Posts tagged ‘ZERO’

## Uggh. Can We Please Not Make These Sort of Truncated-Scale Charts?

Truncating the Y-axis scale on charts to exaggerate apparent trends makes me crazy.  Example

By the way, while I am complaining, there is ZERO reason in this chart to show each bar in a different color.  The color adds no value and only serves to distract.

## Nissan Leaf EPA Rating Hugely Flawed

Update: True MPGe is closer to 36, see below.  The 36 actually comes from the government's own research and rule-making, which they have chosen to ignore.

The EPA has done the fuel economy rating for the all-electric Nissan Leaf.  I see two major problems with it, but first, here is the window sticker, from this article

Problem #1:  Greenhouse gas estimate is a total crock.  Zero?

The Greenhouse gas rating, in the bottom right corner, is that the car produces ZERO greenhouse gasses.  While I suppose this is technically true, it is wildly misleading.  In almost every case, the production of the electricity to charge the car does create greenhouse gasses.  One might argue the answer is zero in the Pacific Northwest where most power is hydro, but even in heavy hydro/nuclear areas, the incremental marginal demand is typically picked up by natural gas turbines.  And in the Midwest, the Leaf will basically be coal powered, and studies have shown it to create potentially more CO2 than burning gasoline.  I understand that this metric is hard, because it depends on where you are and even what time of day you charge the car, but the EPA in all this complexity chose to use the one number - zero - that is least likely to be the correct answer.

Problems #2:  Apples and oranges comparison of electricity and gasoline.

To understand the problem, look at the methodology:

So, how does the EPA calculate mpg for an electric car? Nissan's presser says the EPA uses a formula where 33.7 kWhs are equivalent to one gallon of gasoline energy

To get 33.7 kWhs to one gallon, they have basically done a conversion through BTUs -- ie 1 KWh = 3412 BTU and one gallon of gasoline releases 115,000 BTU of energy in combustion.

Am I the only one that sees the problem?  They are comparing apples and oranges.  The gasoline number is a potential energy number -- which given inefficiencies (not to mention the second law of thermodynamics) we can never fully capture as useful work out of the fuel.  They are measuring the potential energy in the gasoline before we start to try to convert it to a useful form.  However, with electricity, they are measuring the energy after we have already done much of this conversion and suffered most of the losses.

They are therefore giving the electric vehicle a huge break.  When we measure mpg on a traditional car, the efficiency takes a hit due to conversion efficiencies and heat losses in combustion.  The same thing happens when we generate electricity, but the electric car in this measurement is not being saddled with these losses while the traditional car does have to bear these costs.  Measuring how efficient the Leaf is at using electricity from an electric outlet is roughly equivalent to measuring how efficient my car is at using the energy in the drive shaft.

An apples to apples comparison would compare the traditional car's MPG with the Leaf's miles per gallon of gasoline (or gasoline equivalent) that would have to be burned to generate the electricity it uses.  Even if a power plant were operating at 50% efficiency (which I think is actually high and ignores transmission losses) this reduces the Leaf's MPG down to 50, which is good but in line with several very efficient traditional cars.

Update: I have new numbers, which in part help respond to the first commenter.   The short answer to his comment is that there is a big difference between handwaving away10% you missed and handwaving away 70%.  I agree that the EPA numbers for the Leaf are valid "tank-to-wheel" numbers (meaning how efficiently does the car use the energy in its tank).  The question is, whether tank-to-wheel has any meaning at all.  My article above is basically an argument for why it is not valid.  Here is an extreme example -- what if we ran cars off of replaceable flywheels that were spun up by third parties and then put in our cars already energized.  These would be highly efficient on a tank to wheel basis, as we just need to transmit what is already mechanical energy to the wheels.  But does ignoring the energy costs and inefficiencies in spinning these things up offline really make sense?

We can go to the government itself to solve this.  In this rule-making document, the DOE defines some key numbers we need here.

They define petroleum refining and distribution efficiency as .83, meaning it takes 1 gallon of gas out of the well to get .83 in your tank.

For electricity, they define two numbers that must be multiplied together.  The fossil fuel electrical generation efficiency is .328 and the transmission efficiency is .924, for a net of .303.

