Posts tagged ‘US’

When "Pro-Science" Environmentalists Fall For Idiotic Technologies: Solar Roads Edition

I am mostly inured to being told I am "anti-science" for thinking manmade global warming will be less than catastrophic.  In debate situations (which are increasingly rare, since most colleges where I do most of my speaking no longer want a second side in climate discussions) I usually can demonstrate I know a hell of a lot more about the science than my opponent in the first 3 minutes or so.

But the whole "pro-science" pose of environmentalists is especially funny when they get really excited about some very stupid technology.  Environmentalists' support for corn ethanol is a good case in point.  Most of them have retreated on this, and the media has pretty much allowed them to pretend they were never really vociferous supporters of this technology that most now consider (and I considered from the beginning) to be environmentally damaging.

Here is the new, latest, greatest example.  From Think Progress, where else, but the story has been reprinted all over the hip environmental Left:

The World’s First Solar Road Is Producing More Energy Than Expected

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In its first six months of existence, the world’s first solar road is performing even better than developers thought.

The road, which opened in the Netherlands in November of last year, has produced more than 3,000 kilowatt-hours of energy — enough to power a single small household for one year, according to Al-Jazeera America.

“If we translate this to an annual yield, we expect more than the 70kwh per square meter per year,” Sten de Wit, a spokesman for the project — dubbed SolaRoad — told Al Jazeera America. “We predicted [this] as an upper limit in the laboratory stage. We can therefore conclude that it was a successful first half year.”

De Wit said in a statement that he didn’t “expect a yield as high as this so quickly.”

The 230-foot stretch of road, which is embedded with solar cells that are protected by two layers of safety glass, is built for bike traffic, a use that reflects the road’s environmentally-friendly message and the cycling-heavy culture of the Netherlands.

In the US, we pay about 12 cents a KwH for electricity  (the Dutch probably pay more).  But at this rate, in 6 months, the solar sidewalk has generated... $360 of electricity.  Double that for a year, and we get $720 of electricity a year.

How much did the sidewalk cost?  The article doesn't say.  You will find this typical of wind and solar articles.  If they quantify the installation cost, they will not quantify the value of power produced.  If they quantify the power produced, they will never quantify the installation cost. This article says the installation cost was $3.5 million, though I suppose one should subtract from that the cost to build a similar length concrete bike path, but that can't be more than $100,000 for 230 feet.  They say they are getting 70kwh per year per square meter, which is $8.40 worth of electricity per square meter per year.  Since regular solar panels - without all the special glass overlays and installation in the ground and inverters and wiring - cost about $150-$200 per square meter, you can see this is a horrible investment.

Part of the reason this is a bad investment is that solar panels are simply not efficient enough and cheap enough to be cost effective -- I think they will be someday, but not now.   But this project has special problems:

  • The panels are actually in the ground with people driving over them.  Honestly, could one actually choose a worse spot for a solar panel?  This installation location, vs. say a roof, adds incredible cost to toughen the panels for wear.  Also, it increases their maintenance costs and likely reduces their life.
  • Even worse, the panels have to sit flat on the ground, which is not the most efficient place for them.  Panels are most efficient if tilted at an angle and (in the case of Holland) facing south.  Further, they are more efficient up in the air where they do not get shaded by trees or buildings.

This is just stupid, stupid, stupid.  Perhaps if solar becomes more efficient and we have run out of space on every roof in the world, one might possibly maybe (but probably not) consider this.  But despite the inherent inanity of this idea, look at all the articles on Solaroad -- Think Progress, the Huffington Post, Engadget, Tree Hugger, Extreme Tech, NPR, Sustainable Business -- they all have multiple, gushing, unrelentingly positive articles about this.  Look at all the positively fawning comments on Think Progress.  I can't find a single article on the web that is even slightly skeptical.

 Update:  A reader sends me this epic video takedown of this stupid idea.  He did this in advance of the article today.  He finds it to be complete BS, despite the fact that he overestimates electrical production by a factor of 2.

The Federal Government's Minimum Wage Hypocrisy

Diana Furchtgott-Roth and Jared Meyer have an article in the Federalist discussing the hypocrisy of members of Congress who advocate for higher minimum wages while paying their interns nothing.  It is worth a read, but rather than excerpt it, I wanted to add another example.

The example comes from the world of private operation of public parks, the business my company is in.  We keep parks open by operating much less expensively than can the government, usually using only the fees paid by park users without any additional tax dollars.

Last year, Barack Obama issued an order raising the minimum wage of Federal contractors to $10.10 an hour.  Though concessionaires like us are normally thought of legally as tenants of the government rather than contractors, the Department of Labor wrote the rules in such a way that this wage order would apply to concessionaires that operate Federal parks, such as those in the US Forest Service's campground concession program.

As a result of this order and similar minimum wage increases by the State of California, a concessionaire (not our company) that ran campgrounds in the Tahoe National Forest in California informed the Forest Service that it would need to raise camping rates to offset these minimum wage increases.  As an aside, wages and benefits that are tied to wage rates (e.g. workers comp and payroll taxes) make up about 50% of a private concessionaire's costs.  So if minimum wages go up, say, 20%, then (given the very low margins in the business) a 10% price increase is necessary just to stay even.

The Tahoe NF rejected the fee increase request, despite the fact that the concessionaire turned over its books to show that it was losing money at the higher minimum wage rates.

So what did the Tahoe NF do?  It took over operation of the campgrounds itself, ending a successful 30-year partnership with private operators.  How did it solve the minimum wage issue?  Simple!  Minimum wage laws don't apply to the Federal government.  So it will use dozens of volunteers who are paid nothing to operate the campground.

In other words, at a time when the President believes it is a burning priority to make sure every campground worker makes at least $10.10 an hour, the US Forest Service is firing private, paid workers and replacing them with volunteers.

By the way, even using volunteers, the US Forest Service will STILL be paying more to operate the campgrounds than it did with the concessionaire.  Under the private partnership, the private operator paid all expenses and paid the US Forest Service a concession fee, essentially rent.  The campground's operation and maintenance were paid for entirely with user fees, and the USFS actually made money from the operation.  Now, even with volunteers, the USFS operating plan shows it using $2 million of taxpayer money over the next five years in addition to user fees to keep the parks open.

Celebrate the Strong Dollar

We are already seeing articles bemoaning the strong dollar as somehow a threat to the American economy.  Don't believe it.  Maintaining a weak dollar is yet another crony government program that benefits a tiny minority of admittedly vocal and politically connected Americans.

First, a bit of an aside.  It is amazing to me that the US dollar can be strong at all right now, given the actions of the Fed.  With its near infinite QE and zero-interest rate programs, one would expect the dollar to be weak (Oversimplifying, driving down the returns on financial assets reduces the overseas demand for them, thus reducing the demand for dollars, driving down the price of dollars).  But it turns out that the rest of the world (esp. Japan and the EU) are actually working twice as hard to trash their own currencies (they are actually heading into negative interest rate territory, not just zero) and thus on a relative basis, the dollar is stronger.

Companies that export or compete a lot with manufacturers in other countries hate the strong dollar.  It makes their domestically produced products more expensive vis a vis products manufactured in other countries.  Many of these companies have powerful political voices, and some have large unions with even more powerful political voices.  They lobby for a weaker dollar.  Part of that lobbying is often to portray other countries as nefariously "manipulating" their currencies to hurt the US.

What these countries that are weakening their own currencies are actually doing is trashing the prosperity of the vast majority of their citizens to protect the earnings of a few politically powerful producers.  Japan is a great example.  Japan is a country in which consumers have been stomped on from decades in order to reduce the price of the country's exports.  Japanese consumers pay far more for everything than we do, all so their exporters can lower their prices in the US.

This is the same in China.  We frequently host visiting Chinese students.  You know what every one of these kids do on their trip to the US?  They bring an empty suitcase that they fill up with electronic and fashion goods they buy here, many of which were actually manufactured in China  (I have never, ever have hosted a Chinese student that did not buy at least one Chinese-manufactured iPhone here).

So, we must oppose this currency "manipulation" that impoverishes Japanese, Chinese, and European citizens in favor of giving much lower prices to Americans -- Why?

