this part B, we will discuss some of these criticisms, and see why many skeptics believe the 0.8C warming number for the past century is exaggerated.  We will also gain some insights as to why the satellite measured warming rates may be closer to the mark than rates determined by surface temperature stations.

Uncorrected Urban Biases

Years ago a guy named Steve McIntyre published a graphical portrayal of warming rates across the US.  This is a common chart nowadays. Anyway, this chart (almost 10 years old) drew from temperature measurement stations whose locations are shows with the crosses on the map:

usgrid80

I was living in Arizona at the time and I was interested to learn that the highest warming rate was being recorded at the USHCN station in Tucson (remember, just because Arizona is hot is no reason to necessarily expect it to have high warming rates, they are two different things).  At the time, Anthony Watt was just kicking off an initiative to develop quality control data for USHCN stations by having amateurs photograph the sites and upload them to a central data base.  I decided I would go down to the Tucson site to experience the highest warming rate myself.  This is what I found when I tracked down the station, and took this picture (which has been reproduced all over the place at this point):

click to enlarge

That is the temperature station, around that fenced in white box (the uproar over this picture eventually caused this location to be closed).  It was in the middle of a parking lot in the middle of a major university in the middle of a growing city.  100 years ago this temperature station was in the countryside, in essentially the open desert - no paving, no buildings, no cars.  So we are getting the highest warming rates in the country by comparing a temperature today in an asphalt parking lot in the middle of a city to a temperature a hundred years ago in the open desert.

The problem with this is what's called the urban heat island effect.   Buildings and concrete absorb heat from the sun during the day, more than would typically be absorbed by raw land in its natural state.  This heat is reradiated at night, causing nights to be warmer in cities than in the areas surrounding them.  If you live in a city, you will likely hear weather reports that predict colder temperatures in outlying areas, or warn of freezes in the countryside but not in the city itself.

It turns out that this urban heat island effect is easily measured -- it even makes a great science fair project!

Click to enlarge

My son and I did this project years ago, attaching a small GPS and temperature probe to a car.  We then drove out of the city center into the country and back in the early evening, when the urban heat island effect should be largest.  We drove out and then back to average out any effects of overall cooling during our testing.  One of the trips is shown above, with around 6 degrees F of temperature change.  We, and most others who have done this in other cities, found between 5 and 10 degrees of warming as one drives into a city at night.

If this effect were constant over time, it would not pose too many problems for our purposes here, because we are looking at changes in average temperatures over time, not absolute values.  But the urban heat island warming of a city (and particular temperature stations) increases as the urban area grows larger.   Because this urban warming is many times the global warming signal we are trying to measure, and since most temperature stations are located near growing urban locations, it introduces an important potential bias into measurement.

A number of studies have found that, in fact, we do indeed see more warming historically in thermometers located in urban areas than in those located in rural areas.  Two studies in California have shown much lower warming rates at rural thermometers than at urban ones:

click to enlarge

Click to enlarge

Anthony Watt has been working for years to do this same analysis for the entire US.  In fact, the pictures taken above of the temperature station in Tucson were part of the first phase of his project to document each USHCN site used in the global warming statistics with pictures.  Once he had pictures, he compared the details of the siting with a classification system scientists use to measure the quality of a temperature sites, from the best (class 1) to the worst with the most biases (class 5).  He found that perhaps a third of the warming in the official NOAA numbers may come from the introduction of siting biases from bad sites.  Or put another way, the warming at well-sited temperature stations was only about 2/3 in the official metric.

Click to enlarge

By the way, this is one other reason why I tend to favor the satellite measurements.  Going back to the numbers we showed in part A, the satellite temperature metric had about 2/3 the trend of the surface temperature reading, or almost exactly what the surface readings would be if this siting bias were eliminated (the absolute values of the trends don't match, because they are for different time periods and different geographies).

Click to enlarge

There is one other aspect of this chart that might have caught your eye -- if some temperature stations are showing 2 degrees of warming and some 3.2 degrees of warming, why is the total 3.2 degrees of warming.  Shouldn't it be somewhere in the middle?