Note the big freaking difference between .83 and .303, which is why to call it all handwaving is disingenuous.  Sure, we often handwave away the fossil fuel cost of getting gas in our cars, but the fossil fuel cost of getting electricity in the batteries is four times higher.   The government even does the math, multiplying the 33.7 Kwh/gal used above by .303 and dividing by .83 to get an apples to apples well to wheels mpge number for electric vehicles of 12.3 Kwh/gal.

So a total apples to apples comparison factor already exists, and the government chose not to use it for the window stickers.  This is probably because it would have given the Nissan Leaf an mpge of 36, not bad but fairly pedestrian for such an overhyped technology.  And at some level the Leaf is irrelevant.  This entire process has likely been tilted to make the Government Motors Volt look better.

## Huh?

Kevin Drum observes that the Post Office is more efficient and effective than we give it credit because ... it fully accrues for future pension and medical costs.

Over at Jon Cohn's place, Alexander Hart explains why the post office is better run than you think. Go read it. I don't have any big axe to grind in favor of the USPS "” in fact, I'm pretty annoyed at how complicated it is to calculate postage these days on supposedly "odd" size envelopes "” but the fact is that they're actually pretty efficient and pretty cost effective. I'd welcome private competition for first class mail, but just go ahead breathe the words "universal service" and see how many private sector companies are still eager to compete with the post office for 46 cents an ounce.

Wow, I have been so unfair to the post office.  I commented:

Great - the post office is really efficient because ... it fully accrues for benefits plans that are way beyond anything paid in the private sector, and reliably pays these benefits to huge, bloated work forces.  I am confused Kevin.  I read the article you linked.  What the heck did you find in the linked article that had anything to do with "efficient" or "cost effective."  Postal rates have grown at something like twice the rate of inflation.  Even industries you demagogue against, like oil, have raised prices less than the post office.

I don't know much about Alexander Hart, but my suspicion is that this is somehow a broadside in the public-private battle.  If so, then his focus is awfully narrow.  The feds may have accrued for their pension and health benefits, but they sure have not socked away any assets besides government IOU's to pay for them.  At the end of the day, most private company health and retirement plans are actually backed with real, 3rd party assets.  If you want to talk about pension law, private companies are not allowed to invest but a small percent of pension funds in their own stocks and bonds.  Not so the Feds -- the Post Office is running the equivalent of the Enron 401K invested 100% in Enron bonds.

And oh by the way, if we turn our attention to the states or local governments, the situation is entirely reversed.  In fact, many US public entities have ZERO percent funding of health plans and ZERO accrual of future costs, taking retiree benefits entirely out of current cash flow.

## Why My Business Has Ceased Investing

This post at Dr. Helen's site is dead on.  She posts a number of comments from Don Surber's site, starting with this one:

Commenter Sean says:

Businesses aren't hiring because no one knows what in the hell our economic system is going to look like 5 years, or even 5 months, from now.

Will "Cap and Trade" get implemented as the Democrats hope?

How much of an upheaval will "Healthcare Reform" end up being?

Is the administration and Congress done overhauling regulation of the Financial Industry?

No prudent investor is going to bet their money (i.e., invest in growth) when it is conceivable that the government is going to radically alter how 50% of this nation's economy functions.

This is exactly where I am right now.   The business I own has been growing at about 10% a year for the last five years.  In each of the last 3 years, we have invested an average of a half million dollars in new facilities.  In the past five years I have added over a hundred new positions in the company.

This year we will add ZERO.

It is not for lack of opportunity.  Because we are on the low-cost end of recreation, we have had a record year.  And because I am in the business of privatizing public recreation, my phone has been ringing off the hook.  All over the country, desperate public recreation authorities are calling me to say that they are out of money, their parks are about to shut down, and can I do something to keep them open.

To the extent we find opportunities to grow with limited investment, we are pursuing those.  But I just cannot put up any more capital in this environment.  If I make an investment, how much will the government let me keep?  How much are taxes going up (because they certainly are going up)?   Inflation simply must be around the corner given the monetary policy this country is pursuing -- so will my business be able to raise prices fast enough to keep up with inflation in my inputs?