We should celebrate the strong dollar.  It makes every one of us richer.  Not just when we buy Chinese electronics, but even when we buy American-made products that now must be less expensive to compete with foreign products and which benefit from cheaper inputs in their own manufacturing.

Years and years ago I wrote a hypothetical post about Chinese interventions to maintain a trade surplus form a Chinese consumer's perspective in a post from our sister publication Panda Blog.  I think it holds up really well.  It said in part:

It is important to note that each and every one of these government interventions subsidizes US citizens and consumers at the expense of Chinese citizens and consumers.  A low yuan makes Chinese products cheap for Americans but makes imports relatively dear for Chinese.  So-called "dumping" represents an even clearer direct subsidy of American consumers over their Chinese counterparts.  And limiting foreign exchange re-investments to low-yield government bonds has acted as a direct subsidy of American taxpayers and the American government, saddling China with extraordinarily low yields on our nearly $1 trillion in foreign exchange.   Every single step China takes to promote exports is in effect a subsidy of American consumers by Chinese citizens.

Nestle: Private Company Getting Blamed for Government Incompetence

The story begins with a discovery that the permit under which Nestle's Arrowhead Water has been collecting water in the San Bernardino National Forest expired in 1988.  LOL, oops.  Environmental and other Leftish sites are calling for Nestle's head and somehow blaming Nestle for this.

As a permittee with the US Forest Service (USFS) in California and across the country, I can guess with pretty high confidence exactly what happened here.  For years I was head of a trade group of recreation concessionaires (think lodges and guides and such) who do business in the USFS under permit.  Most of these were located in California.  For years, the biggest problem we have had with the USFS in California is that they are years and years behind in nearly all their permit renewals.  There are literally hundreds of expired permit in the USFS in California alone.

For reasons that probably go to bureaucratic incentives, despite the Forest Service's huge budget, they are loath to allocate resources to renewing these permits -- they want to fill their organization with biologists and archaeologists and arborists, not contracts people.  Making the situation worse, Forest Service and other Federal rules have burdened the permit renewal process with so many legal requirements that each one, even if trivial in size and impact, is absurdly time-consuming to complete.

This is not a new situation -- it has obtained for years.  Almost five years ago I met personally with the Chief of the Forest Service in DC and begged for more resources to be assigned to permit renewals, but to no avail.   I did the same in a meeting barely a month ago with the head of the USFS's Region 5 (basically California).   All of us permittees have been vociferously complaining about this for years.

When you look at these situations, then, what you will see is not some evil private business trying to get over on the public, but a business that is literally screaming in frustration, year in and year out, begging the US Forest Service to address its permit renewal.   Generally, local Forest Service staff will give the company verbal assurances that they should keep operating, so they do, continuing to pay their fees and operate within the guidelines of the old, expired contract.

I would be willing to bet a fair amount of money that this is exactly what happened to Nestle.

By the way, the usual groups seem to be piling on Nestle about bottled water from the Sacramento tap water system.  A couple of comments:

  • Environmentalists seem to obsessively hate bottled water, but ignore what a trivial, trivial percentage of total water use is bottled.
  • Critics are accusing Nestle of making obscene profits on Sacramento tap water.  But if they really think the spread between tap water and bottled water is too large, isn't the real issue that Sacramento is under-pricing its tap water?  After all, Nestle is paying what everyone else in the town is paying for water.
  • Environmentalists have a misguided fetish for local foods, often ignoring that transportation costs and energy are a tiny percentage of most food production costs  (a percentage small enough to be dwarfed by differential productivity of soils and climates).  But here, all they can possibly accomplish is to chase Nestle's bottling plant out of California and then have the water trucked back into the state.  This might be a net gain depending on the differential value of California water vs. fuel, but we can't know that because California water pricing is so screwed up.

The Left and Original Sin

Check your privilege.  You are one of the white oppressors.  You are part of the patriarchy.   These are all frequent rhetorical flourishes from the Left today.  What do they have in common?  Well, beyond the fact that they are all ad hominem and have nothing to do with a person's actual arguments or even character, they all work under an assumption of original sin -- that the sins of past generations somehow accrue to individuals of this generation.  If you are male, you are born guilty for the infractions of all past males.  Your maleness or whiteness or the bank balance of your parents creates a stink that can't be washed off.

There is a certain irony to all this, particularly on gender issues, since many of were often justified on Biblical notions of original sin stemming back to the Garden of Eden.  Which all goes, by the way, to demonstrate my contention that "tolerance" today is not about ending out-groups but about shifting the out-group tag to different people.

Don't believe me?  Well, how else to explain this story about Ben Affleck:

Last week we learned that distinguished Harvard professor Henry Louis Gates Jr. compromised his integrity when actor Ben Affleck — a guest on “Finding your Roots,” the PBS documentary on celebrity lineages that Gates hosts — asked Gates to omit a portion of his ancestry.

Affleck, soon to be seen as Batman on the big screen, learned he had a slave-owning ancestor and promptly pushed Gates to spike that detail.

“We've never had anyone ever try to censor or edit what we found,” Gates wrote in an email to Michael Lynton, chief executive of Sony Entertainment, adding: “He's a megastar. What do we do?”

Perhaps I might try to whitewash a story about my parents.  I barely knew my grandparents and can't imagine trying to whitewash their history.  But for what conceivable reason would I whitewash my family history 4 or 5 generations back?  How in the world, unless I were to accept some notion of original sin, would the crimes of a relative more than 150 years ago accrue to me?

A few other thoughts:

  • This concern is also pretty selective.   So an ancestor held opinions about slavery we all would find horrifying today.  But given the times, I can bet that pretty much every relative of Affleck's of that era, slaveholder or no, held opinions (say about women) that we would likely find offensive today.
  • Congrats to Affleck for achieving some negative alchemy here.  He took an issue (his ancestor's slave-holding) that did not reflect on him at all and converted it via some "I am a star" douchebaggery into something that makes him look like a tool.
  • PBS often makes the argument that they somehow have the moral high ground because they are non-commercial and publicly-funded.  Uh, right.  Look at how quickly they caved here.
  • I find it hilarious that any kids in the US feel the ability to say "check your privilege" to someone else.  Even someone at the 20th percentile in the US would be among the richest 20% in many countries.  From the world's perspective, we are all affluent here.

Kevin Drum Claims "We" Haven't Learned Anything from Deepwater Horizon. What you mean, "we," Kemo Sabe?'

Kevin Drum claims that "we" haven't learned anything from the Deepwater Horizon disaster (the BP oil rig that exploded five years ago in the Gulf, killing a number of people and creating a large oil spill).

What is his evidence?  Has he looked at oil company drilling practices and found them unchanged since the disaster?  No, he does not mention any evidence based on observed drilling practices one way or another.  His sole evidence that "we" have not learned anything is that the US Government has not shut down drilling in the Gulf and has not passed any new laws.

This is almost a caricature of progressive thinking -- nothing matters except what the government does.  But presumably oil companies have been influenced by the cost of the disaster on BP.  So far BP has paid out about $30 billion (billion with a B) in reparations and restoration expenses and may be facing another $20 or so billion in fines based on a 2014 court decision.  All this ignores the loss of the platform itself, of access to the resource below the platform, and of BP's reputation.

One would presume that the prospect of losing $50+ billion would be enough to get the attention of private companies and cause them to make changes to their procedures.  I suppose it is also possible that they completely ignored this, but Drum offers no evidence one way or another.  To him, anything not done by the government is irrelevant.

Two Steps Back for Free Speech in Nevada

Until now, Nevada has had one of the strongest anti-SLAPP protection laws in the US.  As a reminder, SLAPP suits are ones aimed at silencing speech by intimidating it with legal threats and overwhelming it with legal defense costs.  Anti-SLAPP laws provide legal protection to speech through a variety of means, including the ability to get quick dismissals of suits whose sole intention is to quash legal speech and in the best cases reimbursement of attorneys fees.

As you can imagine, politicials, the wealthy, and the powerful don't like these suits.  Nevada is in the process of gutting these protections.  Ken White has the story.

