The unending (and infuriating) irony of this election will be that the Democrats won this election by first tanking the economy and then (with the aid of the MSM) blaming the hapless Republicans for it. Tom Blumer explains:
The recession, once it becomes official, will thus richly deserve designation as the POR (Pelosi-Obama-Reid) recession. Further, Obama's and the Democratic Party's performance on the economy must be benchmarked from June 1, 2008 -- not Election Day, not Inauguration Day, and not, as traditionally has been the case, from October 1 of the new president's first year in office.
Evidence of the POR triumvirate's virtually unilateral damage to the economy began appearing as early as the fourth quarter of 2007, the first quarter of negative growth in six years. The POR recession itself began in June. The historically steep downward revision in second-quarter gross domestic product (GDP) growth from an annualized 3.3% to 2.8% in the government's final September announcement was more than likely due to deterioration that occurred in the final month of the quarter.It's not at all a coincidence that June was the month in which it became crystal clear that despite sky-high oil prices, Pelosi, Obama, and Reid were hostile to the idea of drilling for more oil -- offshore or anywhere else. Pelosi insisted that "we can't drill our way out of our problems." In the speaker's world, this means that you don't drill at all. Reid declared that we have to stop using oil and coal because "it's making us sick." Obama seemed pleased that gas prices were so high, saying only that "I think that I would have preferred a gradual adjustment" instead of the sharp spike. What a guy.As would be expected, the country's businesses, investors, and consumers, never having witnessed a political party dedicate itself so completely to starving its own national economy, reacted very negatively to all of this. I said at the time that "businesses and investors are responding to their total lack of seriousness by battening down the hatches and preparing for the worst." Subsequent events have validated that observation.
As commenter Carl Pham pointed out recently, the American people bought fire insurance from an arsonist.
Posted by Rand Simberg at 06:53 AMPaul Hsieh (M.D.) has some thoughts on the inevitable issues with "universal health care."
Posted by Rand Simberg at 06:14 AMTyler Cowen has some history:
The good New Deal policies, like constructing a basic social safety net, made sense on their own terms and would have been desirable in the boom years of the 1920s as well. The bad policies made things worse. Today, that means we should restrict extraordinary measures to the financial sector as much as possible and resist the temptation to "do something" for its own sake.
In short, expansionary monetary policy and wartime orders from Europe, not the well-known policies of the New Deal, did the most to make the American economy climb out of the Depression. Our current downturn will end as well someday, and, as in the '30s, the recovery will probably come for reasons that have little to do with most policy initiatives.
There was also this little item that caught my eye:
A study of the 1930s by Christina D. Romer, a professor at the University of California, Berkeley ("What Ended the Great Depression?," Journal of Economic History, 1992), confirmed that expansionary monetary policy was the key to the partial recovery of the 1930s. The worst years of the New Deal were 1937 and 1938, right after the Fed increased reserve requirements for banks, thereby curbing lending and moving the economy back to dangerous deflationary pressures.
Why?
Because of this news:
ABC News has learned that President-elect Obama had tapped University of California -Berkeley economics professor Christina Romer to be the chair of the Council of Economic Advisers, an office within the Executive Office of the President.
It seems like a much better pick than those of us concerned about an FDRophilic president could have expected. Maybe we won't replay the thirties.
Posted by Rand Simberg at 07:05 AMRemember that civics test? Well, this should inspire confidence in our political "leadership":
US elected officials scored abysmally on a test measuring their civic knowledge, with an average grade of just 44 percent, the group that organized the exam said Thursday.Ordinary citizens did not fare much better, scoring just 49 percent correct on the 33 exam questions compiled by the Intercollegiate Studies Institute (ISI).
But they did fare better. What does this say about our so-called "elites"? Forget about a literacy test for voters. How about one for candidates?
Posted by Rand Simberg at 06:14 AMI scored 32 out of 33 on this test (I missed the last one--Doh!). Unfortunately, most people don't do that well.
I really think that we should bring back literacy tests for voting. They shouldn't have gotten rid of them because they were being used to racially discriminate--they should have just ended the racial discrimination.
[Friday evening update]
I have to say that readers of my blog, even the non-USians (or at least the ones commenting), are way ahead of the curve. Nice to know.
Posted by Rand Simberg at 09:11 AMJonah Goldberg explains why we should fear that Barack Obama will emulate Franklin Roosevelt:
there can be a chasm between being right and merely appearing to be right. Why anyone stakes greater value on the appearance than reality is a mystery to me.