The legislative risks we face are tremendous.   My two highest costs are labor (50% of revenues) and fuel and electricity (about 10% of revenues).  Thus, nearly 2/3 of my costs are going to be increased by the current health care bill and cap-and-trade bill.  The only question is how much.   If forced to guess, I would estimate that my labor costs are going up 8% and my fuel costs by 20%,which when you compute these by their percentage shares, says that my costs will likely increase by at least 6% of revenues.  My current profit margin before tax is between 6 and 8 percent of revenues.  I may be able to raise prices fast enough to cover this, or I may not.  In a business with thin profit margins, there just isn't much, uh, margin for uncertainty.

And none of this takes into account the proposed new paperwork load that will likely make my business less enjoyable to run (example of current mess).  From having to track and report our company's greenhouse gas emissions to keep track of the health insurance choices made by every employee, it is sure to be ridiculously burdensome.

So I am going to wait it out for a while.

## And the First to Violate Net Neutrality is ... The Government!

I have never been very excited about the concept of "net neutrality."  Various bills in Congress trying to enforce this strike me as Trojan horses for regulation of the Internet, and are at best the attempts by one segment of the population to enforce their vision of the Internet via the coercive power of the government. But more on this in a second.

The City of Boston has a free municipal Wi-Fi network  (I aired some of my objections to this here).  By using this "free" wi-fi network (which is free only in the sense that you paid for it via taxes rather than use fees) you apparently must accept government filtering of the content, which caused Boing-Boing to get blocked the other day, for some "arbitrary and capricious" reasons.  Readers may remember I already dinged Boston once when it used its government power to try to block free competitors.

So despite all the panic that evil capitalist broadband suppliers will somehow block or skew content from certain content suppliers, it turns out that the government, acting as broadband supplier, is the first to do so.  Fortunately, Bostonians have many free competitors to the municipal service that provide uncensored access to the Internet.  But without those private options, they would be enjoying the Chinese Internet experience.

Which gets us back to the issue of accountability.  In short, socialists distrust individual self-interest and the market as accountability tools, and believe the government is much more accountable, and therefore trustworthy, than any private institution.  What amazes be is that anyone with a working knowledge of history can continue to believe this.  Take any issue:

• Corruption?  Sure there was Enron and Worldcom, but any crimes at these institutions are trivial compared in both magnitude and frequency to the financial abuses of government.  Take pensions as one example.  Maybe 10-20 out of 500 of the companies in the DJIA have underfunded pensions, with some money put away but not enough.  But probably 99 out of every 100 municipalities you can name have underfunded pensions, and in most cases these not only have too little money put away, they have ZERO!
• Worker health?  Almost all private work environments are incredibly safe -- the very fact that we are worried about carpal tunnel syndrome should tell you something.  But what about in the past?  Well, take one of the highest profile cases of worker harm, that of long-term asbestos exposure.  A huge number of the worst asbestos cases are people exposed in government naval yards.  Government naval yards, for decades, eschewed basic worker protections from asbestos that were common in private industry.
• Environment?  One only has to look at the superfund site list and see that government sites are represented way out of proportion to their economic activity.  This is not to say their are not god-awful private sites, created either through ignorance or willful disregard, but you will find that the government was at least as active a polluter as even the worst private polluters.   Or look around today, at water quality.  The number of private contributors to water problems is nearly nil.  Most modern water pollution problems are caused by governments (Boston's "solution" to piping raw sewage into the harbor was to... lay a longer pipe and dump it further out in the ocean).
• Monopoly?  It is hard to find, in history, any stable private monopolies.  Perhaps the most famous, Standard Oil, was losing market share rapidly due to private forces at the time of its breakup.  Government monopolies, however, can last forever despite high prices and crappy services.  Just look at public education.
• Commerce?  Those who are frequent readers will know that I buy some product from the government, and they are by far my worst, hardest to deal with, and most abusive vendor.