I have a new-found interest in such matters, as I was threatened by a major corporation this week with a libel suit if I did not remove my negative reviews of them on Yelp and on this blog.  More on that in the next post.

 

Everything You Need to Know About California Water Pricing

California is the #2 rice grower in the nation, with 22% of US production.

There is a debate growing in California about whether crops like almonds (that use a lot of water) should be allowed.  But all that authoritarian command and control debate about "allowing" certain activities is unnecessary.  Just raise prices to some sort of supply and demand matching level (it is a bit awkward to do this because there is not a true free market in water supply but any attempts have got to be better than the current absurdly low prices).  Then the almond growers themselves, and the rice growers, and the golf courses, and everyone else will decide if they can still operate in CA or not.  No politicians' commands necessary.

Raising prices also creates a secondary benefit over government-imposed rationing -- it provides incentives for people to seek out and invest in new sources of supply.  Desalinization, any one?

We Still Haven't Figured Out How to Measure Prosperity

The previous chart on beer availability reminds me of an issue I have been thinking about for a while -- that we do no know how to measure prosperity.

GDP growth and unemployment reduction are terrible measures.  Just to give one example, these measures looked fabulous in WWII.  But the average person living in the US had access to almost nothing -- they couldn't buy anything under rationing, they couldn't travel for leisure, etc.   GDP looked great because we were building stuff and then blowing it up, the economic equivilent of digging a hole and filling it in (but worse, because people were dying).  And unemployment looked great because we had drafted everyone and sent them off to get shot.

But median income and net worth numbers fail to measure prosperity as well.  The reason was described in this post here way back in 2007.

The home on the left was owned by Mark Hopkins, railroad millionaire and one of the most powerful men of his age in California.  Hopkins had a mansion with zillions of rooms and servants to cook and clean for him, but he never saw a movie, never listened to music except when it was live, never crossed the country in less than a week.  And while he could afford numerous servants around the house, Hopkins (like his business associates) tended to work 6 and 7 day weeks of 70 hours or more, in part due to the total lack of business productivity tools (telephone, computer, air travel, etc.) we take for granted.  Hopkins likely never read after dark by any light other than a flame.

If Mark Hopkins or any of his family contracted cancer, TB, polio, heart disease, or even appendicitis, they would probably die.  All the rage today is to moan about people's access to health care, but Hopkins had less access to health care than the poorest resident of East St. Louis.  Hopkins died at 64, an old man in an era where the average life span was in the early forties.  He saw at least one of his children die young, as most others of his age did.  In fact, Stanford University owes its founding to the early death (at 15) of the son of Leland Stanford, Hopkin's business partner and neighbor.  The richest men of his age had more than a ten times greater chance of seeing at least one of their kids die young than the poorest person in the US does today.

How do we take into account that even if a person has the same income as someone in 1952, they are effectively wealthier in many ways due to access to medical procedures, travel, entertainment, electronic devices, etc?

Somehow we need to measure consumer capability -- not just how much raw money one has but what can one do with the money?  What is the horizon of possibilities?  Deirdre McCloskey tends to eschew the term capitalism in favor of "market-tested innovation."  I think that is a pretty powerful description of our system.  But if it is, we really are only measuring the impact of productivity and cost-reduction innovations.  How do we measure the wealth impact of consumer-empowerment innovations like iPhones?  Essentially, we don't.  Which, by the way, may be one reason our current crappy metrics say we have growing income inequality.  With our current metrics, Steve Jobs' increase in wealth is noted in the metrics, but the metrics don't show the rest of us getting any wealthier by the fact that we can now have iPhones (or the myriad of competitors the iPhone spawned).  The consumer surplus from iPhones undoubtedly dwarfs the money Jobs made, but it doesn't show up in any wealth calculations.

A few years ago I told a youth group that there were still many things left to discover in the mundane world -- by this I meant the everyday world we encounter and not just at the limits of the universe or at the scale of quarks.  The example I gave at the time is that there is a lot of room for better techniques to tease out causality in complex systems -- e.g. how much did the stimulus really affect the economy or how much does CO2 really affect temperatures.  I would add this question of measuring prosperity as a second item in this category.

The Dangers of Bipartisanship

The media loves to talk about the joys of bipartisanship, but libertarians run for the hills whenever we hear that word.  Because it means that true legislative suckage is probably on the way.   The horrendous war on drugs is just one example.

Here is another -- freedom to buy alcohol where it is most convenient.  Living in AZ, I have come to expect that I can buy some tequila at my grocery store, but apparently this is a very limited freedom in the US:

AlcoholGroceryStores_Liquor4

There are two reasons.  First, this is where you get one of those left-right coalitions, with Republican social conservatives wanting to limit liquor availability and Democratic big government types wanting to keep sales to a small group that can be tightly regulated (and strip-mined for campaign donations), or even better, to state-run liquor stores.  The second reason is that once any regulation is in place that restricts sales, the beneficiaries of those restrictions (e.g. liquor stores or unionized employees at state-run stores) fight any liberalization tooth and nail to protect their crony rents.

India: One Foot In, One Foot Out of the Modern World

I just filled out a tourist visa application for one of my kids going to India.  I found it intriguing that on the one hand:

  • If you are a student, you had to give employment information on your source of support, but the only options were spouse and father.  No option for mother's occupation
  • You had to specify a religion -- no option for "atheist" or "none" or "none of your freaking business"

On the other hand:

  • There was a gender option for "transgender".

Anyway, the Indian online visa process had the Italians beaten hands down.  Actually the Chinese beat the Italians as well.  And, everyone I know who is not American tells me the US is the worst about visas.

Skeptics: Please Relax on the Whole "Greatest Scientific Fraud of All Time" Thing

Climate skeptics are at risk of falling into the same exaggeration-trap as do alarmists.

I have written about the exaggeration of past warming by questionable manual adjustments to temperature records for almost a decade.  So I don't need to be convinced that these adjustments 1) need to be cleaned up and 2) likely exaggerate past warming.

However, this talk of the "Greatest Scientific Fraud of All Time" is just crazy.  If you are interested, I urge you read my piece from the other day for a more balanced view.  Don't stop reading without checking out #4.

These recent articles are making it sound like alarmist scientists are simply adding adjustments to past temperatures for no reason.  But there are many perfectly valid reasons surface temperature measurements have to be manually adjusted.  It is a required part of the process.  Just as the satellite data must be adjusted as well, though for different things.

So we should not be suspicious of adjustments per se.  We should be concerned about them, though, for a number of reasons:

  • In many parts of the world, like in the US, the manual adjustments equal or exceed the measured warming trend.  That means the"signal" we are measuring comes entirely from the adjustments.  That is, to put it lightly, not ideal.
  • The adjustments are extremely poorly documented and impossible for any third party to replicate (one reason the satellite record may be more trustworthy is all the adjustment code for the satellites is open source).
  • The adjustments may have a bias.  After all, most of the people doing the adjustments expect to see a warming trend historically, and so consider lack of such a trend to be an indicator the data is wrong and in need of adjustment.  This is not a conspiracy, but a normal human failing and the reason why the ability to replicate such work is important.
  • The adjustments do seem to be very aggressive in identifying any effects that might have artificially created a cooling trend but lax in finding and correcting effects that might have artificially created a warming trend.  First and foremost, the changing urban heat island effect in growing cities seems to be under-corrected  (Again there is debate on this -- the proprietors of the model believe they have fixed this with a geographic normalizing, correcting biases from nearby thermometers.  I and others believe all they are doing is mathematically smearing the error over a larger geography).

Again, I discussed all the pros and cons here.  If pushed to the wall, I would say perhaps half of the past warming in the surface temperature record is due to undercorrection of warming biases or overcorrection of cooling biases.