But as Obama clearly recognizes, that was a big part of the FDR magic. FDR came into office promising "bold, persistent experimentation" -- and delivered. Raymond Moley, an early member of FDR's "brain trust," saw the New Deal for what it was. "To look upon these programs as the result of a unified plan was to believe that the accumulation of stuffed snakes, baseball pictures, school flags, old tennis shoes, carpenter's tools, geometry books and chemistry sets in a boy's bedroom could have been put there by an interior decorator," Moley wrote later.Yet Americans thought it was all part of a plan, even though experimentation and planning are in fact near opposites. Why? Because FDR always projected such confidence, even as he made things worse. But this isn't another column about how FDR prolonged the Depression. Been there, done that. I'd rather be forward-looking.
In fact, I want to be experimental, too. So here's my idea: Just stop.
Stop talking about bailouts and stimuli. Stop pondering ever more drastic action. Give it a rest. Let it be.
One of the main reasons there's all of this "money on the sidelines" out there among private investors is that Wall Street doesn't know what the government will do next. Will it bail out the auto industry? The insurance companies? Which taxes will go up? How far will interest rates go down? How long will the federal government own stakes in the banks? Will more stimulus checks go out? If so, how big will the deficit get?
Don't just do something--stand there!
One of his readers says that this also explains the current market volatility:
Free market economics involves the application of immutable laws, and it's those laws that allow us to forecast the effect of current events on various companies and the stocks and bonds they've issued. But investors will only play the game if they believe the rules aren't going to change in the middle. When government begins 'experimenting', it makes it harder for investors to generate a long term forecast. This drives long term investors away from the market, or converts them into short term traders. The result is a massive increase in volatility as investors shorten their investment outlook because they can't predict what's going to happen far enough into the future.
Volatility is an indication of instability. It's not a sign of a healthy economy but of an economy which has lost its way. High volatility isn't what you expect from the worlds largest market, but from the emerging economy of a third world country. As you can see from the attached chart, when Roosevelt began his 'bold persistent experimentation' it drove away long term investors and that caused volatility to dramatically increase. It will almost certainly have the same effect when Obama does it.Since he's so determined not to learn from the mistakes of the past, I would expect him to repeat them. I'm betting that his poking and prodding will add to unemployment, reduce economic growth, and wreak havoc with the federal deficit. There is little doubt that he's the wrong man at the wrong time. I'm just hoping that he is as devoid of principles as the Clintons, and that he finds a way to break his campaign promises or we're in for a long painful recession, and maybe worse.
We can only hope, since we lost an opportunity to do any more than that a couple weeks ago.
Posted by Rand Simberg at 08:20 AM...to the charlatans like Jim Hansen. Here are two useful books. First, Cool It
Yup. As many reviewers note, "climate change" isn't really about science--it's just the latest ideology to come along for the collectivists to use in their latest attempt to bend us to their will.
Posted by Rand Simberg at 09:42 AMHere's a fellow Flintite (Flintian) explaining why her former employer shouldn't be bailed out:
The strength of the union and the weakness of management made it impossible to conduct business properly at any level. For instance, I had an employee who punched in his time card and then disappeared. The rules were such that I had to spend hours documenting that this man was not in his three foot by three foot work area. I needed witnesses, timed reports, calls over the intercom and a plant wide search all documented in detail. After this absurdity I decided to go my own route; I called the corner bar and paged him and he came to the phone. I gave him a 30 day unpaid disciplinary lay off because he was a "repeat offender". When he returned he thanked me for the PAID vacation. I scoffed, until he explained: (1) He had tried to get the lay off because it was fishing season; (2) The UAW negotiated with GM Labor Relations Department to give him the time WITH PAY.
I supervised a loading dock and 21 UAW workers who worked approximately five hours per day for eight hours pay. They could easily load one third more rail cars and still maintain their union negotiated break times, but when I tried to make them increase production ever so slightly they sabotaged my ability to make even the current production levels by hiding stock, calling in sick, feigning equipment problems, and even once, as a show of force, used a fork lift truck and pallets and racks to create a car part prison where they trapped me while I was conducting inventory. The reaction of upper management to my request to boost production was that I should "not be naïve".Another employee in the plant urinated on the feet of his supervisor as a protest to discipline. He was, of course, fired...that is until the union negotiated and got his job back.
Eventually I was promoted to a management position where I supervised salaried employees at HQ. As I left the plant I gave management a blunt message. I told them that I expected the union to act like the union, but I was disappointed that management didn't act like management.
