Coyote Blog

Kevin Drum writes

On the right, both climate change and questions about global limits on oil production have exited the realm of empirical debate and become full-blown fronts in the culture wars. You're required to mock them regardless of whether it makes any sense. And it's weird as hell. I mean, why would you disparage development of renewable energy? If humans are the ultimate creators, why not create innovative new sources of renewable energy instead of digging up every last fluid ounce of oil on the planet?

I am sure it is perfectly true that there are Conservatives who knee-jerk oppose every government renewable energy and recycling and green jobs idea that comes along without reference to the science.  But you know what, there are plenty of Liberals who knee-jerk support all these same things, again without any understanding of the underlying science.  Mr. Drum, for example, only recently came around to opposing corn ethanol, despite the fact that the weight of the science was against ethanol being any kind of environmental positive years and years ago.  In fact, not until it was no longer cool and caring to support ethanol (a moment I would set at when Rolling Stone wrote a fabulous ethanol expose) did Drum finally turn against it.  Is this science, or social signalling?   How many folks still run around touting electric cars without understanding what the marginal fuels are in the electricity grid, or without understanding the true well-to-wheels efficiency?  How many folks still run around touting wind power without understanding the huge percentage of this power that must be backed up with hot backup power fueled by fossil fuels?

Why is his almost blind support of renewable energy without any reference to science or the specifics of the technologies involved any saner than blind opposition?  If anything, blind opposition at least has the numbers on their side, given past performance of investments in all sorts of wonder-solutions to future energy production.

The reason there is a disconnect is because statists like Drum equate supporting government subsidies and interventions with supporting renewables.  Few people, even Conservatives, oppose renewables per se.  This is a straw man.  What they oppose are subsidies and government mandates for renewables.  Drum says he has almost limitless confidence in  man's ability to innovate.  I agree -- but I, unlike he apparently, have limitless confidence in man's ability to innovate absent government coercion.  It was not a government program that replaced whale oil as an illuminant right when we were approaching peak whale, it was the genius of John D. Rockefeller.  As fossil fuels get short, prices rise, and people naturally innovate on substitutes.  If Drum believes that private individuals are missing an opportunity, rather than root for government coercion, he should go take up the challenge.  He can be the Rockefeller of renewable energy.

Postscript:  By the way, it is absurd and disingenuous to equate opposition to what have been a series of boneheaded government investments in questionable ventures and technologies with some sort of a-scientific hatred of fossil fuel alternatives.  I have written for a decade that I long for the day, and expect it to be here within 20 years, that sheets of solar cells are cranked from factories like carpet out of Dalton, Georgia.

Rolling Stone Magazine has an good story on the conviction of a number of banks and brokers on charges of bid-rigging, specifically on contracts for short-to-medium term management of municipal bond cash accounts.  Apparently brokers were paid by certain banks to be given a look at all the other bids before they made their final bid.  The article focuses mainly on the ability of winning bidders not to bid any higher than necessary, though I would suppose there were also times when, given this peek, the winning bidder actually raised its bid higher than it might have to ace out other bidders.

This is classic government contracting fraud and it's great to see this being rooted out.  I am not wildly confident it is going to go away, but any prosecutorial attention is welcome.

But I am left with a few questions:

• It seems that government contracting is more susceptible to this kind of manipulation.  Similar stories have existed for years in state highway contracting, and the municipal bond world has had accusations of kick-backs for years.  Is this a correct perception, or is the rate of fraud between public and private contracting the same but we just notice more with the government because the numbers are larger, the press coverage is greater, and the prosecutorial resources are more robust?
• If government contracting of this sort is more susceptible to fraud, why, and how do we fix it?

The latter is not an academic question for me.  I run a company that privately operates public recreation areas.  I bid on and manage government contracts.  Frequently, a major argument used against the expansion of such privatization initiatives is that past government outsourcing and contracting efforts have been characterized by fraud and mismanagement.  The argument boils down to "the government has so many management problems that it can't be trusted with contracting for certain services so it needs to operate those services itself."

The only way to reconcile this view is to assume that private actors are more likely to act fraudulently and be dishonest than public employees.  If this were true, then the public would be safer if a public management process of questionable ability were applied towards public employees rather than outside private contractors, because those who were being managed would be less likely to take advantage.  And certainly there are plenty of folks with deep skepticism of private enterprise that believe this.