Adjusting the Temperature Records

I have been getting inquiries from folks asking me what I think about stories like this one, where Paul Homewood has been looking at the manual adjustments to raw temperature data and finding that the adjustments actually reverse the trends from cooling to warming.  Here is an example of the comparisons he did:

Raw, before adjustments;

puertoraw

 

After manual adjustments

puertoadj2

 

I actually wrote about this topic a few months back, and rather than rewrite the post I will excerpt it below:

I believe that there is both wheat and chaff in this claim [that manual temperature adjustments are exaggerating past warming], and I would like to try to separate the two as best I can.  I don't have time to write a well-organized article, so here is just a list of thoughts

  1. At some level it is surprising that this is suddenly news.  Skeptics have criticized the adjustments in the surface temperature database for years.
  2. There is certainly a signal to noise ratio issue here that mainstream climate scientists have always seemed insufficiently concerned about.  For example, the raw data for US temperatures is mostly flat, such that the manual adjustments to the temperature data set are about equal in magnitude to the total warming signal.  When the entire signal one is trying to measure is equal to the manual adjustments one is making to measurements, it probably makes sense to put a LOT of scrutiny on the adjustments.  (This is a post from 7 years ago discussing these adjustments.  Note that these adjustments are less than current ones in the data base as they have been increased, though I cannot find a similar chart any more from the NOAA discussing the adjustments)
  3. The NOAA HAS made adjustments to US temperature data over the last few years that has increased the apparent warming trend.  These changes in adjustments have not been well-explained.  In fact, they have not really be explained at all, and have only been detected by skeptics who happened to archive old NOAA charts and created comparisons like the one below.  Here is the before and after animation (pre-2000 NOAA US temperature history vs. post-2000).  History has been cooled and modern temperatures have been warmed from where they were being shown previously by the NOAA.  This does not mean the current version  is wrong, but since the entire US warming signal was effectively created by these changes, it is not unreasonable to act for a detailed reconciliation (particularly when those folks preparing the chart all believe that temperatures are going up, so would be predisposed to treating a flat temperature chart like the earlier version as wrong and in need of correction. 1998changesannotated
  4. However, manual adjustments are not, as some skeptics seem to argue, wrong or biased in all cases.  There are real reasons for manual adjustments to data -- for example, if GPS signal data was not adjusted for relativistic effects, the position data would quickly get out of whack.  In the case of temperature data:
    • Data is adjusted for shifts in the start/end time for a day of measurement away from local midnight (ie if you average 24 hours starting and stopping at noon).  This is called Time of Observation or TOBS.  When I first encountered this, I was just sure it had to be BS.  For a month of data, you are only shifting the data set by 12 hours or about 1/60 of the month.  Fortunately for my self-respect, before I embarrassed myself I created a spreadsheet to monte carlo some temperature data and play around with this issue.  I convinced myself the Time of Observation adjustment is valid in theory, though I have no way to validate its magnitude  (one of the problems with all of these adjustments is that NOAA and other data authorities do not release the source code or raw data to show how they come up with these adjustments).   I do think it is valid in science to question a finding, even without proof that it is wrong, when the authors of the finding refuse to share replication data.  Steven Goddard, by the way, believes time of observation adjustments are exaggerated and do not follow NOAA's own specification.
    • Stations move over time.  A simple example is if it is on the roof of a building and that building is demolished, it has to move somewhere else.  In an extreme example the station might move to a new altitude or a slightly different micro-climate.  There are adjustments in the data base for these sort of changes.  Skeptics have occasionally challenged these, but I have no reason to believe that the authors are not using best efforts to correct for these effects (though again the authors of these adjustments bring criticism on themselves for not sharing replication data).
    • The technology the station uses for measurement changes (e.g. thermometers to electronic devices, one type of electronic device to another, etc.)   These measurement technologies sometimes have known biases.  Correcting for such biases is perfectly reasonable  (though a frustrated skeptic could argue that the government is diligent in correcting for new cooling biases but seldom corrects for warming biases, such as in the switch from bucket to water intake measurement of sea surface temperatures).
    • Even if the temperature station does not move, the location can degrade.  The clearest example is a measurement point that once was in the country but has been engulfed by development  (here is one example -- this at one time was the USHCN measurement point with the most warming since 1900, but it was located in an open field in 1900 and ended up in an asphalt parking lot in the middle of Tucson.)   Since urban heat islands can add as much as 10 degrees F to nighttime temperatures, this can create a warming signal over time that is related to a particular location, and not the climate as a whole.  The effect is undeniable -- my son easily measured it in a science fair project.  The effect it has on temperature measurement is hotly debated between warmists and skeptics.  Al Gore originally argued that there was no bias because all measurement points were in parks, which led Anthony Watts to pursue the surface station project where every USHCN station was photographed and documented.  The net result was that most of the sites were pretty poor.  Whatever the case, there is almost no correction in the official measurement numbers for urban heat island effects, and in fact last time I looked at it the adjustment went the other way, implying urban heat islands have become less of an issue since 1930.  The folks who put together the indexes argue that they have smoothing algorithms that find and remove these biases.  Skeptics argue that they just smear the bias around over multiple stations.  The debate continues.
  5. Overall, many mainstream skeptics believe that actual surface warming in the US and the world has been about half what is shown in traditional indices, an amount that is then exaggerated by poorly crafted adjustments and uncorrected heat island effects.  But note that almost no skeptic I know believes that the Earth has not actually warmed over the last 100 years.  Further, warming since about 1980 is hard to deny because we have a second, independent way to measure global temperatures in satellites.  These devices may have their own issues, but they are not subject to urban heat biases or location biases and further actually measure most of the Earth's surface, rather than just individual points that are sometimes scores or hundreds of miles apart.  This independent method of measurement has shown undoubted warming since 1979, though not since the late 1990's.
  6. As is usual in such debates, I find words like "fabrication", "lies",  and "myth" to be less than helpful.  People can be totally wrong, and refuse to confront their biases, without being evil or nefarious.

To these I will add a #7:  The notion that satellite results are somehow pure and unadjusted is just plain wrong.  The satellite data set takes a lot of mathematical effort to get right, something that Roy Spencer who does this work (and is considered in the skeptic camp) will be the first to tell you.  Satellites have to be adjusted for different things.  They have advantages over ground measurement because they cover most all the Earth, they are not subject to urban heat biases, and bring some technological consistency to the measurement.  However, the satellites used are constantly dieing off and being replaced, orbits decay and change, and thus times of observation of different parts of the globe change [to their credit, the satellite folks release all their source code for correcting these things].   I have become convinced the satellites, net of all the issues with both technologies, provide a better estimate but neither are perfect.

Question for Keynesians: What Are You Doing To Prepare for the Next Cycle?

When I was in school learning macro 101 from Baumol and Blinder, my memory is that the theory of Keynesian stimulus and managing the economic cycle was that deficits should be run in the bottom part of the economic cycle, paid for with surpluses in the top half.   So we are now almost certainly in the top half of the cycle.  But I don't hear any Keynesians seeking to run a surplus, or even to dial back on government deficits or spending.  In fact, our Keynesian-in-chief says he is done with "mindless austerity" and wants to start spending even harder in 2015.

Its enough to make one suspicious that all the stimulus talk is just a Trojan Horse for a desire to increase the size and power of government.

But for Keynesians who really believe what they are saying, that deficit spending somehow saved us from a depression in 2009 and 2010, then I ask you -- what are you going to do next time?  It appears that when we enter the next recession in this country, that US debt as a percentage of GDP is going to be almost twice what it was entering the last recession.  Don't you worry that this limits your flexibility and ability to ramp up deficit spending in the next recession?

The situation in the US is the same as it is worldwide.  While those evil private short-term-focused private actors have used the improving economy to de-leverage back below 2007 levels, governments have increased their debt as a percentage of GDP by just over 50% since just before the last recession.

20150205_debt1

 

Since 2007, according to my old friends at McKinsey, global government debt has risen by $25 trillion since 2007.  If you really care about Keynesian stimulus in recessions, and not just "mindlessly" (I can use that term too) increase government spending, wouldn't you want to be building up some reserves for next time?

A Unified Theory of Poor Risk Management: What Climate Change Hysteria, the Anti-GMO Movement, and the Anti-Vaccination Movement Have in Common

After debating people online for years on issues from catastrophic man-made climate change to genetically-modified crops to common chemical hazards (e.g. BPA) to vaccination, I wanted to offer a couple quick thoughts on the common mistakes I see in evaluating risks.