Getting back to the issue of net neutrality, let's take a look at what accountability-enforcement tools a private individual has over a private vs. a public broadband supplier.  If I don't like my private broadband supplier, I can make a phone call and switch to one of several others.  Time elapsed:  About 30 minutes.  If I don't like my public broadband supplier, I could switch to a private company.  But this is really a libertarian end-around to the socialist problem.  To be fair, we need to look at a pure socialist system and evaluate the accountability tools in this system.  So, assuming the government entity has enforced a monopoly position for itself (like in education or the postal service), I would have to muster a grass roots campaign and likely millions of dollars to force any changes through an entrenched and brain-dead legislative body.  Time elapsed:  From 3 years to never.

## Arizona Minimum Wage Ballot Initiative

Arizona has a ballot initiative here in November to raise the minimum wage to \$6.75.  Perhaps more worrisome, the law has been structured to raise the rate every year based on some cost of living increase.  (As an aside - these cost of living escalators in government-mandated wage rates are insanely recursive.  The government raises wages, which increases prices, which leads to a further increase of the statutory rate).  An Arizona group opposed to the initiative has put out a nice Word document with the proposed laws language annotated with facts and refutations.

I will not be coy and pretend that I don't have an interest in this question.  The campgrounds we operate on public lands were run by volunteers in the past, until the courts decided that private companies were not legally allowed to use volunteers.  Most of our camp hosts, who tend to be in their 70's or older (we have many employees in their eighties and a few in their nineties!) get paid minimum wage plus a camp site in a nice park for the summer (the latter is what they really want).  Unlike private campgrounds that are built to be efficient to operate, the public campgrounds we operate tend to be small and labor-intensive.

We make about a 5% profit on sales in the camping business (yes, I know that is pathetically low).  Labor is 60-70% of our costs, if you include costs that are directly tied to wages like payroll taxes and workers comp. premiums.  This law would raise the minimum wage by 31%.  You do the math.  In a stroke, this ballot initiative would raise our costs by 20% (.31 x .65) in a business where costs are 95% of revenues.  Something has to give.  I am not going to work the hours I work and run the business for charity.  A 5% margin is almost there already.  We are therefore planning for two different contingencies.

1. Camping fees will have to rise by approximately 20%.  This means that a camping fee of \$16 will go up by \$3.  I will not make any more money, this will all be a pass-through to my employees, most of whom really wanted to volunteer in the first place.  One could rename this ballot initiative the "vote yourself a camping fee increase" initiative.  A few years ago, an attempt to raise lodging taxes on camping by a few percent met with howls of opposition.  But in effect this is ballot initiative in in effect adding a 20% tax to camping fees.
2. My labor model of hiring retired people may well have to change.  There is a real trade-off in hiring retired folks to maintain campgrounds.  On the plus side, we get a lot of honest and responsible people who have the time and the flexibility in their life to pick up stakes and go live in a campground all summer.  The down side, of course, someone who is 75, or 85, is not going to work as fast or as productively as younger folks.  My workers also tend to get injured more easily (my insurance company freaks every time it sees my employee list with dates of birth) which costs a lot in workes comp. premiums.

When presented with the choice in the current market of hiring a retired person at \$5.15 an hour or a younger, faster worker at \$7.50 an hour, I have been happy to hire retired people.  This model has worked great for us.  Unfortunately, I must revisit this business model when my choice is between hiring a faster worker at \$7.50 and a slower worker at \$6.75 (and rising).  Already in high minimum wage states like CA, OR, and WA we have begun shifting away from hiring as many retired people.  I also hire a lot fewer people, having invested in automated fee collection in high labor cost areas.  (Think about this, at least for a few seconds, before all of you start sending me the inevitable emails I get for being a heartless brute for paying anyone minimum wage).

By the way, the federal government gets around this problem for the campgrounds it operates itself.   How?  Why, it exempts itself from these laws.  Most federal campgrounds employ retired persons as volunteers.  They don't pay campground workers minimum wage, they pay them ZERO.

I wrote a much longer post on minimum wage laws here.  Minimum wage laws are becoming hip in traditionally red-state border areas as a tool to keep immigrants from working.

Update:  I actually underestimated the amount of my costs directly tied to wages, and so I have updated some of the numbers to be more realistic.