One explanation is that the NOAA and other bodies take the data from these stations and perform a number of data manipulation steps in addition to a straight spatial averaging.   One such step is that they will use a computer process to try to correct temperature stations based on the values from neighboring stations.  The folks that run these indices argue that this computational process overcomes the site bias problem.  Skeptics will argue that this approach is utter madness -- why work to correct a known bad temperature point, why not just eliminate it?  If you have a good compass and a bad compass, you don't somehow mathematically average the results to find north, you throw out the bad one and use the good one.  In short, skeptics argue that this approach does not eliminate the error, it just spreads the error around to all the good stations, smearing the error like peanut butter.  Here is an example from the GISS, using station data that has only been adjusted for Time of Observation changes (TOBS).
Grand_12

This is exactly what we might expect - little warming out in undeveloped nature in Grand Canyon National Park, lots of warming in a large and rapidly growing modern city (yes, the Tucson data is from our favorite temperature station we featured above).  Now, here is the same data after the GISS has adjusted it:

Grand_15

You can see that Tucson has been adjusted down a degree or two, but Grand Canyon has been adjusted up a degree or two (with the earlier mid-century spike adjusted down).  OK, so it makes sense that Tucson has been adjusted down, though there is a very good argument to be made that it should be been adjusted down more, say by at least 3 degrees.  But why does the Grand Canyon need to be adjusted up by about a degree and a half?  What is currently biasing it colder by 1.5 degrees, which is a lot?  One suspects the GISS is doing some sort of averaging, which is bringing the Grand Canyon and Tucson from each end closer to a mean -- they are not eliminating the urban bias from Tucson, they are just spreading it around to other stations in the region.

Temperature Adjustments and Signal-To-Noise Ratio

Nothing is less productive, to my mind, than when skeptics yell the word "fraud!" on the issue of temperature adjustments.  All temperature databases include manual adjustments, even the satellite indices that many skeptics favor.    As mentioned above, satellite measurements have to be adjusted for orbital decay of the satellites just as surface temperature measurements have to be adjusted for changes in the daily time of observation.  We may argue that adjustment methodologies are wrong (as we did above with urban biases).  We may argue that there are serious confirmation biases (nearly every single adjustment to every temperature and sea level and ocean heat database tends to cool the past and warm the present, perhaps reinforced by preconceived notions that we should be seeing a warming signal.)  But I find that charges of fraud just cheapen the debate.

Even if the adjustments are all made the the best of intentions, we are still left with an enormous problem of signal to noise ratio.  It turns out that the signal we are trying to measure -- warming over time -- is roughly equal to the magnitude of the manual adjustments.  In other words, the raw temperature data does not show warming, only the manually adjusted data show warming.  This does not mean the adjusted data is wrong, but it should make us substantially less confident that we are truly measuring the signal in all this noise of adjustment.  Here are two examples, for an individual temperature station and for the entire database as a whole:

Click to enlarge

In this first example, we show the raw data (with Time of Observation adjustments only) in orange, and the final official adjusted version in blue.  The adjustments triple the warming rate for the last century.

Click to enlarge

We can see something similar for the whole US, as raw temperature measurements (this time before time of observation adjustments) actually shows a declining temperature trend in the US.  In this case, the entirety of the global warming signal, and more, comes from the manual adjustments.  Do these adjustments (literally thousands and thousands of them) make sense when taken in whole?  Does it make sense that there was some sort of warming bias in the 1920's that does not exist today? This  is certainly an odd conclusion given that it implies a bias exactly opposite of the urban heat island effect.

We could go into much more detail, but this gives one an idea of why skeptics prefer the satellite measurements to the surface temperature record.  Rather than endlessly working to try to get these public agencies to release their adjustment details and methodology for third party validation to the public that pays them (an ongoing task that still has not been entirely successful), skeptics have simply moved on to a better approach where the adjustments (to a few satellites) are much easier to manage.

Ultimately, both approaches for seeking a global warming signal are a bit daft.  Why?  Because, according to the IPCC, of all the extra warming absorbed by the surface of the Earth from the greenhouse effect, only about 1% goes into the atmosphere:

 

click to enlarge

Basically, water has a MUCH higher heat carrying capacity than air, and over 90% of any warming should be going into oceans.  We are just starting to get some new tools for measuring the changes to ocean heat content, though the task is hard because we are talking about changes in the thousandths of a degree in the deep oceans.

After this brief digression into the surface temperature records, it is now time to get back to our main line of discussion.  In the next chapter, we will begin to address the all-important attribution question:  Of the warming we have seen in the past, how much is man-made?

Chapter 5, Part A on the question of attributing past warming to man is here.