1.  Poor Understanding of Risk, and of Studies that Evaluate Risk

First, people are really bad at thinking about incremental risk above and beyond the background risk  (e.g. not looking at "what is my risk of cancer" but "what is my incremental added risk from being exposed to X").  Frequently those incremental risks are tiny and hard to pick out of the background risk at any level of confidence.  They also tend to be small compared to everyday risks on which people seldom focus.  You have a far higher - almost two orders of magnitude - risk in the US of drowning in your own bathtub than you have in being subject to terrorism, but which do we obsess over?

Further, there are a lot of folks who seem all-to-ready to shoot off in a panic over any one scary study in the media.  And the media loves this, because it drives the meter on their earnings, so they bend over backwards to look for studies with scary results and then make them sound even scarier.  "Tater-tots Increase Risk of Ebola!"  But in reality, most of these scary studies never get replicated and turn out to be mistaken.  Why does this happen?

The problem is that every natural process is subject to random variation.  Even without changing the conditions of an experiment, there is going to be random variation in measurements.  For example, one population of white mice might have 6 cancers, but the next might have 12 and the next might have zero, all from natural variation.  So the challenge of most experiments is to determine whether the thing one is testing (e.g. exposure to a particular substance) is actually changing the measurements in a population, or whether that change is simply the result of random variation.  That is what the 95% confidence interval (that Naomi Oreskes wants to get rid of) really means.  It means there is only a 5% chance that the results measured were due to natural variation.

This is a useful test, but I hope you can see how it can fail.  Something like 5% of the time that one is measuring two things that actually are uncorrelated, the test is going to give you a false positive.  Let's say in a year that the world does 1000 studies to test links that don't actually exist.  Just from natural variation, 5% of these studies will still seem to show a link at the 95% confidence level.  We will have 50 studies that year broadcasting false links.  The media will proceed to scare the crap out of you over these 50 things.

I have never seen this explained better than in this XKCD cartoon (click to enlarge):

click to enlarge

All of this is just exacerbated when there is fraud involved, an unfortunate but not unknown occurrence when reputations and large academic grants are on the line.  This is why replication of the experiment is important.   Do the study a second time, and all but 2-3 of these 50 "false positive" studies will fail to replicate the original results.  Do it three times, and all will likely fail to replicate.   This, for example, is exactly what happened with the vaccine-autism link -- it came out in one study with a really small population and some evidence of fraud, and was never replicated.

2.  The Precautionary Principle vs. the Unseen, with a Dollop of Privilege Thrown In

When pressed to the wall too hard about the size and quality of the risk assessment, most folks subject to these panics will fall back on the "precautionary principle".   I am not a big fan of the precautionary principle, so I will let Wikipedia define it so I don't create a straw man:

The precautionary principle or precautionary approach to risk management states that if an action or policy has a suspected risk of causing harm to the public or to the environment, in the absence of scientific consensus that the action or policy is not harmful, the burden of proof that it is not harmful falls on those taking an action.

I will observe that as written, this principle is inherently anti-progress.  The proposition requires that folks who want to introduce new innovations must prove a negative, and it is very hard to prove a negative -- how do I prove there are no invisible aliens in my closet who may come out and eat me someday, and how can I possibly get a scientific consensus to this fact?  As a result, by merely expressing that one "suspects" a risk (note there is no need listed for proof or justification of this suspicion), any advance may be stopped cold.  Had we followed such a principle consistently, we would still all be subsistence farmers, vassals to our feudal lord.

One other quick note before I proceed, it turns out that proponents of the precautionary principle are very selective as to where they apply the principle.  They feel like it absolutely must be applied to fossil fuel burning, or BPA use, or GMO's.  But precautionary principle supporters never apply it in turn to, say, major new government programs and regulations and economic interventions, despite many historically justified concerns about the risks of these programs.

But neither of these is necessarily the biggest problem with the precautionary principle.  The real problem is that it focuses on only one side of the equation -- it says that risks alone justify stopping any action or policy without any reference at all to benefits of that policy or opportunity costs of its avoidance.   A way of restating the precautionary principle is, "when faced with risks and benefits of a certain proposal, look only at the risks."

Since the precautionary principle really hit the mainstream with the climate change debate, I will use that as an example.  Contrary to media appellations of being a "denier," most science-based climate skeptics like myself accept that man is adding to greenhouse gasses in the atmosphere and that those gasses have an incremental warming effect on the planet.  What we deny is the catastrophe -- we believe we have good evidence that catastrophic forecasts from computer models are exaggerating future warming, and greatly exaggerating resulting forecast climate changes.  Whenever I am fairly successful making this argument, the inevitable rejoinder is "well, the precautionary principle says that if we have even a small percentage chance that burning fossil fuels will lead to a climate disaster, then we have to limit their use immediately".

The problem with this statement is that it assumes there is no harm or risk to reducing fossil fuel use.  But fossil fuel use pays enormous benefits to everyone in the world.  Even if we could find near substitutes that don't create CO2 emissions (and it is every much open to debate if such substitutes currently exist), these substitutes tend to be much more expensive and much more infrastructure-intensive than are fossil fuels.  The negative impact to the economy would be substantial.  One could argue that one particular impact -- climate or economy -- outweighs the other, but it is outright fraud to refuse to discuss the trade-off altogether.   Particularly since catastrophic climate change may only be a low-percentage risk while economic dislocation from reduction in fossil fuel use is a near certainty.

My sense is that if the United States chose to cut way back on fossil fuel use in a concerted effort, we could manage it and survive the costs.  But that is because we are a uniquely rich nation.  I am not sure anyone in this country understands how rich.  I am not talking just about Warren Buffet.  Even the poorest countries have a few rich people at the top.  I am talking about everybody.  Our poorest 20% would actually be among the richest quintile in many nations of the world.   A worldwide effort to eliminate fossil fuel use or to substantially raise its costs or to force shifts to higher cost, less easily-used alternatives  would simply devastate many developing nations, which need every erg their limited resources can get their hands on.  We are at a unique moment in history when more than a billion people are in the process of emerging from poverty around the world, progress that would be stopped in its tracks by a concerted effort to limit CO2 output.   Why doesn't the precautionary principle apply to actions that affect their lives?

College kids have developed a popular rejoinder they use in arguments that states "check your privilege."  I thought at first it was an interesting phrase.  I used it in arguments a few times about third world "sweat shops".  I argued that those who wanted to close down the Nike factory paying $1 an hour in China needed to check their privilege -- they had no idea what alternatives those Chinese who took the Nike jobs were facing.  Yes, you middle class Americans would never take that job, but what if your alternative was 12 hours a day in a rice paddy somewhere that barely brought in enough food for your family to subsist?  Only later, I learned that "check your privilege" didn't mean what I thought it meant, and in fact in actual academic use it instead means "shut up, white guy."  In a way, though, this use is consistent with how the precautionary principle is often used -- in many of my arguments, "precautionary principle" is another way of saying "stop talking about the costs and trade-offs of what I am proposing."

Perhaps the best example of the damage that can be wrought by a combination of Western middle class privilege and the precautionary principle is the case of golden rice.  According to the World Health Organization between 250,000 to 500,000 children become blind every year due to vitamin A deficiency, half of whom die within a year of becoming blind. Millions of other people suffer from various debilitating conditions due to the lack of this essential nutrient.  Golden Rice is a genetically modified form of rice that, unlike conventional rice, contains beta-Carotene in the rice kernel, which is converted to vitamin A in humans.

By 2002, Golden Rice was technically ready to go. Animal testing had found no health risks. Syngenta, which had figured out how to insert the Vitamin A–producing gene from carrots into rice, had handed all financial interests over to a non-profit organization, so there would be no resistance to the life-saving technology from GMO opponents who resist genetic modification because big biotech companies profit from it. Except for the regulatory approval process, Golden Rice was ready to start saving millions of lives and preventing tens of millions of cases of blindness in people around the world who suffer from Vitamin A deficiency.

Seems like a great idea.  Too bad its going nowhere, due to fierce opposition on the Left (particularly from Greenpeace) to hypothetical dangers from GMO's

It’s still not in use anywhere, however, because of the opposition to GM technology. Now two agricultural economists, one from the Technical University of Munich, the other from the University of California, Berkeley, have quantified the price of that opposition, in human health, and the numbers are truly frightening.