However, I would offer that only by adopting an asymmetric view of what constitutes fraud would we get to this conclusion.  Clearly, banks colluding to shave a few basis points off municipal asset returns is fraud.     As the author of the Rolling Stone piece puts it several times, the crime here is that the public did not get the best market rate.  So why is, say, elected officials colluding with public employees unions to artificially raise wages, benefits, and staffing levels above market rates not fraud as well?  In both cases insiders are manipulating the government's procurement and political processes to pay more than the market rates for certain services.

This is Bastiat's "seen and unseen" of the privatization debate.   Yes, the world is unfortunately littered with examples of government procurement fraud.  This is often cited as a reason for maintaining the status quo of continued government management of a diverse range of services.  But what we miss, what is unseen, is that these government services are often run with staffing levels, work rules, productivity expectations, and pay rates that would constitute a scandal if uncovered in a division of a corporation, particularly if the workers were spending a lot of money to make sure the manager handing them this largess was able to keep his job.

Yes, the public lost several basis points on its investments when it did not get the market rate of return from cheating bankers.  But it loses as much as 50% of every tax dollar sent to many state agencies because it does not get market rates (and practices) for state labor.

I don't really have any Valentine's related advice for folks.  I will just leave you with this list of meanest loves songs that I heard on the radio this morning.  The Rolling Stone's "Under my Thumb" and Meatloaf's "Two out of Three Ain't Bad" would have been the top of my list.

Oh, and related advice:  I saw yet another wedding a while back that used Whitney Houston's "I Will Always Love You" as part of the ceremony.  I know the refrain is nice, but please, those of you who are betrothed out there, read the lyrics before you use this song in your wedding!

Update: From the same source, this is actually a more interesting list.

Update #2: Valentines jewelry for the brave man.

I had a call today from a reporter at the Christian Science Monitor who wanted to discuss climate skepticism.  What a disaster of an interview I am!  He would ask an open-ended question, and off I would go into feedback theory and then to acoustics and then into helicopter dynamics and back to the ice age and then to temperature measurement in Tucson.  I try to follow 6 trains of thought simultaneously and the result is a mess. 

The poor reporter was quite friendly and ended with "I am not sure where we are going with this story" which is the universal reporter speak for "your interview was such a mess I am not sure how we would ever use it."  LOL.  Only by writing, with the implicit governor applied by the keyboard, am I able to organize my thoughts well.  Which is why I have never invested in a computer dictation product - I shudder to think what I would find on the page after a session.  Which reminds me of the early Doonesbury cartoons with Duke when he was a reporter at the Rolling Stone, when he would come into the his editor's office and claim to have dictated some really powerful stuff, only to find a garbled drug-induced mess, which was obviously a reference to Hunter S. Thompson, who... oh crap, I'm doing it again.

Finally, the blinders are coming off and the media is starting to
wake up to the absolute travesty that is the Congress's promotion of
ethanol.  From Rolling Stone(!) emphasis added.

This is not just hype -- it's dangerous, delusional bullshit.  Ethanol doesn't burn cleaner than gasoline, nor is it
cheaper. Our current ethanol production represents only 3.5 percent of
our gasoline consumption -- yet it consumes twenty percent of the
entire U.S. corn crop, causing the price of corn to double in the last
two years and raising the threat of hunger in the Third World. And the
increasing acreage devoted to corn for ethanol means less land for
other staple crops, giving farmers in South America an incentive to
carve fields out of tropical forests that help to cool the planet and
stave off global warming.

So why bother? Because the whole
point of corn ethanol is not to solve America's energy crisis, but to
generate one of the great political boondoggles of our time. Corn is
already the most subsidized crop in America, raking in a total of $51
billion in federal handouts between 1995 and 2005 -- twice as much as
wheat subsidies and four times as much as soybeans. Ethanol itself is
propped up by hefty subsidies, including a fifty-one-cent-per-gallon
tax allowance for refiners. And a study by the International Institute
for Sustainable Development found that ethanol subsidies amount to as
much as $1.38 per gallon -- about half of ethanol's wholesale market
price.

Hurrah!  Unfortunately, I fear we may be waking up too late.  Already, billions of dollars are being invested by politically connected companies
on the promises of subsidies and promotion of ethanol extending out to
the end of the universe.  At this point, ethanol may be as entrenched
as agriculture subsidies, the education department, and depression-era
alcohol regulation.  The government has no problem reneging on contracts with oil companies, but God forbid anyone deny Archer Daniels Midland the right to infinite subsidies.