Their study, published in the journalEnvironment and Development Economics, estimates that the delayed application of Golden Rice in India alone has cost 1,424,000 life years since 2002. That odd sounding metric – not just lives but ‘life years’ – accounts not only for those who died, but also for the blindness and other health disabilities that Vitamin A deficiency causes. The majority of those who went blind or died because they did not have access to Golden Rice were children.

Note this is exactly the sort of risk tradeoff the precautionary principle is meant to ignore.  The real situation is that a vague risk of unspecified and unproven problems with GMO's (which are typically driven more by a distrust on the Left of the for-profit corporations that produce GMO's rather than any good science) should be balanced with absolute certainty of people dying and going blind.  But the Greenpeace folks will just shout that because of the "precautionary principle", only the vague unproven risks should be considered and thus golden rice should be banned.

Risk and Post-Modernism

A few weeks ago, I wrote about Naomi Oreskes and the post-modern approach to science, where facts and proof take a back-seat to political narratives and the feelings and intuition of various social groups.  I hadn't really thought much about this post-modernist approach in the context of risk assessment, but I was struck by this comment by David Ropeik, who blogs for Scientific American.

The whole GMO issue is really just one example of a far more profound threat to your health and mine. The perception of risk is inescapably subjective, a matter of not just the facts, but how we feel about those facts. As pioneering risk perception psychologist Paul Slovic has said, “risk is a feeling.” So societal arguments over risk issues like Golden Rice and GMOs, or guns or climate change or vaccines, are not mostly about the evidence, though we wield the facts as our weapons. They are mostly about how we feel, and our values, and which group’s values win, not what will objectively do the most people the most good. That’s a dumb and dangerous way to make public risk management decisions.

Mr. Ropeik actually disagrees with me on the risk/harm tradeoffs of climate change (he obviously thinks the harms outweigh the costs of prevention -- I will give him the benefit of the doubt that he has actually thought about both sides of the equation).  Fine.  I would be thrilled for once to have a discussion with someone about climate change when we are really talking about costs and benefits on both sides of the equation (action and inaction).  Unfortunately that is all too rare.

Postscript:  To the extent the average person remembers Bjorn Lomborg at all, they could be excused for assuming he is some crazed right-wing climate denier, given how he was treated in the media.  In fact, Lomborg is very much a global warming believer.  He takes funding from Right-ish organizations now, but that is only because he has been disavowed by the Left, which was his original home.

What he did was write a book in which he looked at a number of environmental problems -- both their risks and costs as well as their potential mitigation costs -- and he ranked them on bang for the buck:  Where can we get the most environmental benefit and help the most people for the least investment.  The book talked about what he thought were the very real dangers of climate change, but it turned out climate change was way down this ranked list in terms of benefits vs. costs of solutions.

This is a point I have made before.  Why are we spending so much time, for example, harping on China to reduce CO2 when their air is poisonous?  We know how to have a modern technological economy and still have air without soot.  It is more uncertain if we can have a modern technological economy, yet, without CO2 production.   Lomborg thought about just this sort of thing, and made the kind of policy risk-reward tradeoffs based on scientific analysis that we would hope our policy makers were pursuing.  It was exactly the kind of analysis that Ropeik was advocating for above.

Lomborg must have expected that his work would be embraced by the environmental Left.  After all, it was scientific, it achnowleged the existence of a number of environmental issues that needed to be solved, and it advocated for a strong government-backed effort led by smart technocrats doing rational prioritizations.  But Lomborg was absolutely demonized by just about everyone in the environmental community and on the Left in general.  He was universally trashed.  He was called a climate denier when in fact he was no such thing -- he just pointed out that man-made climate change was way harder to solve than other equally harmful environmental issues.  Didn't he get the memo that the narrative was that global warming was the #1 environmental threat?  How dare he suggest a re-prioritization!

Lomborg's prioritization may well have been wrong, but no one was actually sitting down to make that case.  He was simply demonized from day one for getting the "wrong" answer, defined as the answer not fitting the preferred narrative.  We are a long, long way from any reasonable ability to assess and act on risks.

Policing For Profit

Eric Holder should get credit for at least taking some baby steps to limit asset forfeiture abuse (steps it does not appear his nominated successor is going to be very enthusiastic about).  But there is a long way to go, as evidenced by this horror story of CalFire, the US Forest Service and the Holder Justice Department using everything every dirty trick I have ever heard of to extort money from a private company.

Quantitative Easing and the Left's Relationship to the Rich and to Large Corporations

The Left spends a lot of time railing against the rich and large corporations.  But in practice, they seem hell-bent on lining the pockets of exactly these groups.  Today the ECB announces a one trillion plus euro government buyback of public and private securities.

Between Japan, the US, and now Europe, the world's central banks are printing money like crazy to inflate securities values around the world -- debt securities directly by buying them but indirectly a lot of the money spills over into stocks as well.  This has been a huge windfall for people whose income mostly comes from capital gains (i.e. rich people) and institutions that have access to bond and equity markets (i.e. large corporations).  You can see the effects in the skyrocketing income inequality numbers over the last 6 years.  On the other end, as a small business person, you sure can't see any difference in my access or cost of capital.  It is still just as impossible to get a cash flow loan as it always was.

This is a GOOD Sign for the United States

Thomas Friedman, and many others, think it is a sign of America's decline and some sort of failure of government will that other countries are building super-massive showcase infrastructure projects while we are not.  They would take this chart as a sign of decline:

20150114_sky

I disagree.  This is a sign of growing maturity on the part of the United States.  Many of these super-tall building projects make little economic sense, but are completed to validate the prestige of emerging nations, like teenage boys comparing penis sizes.  Grown men are beyond that behavior, just as are grown-up nations.  I discussed this in the context of rail a while back at Forbes.  In that case, it seems everyone thinks the US is behind in rail, because it does not have sexy bullet trains.  But in fact we have a far more developed freight network than any other country, and shift of transport to rail makes a much larger positive economic and environmental impact for cargo than for rail.  It comes down to what you care about -- prestige or actual performance.   Again choosing performance over prestige is a sign of maturity.**

The US had a phase just like China's, when we were emerging as a world economic and political power, and had a first generation of successful business pioneers who were unsure how to put their stamp on the world.  So they competed at building tall buildings.   Many of the tallest were not even private efforts.  The Empire State Building was a crony enterprise from start to finish, and ended up sitting empty for years.  The World Trade Center project (WTC) was a complete government boondoggle, built by a public agency at the behest of the Rockefeller family, who wanted to protect its investments in lower Manhattan.  That building also sat nearly empty for years.   By the way, the Ken Burns New York documentary series added a special extra episode at the end after 9/11 on the history of the WTC and really digs in to the awful crony and bureaucratic history of that project.  Though Burns likely did not think of it that way, it could as easily be a documentary of public choice theory.  His coverage earlier in that series of Robert Moses (featuring a lot of Robert Caro) is also excellent.

** I have always wondered if you could take this model further, and predict that once-great nations in decline (at least in decline relative to their earlier position) might not re-engage with such prestige projects, much like an aging male seeking out the young second wife and buying a Porche.

Update:  Here is part of what I wrote on US vs. European and Japanese railroading, which I think is an absolutely awesome example of where the triumphalists like Friedman go wrong:

In particular, both Friedman and Epstein think we need to build more high speed passenger trains.  This is exactly the kind of gauzy non-fact-based wishful thinking that makes me extremely pleased that these folks do not have the dictatorial powers they long for.   High speed rail is a terrible investment, a black hole for pouring away money, that has little net impact on efficiency or pollution.   But rail is a powerful example because it demonstrates exactly how this bias for high-profile triumphal projects causes people to miss the obvious.

Which is this:  The US rail system, unlike nearly every other system in the world, was built (mostly) by private individuals with private capital.  It is operated privately, and runs without taxpayer subsidies.    And, it is by farthe greatest rail system in the world.  It has by far the cheapest rates in the world (1/2 of China’s, 1/8 of Germany’s).  But here is the real key:  it is almost all freight.

As a percentage, far more freight moves in the US by rail (vs. truck) than almost any other country in the world.  Europe and Japan are not even close.  Specifically, about 40% of US freight moves by rail, vs. just 10% or so in Europe and less than 5% in Japan.   As a result, far more of European and Japanese freight jams up the highways in trucks than in the United States.  For example, the percentage of freight that hits the roads in Japan is nearly double that of the US.

You see, passenger rail is sexy and pretty and visible.  You can build grand stations and entertain visiting dignitaries on your high-speed trains.  This is why statist governments have invested so much in passenger rail — not to be more efficient, but to awe their citizens and foreign observers.

But there is little efficiency improvement in moving passengers by rail vs. other modes.   Most of the energy consumed goes into hauling not the passengers themselves, but the weight of increasingly plush rail cars.  Trains have to be really, really full all the time to make for a net energy savings for high-speed rail vs. cars or even planes, and they seldom are full.  I had a lovely trip on the high speed rail last summer between London and Paris and back through the Chunnel — especially nice because my son and I had the rail car entirely to ourselves both ways.

The real rail efficiency comes from moving freight.  As compared to passenger rail, more of the total energy budget is used moving the actual freight rather than the cars themselves.  Freight is far more efficient to move by rail than by road, but only the US moves a substantial amount of its freight by rail.    One reason for this is that freight and high-speed passenger traffic have a variety of problems sharing the same rails, so systems that are optimized for one tend to struggle serving the other.

Freight is boring and un-sexy.  Its not a government function in the US.  So intellectuals tend to ignore it, even though it is the far more important, from and energy and environmental standpoint, portion of transport to put on the rails.  In fact, the US would actually probably have even a higher rail modal percentage if the US government had not enforced a regulatory regime (until the Staggers Act) that favored trucks over rail.   If the government really had been asleep the last century, we would be further along.

Keynesian Moving Target on What Constitutes Austerity

The other day I said I was confused by what exactly creates Keynesian stimulus, and in reverse, what constitutes austerity.  I had thought that it was deficit spending that creates the stimulus, but then sometimes it seems to just be spending and in the case of the Kevin Drum post I was discussing, he says it is not the level of spending but only the first derivative of per capita real government spending (with no reference to whether it is debt or tax funded) that matters.

I figured that I was just confused because I had not formally studied economics past my undergrad years, but apparently practicing economists are also confused.  Here is Scott Sumner:

What is the proper measure of austerity?  The textbooks talk about deficits.  But most of the Keynesian bloggers focus on government purchases.  So which is it?  And if it’s purchases, why did these same bloggers claim that austerity would result from big tax increases in the US in 2013, and a big tax increase in Japan in 2014?  And why does the measure chosen (ex post) usually seem to be the one that best supports their argument in that particular case?

As a postscript, I will add that every climate skeptic can totally empathize with this Sumner concern:

A number of Keynesian bloggers have recently expressed dismay that the rest of us don’t buy their model.  Maybe it would help if they’d stop ignoring our criticisms of their model, and respond to our complaints.

Great Moments in Bad Economic Policy

This article on bad bipartisan energy laws and regulations from Master Resource brought back some old memories of the 1970s.

Folks who are at all economically literate understand the role that government price controls (specifically price caps) had on gasoline shortages in the 1970s.  When there was a supply shock via the Arab oil embargo, prices were not allowed to rise to match supply and demand.  As in the case of all such price control situations, shortages and queuing resulted.

It is too bad in a way that most folks today can't really remember the gas lines of 1973 and again in 1978.  It was my job in 1978 as the new driver in the family to go wait in line for gas for all the family cars.  I wasted hours and hours sitting in gas lines. I wonder if anyone has every computed the economic value of the time lost to Americans sitting in gas lines because politicians did not want the price to rise by 20 cents.

A number of my friends who knew my dad was an Exxon executive were surprised at my waiting in lines, and wondered why we didn't get some sort of secret access to gas.  But my family waited in lines like everything else.

Well, almost like everyone else.  Because of my dad's position, we did have a bit of information most people did not have, at least in the first shock of 1973.  It was not a secret, it was just totally unreported in the media.  The key was the knowledge of a piece of Congressional legislation called the Emergency Petroleum Allocation Act of 1973.  It had an enormous impact on exacerbating the urban gas lines, but either out of a general ignorance or else a media/academic desire not to make government regulation look bad, it is as unknown today as it was unreported in 1973.

What the law did was this -- it mandated that oil companies distribute gasoline geographically in the US in the same proportion that it was sold in the prior year.  So if they sold x% in area Y last year before the embargo, x% must be distributed to area Y this year after the embargo.  I can't remember the exact concern, but Congress had some fear that oil companies would somehow respond to price signals in a way that caused gasoline allocations to hose someone somewhere.

Anyway, the effect was devastating, probably even worse than the effect of price controls.  The reason was that while Congress forced gasoline supply distribution patterns to remain the same as the prior year (in classic directive 10-289 style), demand patterns had changed a lot.  Specifically, with the fear that gas might not be available over the road and looming economic problems, people cancelled their summer long-distance driving trips.

Everyone stayed home and didn't drive the Interstates cross-country.  So there was little demand for gas at the stations that served these routes.  But by law, oil companies had to keep delivering gasoline to these typically rural stations.  So as urban drivers fumed sitting in gas lines for hours and hours, many rural locations were awash in gas.  Populist Congressmen berated oil companies in the press for the urban gas shortages and lines, all while it was their stupid, ill-considered laws that created a lot of the problem.

So this was the fact that should have been public, but was not: That instead of sitting in urban gas lines for four hours, one could drive 30 minutes into the countryside and find it much easier.  Which is what we did, a number of times.

By the way, it was about this time that I read Hedrick Smith's great book "The Russians."  It was, for the time, a nearly unique look at the life of ordinary Russians under Soviet communism.  I wish the book were still in print (I would love to see one of the free market think tanks do a reissue, at least on Kindle).  Anyway, about 80% of the book seemed to be about how individual Russians dealt with constant shortages and ubiquitous queuing.  It seemed that a lot of the innovation in the general populace was channeled into just these concerns.  What a waste.  Dealing with the 1970s gas lines and shortages is about the closest I have ever come to the life described in that book.

And The Highest-Paid US Government Employee is....

...Probably Nick Saban, coach of the University of Alabama football team at around $7 million a year.  But Jim Harbaugh, recently hired by the University of Michigan for a $5 million base salary, apparently has incentives that can take that up to $9 million a year.

Apologists will argue that this is all OK and shouldn't worry taxpayers at all because these guys are paid out of the college athletic budget which is generated from sports revenue rather than taxes.  Hmm.  Any state parks agency probably generates millions or tens of millions each year in user fees.  Should we be OK with the state employee who runs those agencies making $5 million because it comes out of user fees rather than taxes?  Money is fungible.  $5 million more spent on a football coach is $5 million less that can fund other University services.

(PS - in the US Today ranking of college football coach salaries, 19 of 20 are at public institutions).

US to Normalize with Cuba -- Limiting Free Interchange with Authoritarian Regimes Only Benefits Their Leaders

I certainly am no Castro apologist, but it strikes me that 50+ years of embargoes and pointless travel restrictions have not brought his regime to heal.  So it is past time to recognize this and perhaps try something else.  So kudos to President Obama for doing something that apparently only a lame duck President who no longer has to worry about winning the Florida electoral votes can do, he is going to normalize relations with Cuba.

This should be good news for anyone who opposes the Cuban regime and its oppression. Time and again over the last 50 years, we have seen cultural and economic interchange fell more authoritarian governments than any amount of military action.  When we cut off free exchange with authoritarian regimes, we are doing their leaders a favor.

Thinking of the Gracchi Brothers Today

It is with mixed emotions that I greet this day.  Frequent readers will know that I long for a system of much more open immigration.  I don't think that the US Government should be limiting who can and cannot seek work or live within the US borders (setting rules for citizenship and receipt of benefits are different matters).  So I would like to see many long-time immigrants legalized today (and in fact I likely have friends and acquaintances who will benefit, though it's always been a bit awkward to ask them about immigration status).

However, I would MUCH rather see a rational process implemented than these once a decade amnesties we seem to go in for instead.

I also worry that Obama is taking these actions for all the wrong reasons, seeking to add 5 million Democratic voters rather than trying to help 5 million people who are seeking prosperity.  The reason I suspect this is that he is also seeking higher minimum wages that will likely make it harder for these folks to find work, likely something he has promised to his union allies so they won't freak out.  I have always said that Republicans want immigrants to work but not vote and Democrats want immigrants to vote but not work.

But I am much more worried about the un-Constitutional process that is going to be followed.  Of course, this is not the only Executive power grab over the last two presidencies, but it is a big one and one of the first where the President has admitted he doesn't have the power but is going to do it anyway.

Around 133BC, Tiberius Gracchus was ticked off that the Roman Republic would not consider necessary land reform.  I am going to oversimplify here, but in their conquests the Romans had grabbed a lot of new territory and by law that land was supposed to be parceled in small sections to lots of individual land holders.  Instead, powerful men (many of whom were in the Senate) grabbed the lion's share of this land for themselves in huge estates.   Gracchus rightly saw this as unfair and a violation of law, but it was also a threat to the security of the nation, as independent landowners who bought their own weapons were the backbone of the Roman army.  The shift of agriculture to huge estates staffed with slaves was not only forcing a shift in the makeup of the army (one which would by the way contribute to the rise of despotic generals like Sulla and Caeser), but also was creating social problems by throwing mobs of unlanded poor on the cities, particularly Rome.

Anyway, the short version is that Tiberius Gracchus had good reason to think these reforms were important.  But traditionally they would have to be considered by the Senate first, and he was too impatient to wait that process out, and besides (probably rightly) feared the Senate would find a way to kill them.   He was so passionate about them that he violated the (unwritten) Roman Constitution by ignoring the Senate and setting new precedents for using his position as Tribune to pass the new laws.  It was absolutely the prototype for a well-intentioned bypassing of the Constitution.  I won't go into detail, but Tiberius was killed at the behest of some Senators, but his brother picked up his mantle 10 years later and did some similar things.  Which is why we talk of the Gracchi brothers.

In the near term, the results were some partial successes with land reform.  However, in the long-term, their actions really got the ball rolling on what is called the Roman Revolution.  A hundred years later, the Republic would be gone, replaced with a dictatorship.  Step by step, the precedents often set initially with only the best intentions, were snatched up and used by demagogues to cement their own power.  In later years, what gave emperors their authority was a package of powers granted to them.  One of the most important was "tribunition" power.  In essence, the tribunition power included many of the powers first exercised aggresively by the Gracchi brothers.  More than just starting the ball rolling on the Revolution, they pioneered the use of powers that were to be the core of future emperors' authority.

Thoughts on the Japanese Economy

I would characterize long-term Japanese economic policy this way:

  • Technocratically planned economy where the government chose winners and losers and directed capital to industries favored for development (e.g. MITI with steel, autos, electronics).
  • Strong government favoritism for exports and exporters over the domestic economy -- export industries are heavily protected at the cost of raising costs for internal consumers and limiting competition in domestic markets.
  • Enormous, near Herculean commitment to deficit spending as stimulus.  With deficits consistently running in the 8% of GP range and total government debt a stratospheric levels, Japan is the poster child for Krugman's anti-austerity

To these three I would add something that is seldom mentioned, that Japan has a near Scandinavian GINI index, with income inequality well under that of the US.  Oh yes, and they were an enthusiastic adopter of CO2 limits.

And the result of all this has been... 25 years of stagnation.

I remember when every one of these three planks was enthusiastically lauded by the US elite.  I was at Harvard Business School in the late 1980's and much of the discussion was about the US needing to adopt MITI-like government industrial planning and management.  If pressed at the time, people might kind of sort of acknowledge that life wasn't so good for Japanese consumers, but we were in a Michael Porter big picture competitiveness-of-nations phase, and no one seemed to care that their definition of national success did not turn out so well for the people actually living there.

To me, Japan is a giant case study in Austrian economics.  It's like they set out to run a quarter-century test: "let's see if mispricing of credit and forced misallocation of capital is really the cause of recessions."  So it is amazing that no one seems to want to acknowledge the results of this experiment.  Paul Krugman appears weekly in the New York Times to frequently advocate for exactly this same economic plan.

Net Neutrality is Not Neutrality, It is Actually the Opposite. It's Corporate Welfare for Netflix and Google

Net Neutrality is one of those Orwellian words that mean exactly the opposite of what they sound like.  There is a battle that goes on in the marketplace in virtually every communication medium between content creators and content deliverers.  We can certainly see this in cable TV, as media companies and the cable companies that deliver their product occasionally have battles that break out in public.   But one could argue similar things go on even in, say, shipping, where magazine publishers push for special postal rates and Amazon negotiates special bulk UPS rates.

In fact, this fight for rents across a vertical supply chain exists in virtually every industry.  Consumers will pay so much for a finished product.  Any vertical supply chain is constantly battling over how much each step in the chain gets of the final consumer price.

What "net neutrality" actually means is that certain people, including apparently the President, want to tip the balance in this negotiation towards the content creators (no surprise given Hollywood's support for Democrats).  Netflix, for example, takes a huge amount of bandwidth that costs ISP's a lot of money to provide.  But Netflix doesn't want the ISP's to be be able to charge for this extra bandwidth Netflix uses - Netflix wants to get all the benefit of taking up the lion's share of ISP bandwidth investments without having to pay for it.  Net Neutrality is corporate welfare for content creators.

Check this out: Two companies (Netflix and Google) use half the total downstream US bandwidth.  They use orders and orders of magnitude more bandwidth than any other content creators, but don't want to pay for it (source)

sandvine-2h-2013

Why should you care?  Well, the tilting of this balance has real implications for innovation.  It creates incentives for content creators to devise new bandwidth-heavy services.  On the other hand, it pretty much wipes out any incentive for ISP's (cable companies, phone companies, etc) to invest in bandwidth infrastructure (cell phone companies, to my understand, are typically exempted from net neutrality proposals).  Why bother investing in more bandwidth infrastrcture if the government is so obviously intent on tilting the rewards of such investments towards content creators?  Expect to see continued lamentations from folks (ironically mostly on the Left, who support net neutrality) that the US trails in providing high-speed Internet infrastructure.

Don't believe me?  Well, AT&T and Verizon have halted their fiber rollout.  Google has not, but Google is really increasingly on the content creation side.  And that is one strategy for dealing with this problem of the government tilting the power balance in a vertical supply chain:  vertical integration.

Postscript:  There are folks out there who always feel better as a consumer if their services are heavily regulated by the Government.  Well, the Internet is currently largely unregulated, but the cable TV industry is heavily regulated.  Which one are you more satisfied with?

Update:  OK, after a lot of comments and emails, I am willing to admit I am conflating multiple issues, some of which fit the strict definition of net neutrality (e.g.  ISP A can't block Planned Parenthood sites because its CEO is anti-abortion) with other potential ISP-content provider conflicts.  I am working on some updates as I study more, but I will say in response that

  1. President Obama is essentially doing the same thing, trying to ram through a regulatory power grab (shifting ISPs to Title II oversight) that actually has vanishly little to do with the strict definition of net neutrality.   Net neutrality supporters should be forewarned that the number of content and privacy restrictions that will pour forth from regulators will dwarf the essentially non-existent cases of net neutrality violation we have seen so far in the unregulated market.
  2. I am still pretty sure the net effect of these regulations, whether they really affect net neutrality or not, will be to disarm ISP's in favor of content providers in the typical supply chain vertical wars that occur in a free market.  At the end of the day, an ISP's last resort in negotiating with a content provider is to shut them out for a time, just as the content provider can do the same in reverse to the ISP's customers.  Banning an ISP from doing so is like banning a union from striking. And for those who keep telling me that this sort of behavior is different and won't be illegal under net neutrality, then please explain to me how in practice one defines a ban based on a supply chain rent-division arguments and a ban based on nefarious non neutrality.