I saw a lot of this in the 1970s when I worked summer jobs in the shop, and my relatives who are still there tell me it goes on to this day. Of course, it's hard to put all the blame on management, when the Wagner Act made it impossible for them to do much about it, because it allowed the UAW to credibly threaten their company with bankruptcy if they didn't knuckle under. This crisis was caused by government, and bailing out the UAW will not solve it.
Also, Jim Manzi explains why we (the taxpayers) can't just buy the three auto companies for their current market value (only seven billion) and save ourselves the many more billions that a bailout would cost. It's kind of amazing that the stock has any value at all (GM's in fact doesn't). Equity in these companies currently has negative value because running them requires putting more cash into them, with no certainty, or even likelihood of return, at least with their current union contracts and cost structure. They are the proverbial white elephants.
This, by the way, is the reason that the notion of selling the Shuttle or the ISS to anyone else is a non-starter. No one could afford them, even if you gave them away.
Posted by Rand Simberg at 10:07 AM...Soylent green. The miracle food of high-energy plankton gathered from the oceans of the world.Soylent Green, 1973
The New York Times predicts that "if current fishing practices continue, the world's major commercial stocks will collapse by 2048." Their solution: lower energy content by eating sardines instead of feeding them to farm-raised salmon.
Mistaking energy content for price is a common mistake. Chew on this: organic lettuce is more expensive than a hamburger.
Wild fish will be eclipsed by farm-raised fish just as farm-raised beef has eclipsed free-range beef. Get used to it, perhaps by preparing to pay an extreme premium for free-range fish. Don't expect the Chinese middle class to prefer wild cod once a year to farm-raised salmon once a month. Expect the coastal waters to be fenced into fish farms just as the Great Plains was fenced in during the 19th century.
It's time to manage the pollution and reserve the wild fish parks upcurrent. This tide isn't going to be turned back by pondering how the old days were until we're eaten up.
Posted by Sam Dinkin at 07:47 AMI have thoughts on "Change!" and free markets this morning, over at PJM.
Posted by Rand Simberg at 05:14 AMExploding the myths of Clintonomics:
The bull market took off precisely when then-Fed Chairman Alan Greenspan took his foot off the brakes and hit the gas in 1995. It was also then that Republicans took control of Congress -- further blunting the effects of the Clinton tax torpedo that had taken effect the previous year.
Clinton also benefitted from innovations long in the making, including the Pentium chip released in March 1993 and Microsoft's Windows program released in August 1995. These together made the Internet boom possible.As for the budget surpluses, they came as a complete surprise to Clinton economic forecasters, whose static models only predicted their tax hikes on the rich would narrow the budget gap, not get it into the black.
Their "deficit-reduction plan" didn't create the surpluses at all. They were a direct result of a tidal wave of capital-gains revenues generated by the GOP-led stock boom.
Relieved that Washington would no longer threaten to take over 14% of the economy by socializing medicine or raise taxes even higher, the market took off like a shot at that point. And capital gains tax receipts exploded, flooding federal coffers.
Clinton's own long-term budgets predicted no surpluses of any kind during his administration and beyond.
Bill Clinton never had a plan to end deficits. The Republicans and economic circumstances did it for him. But I'm sure that this myth that Bill Clinton balanced the budget will prevail in the minds of the media and Democrats, just as the false myth that Roosevelt, and not the war, got us out of the Depression continues to prevail many decades later. They have to rewrite history to justify their continued plunder. And of course, the near-term danger is that President-Elect Obama and the Congressional majority will use this mistaken history as a justification for tax hikes in a recession, which could be economically ruinous.
Posted by Rand Simberg at 06:20 AMPeter Robinson explains
Item: Since my dinner with Milton Friedman, a Republican president and Republicans in Congress--I repeat, Republicans--enacted a prescription drug benefit that represents the biggest expansion of the welfare state since the Great Society. They also indulged in a massive increase in discretionary domestic spending and passed the biggest farm bill in history, a massive transfer of resources to the 2% of the population still engaged in agriculture.
Item: In the campaign that just concluded, the GOP--again, I repeat, the GOP--nominated a man whose proudest legislative achievement was a campaign finance reform, the McCain-Feingold bill, that represented a direct assault on freedom of speech.Item: During the campaign, the Republican nominee--again, the Republican--told voters that the federal government should "give you a mortgage you can afford" while attacking businesspeople as "greedy."
This reminds me of the story of the woman who came up to Franklin after the Constitutional Convention, and asked him what he had given us. His response: "A Republic, madame. If you can keep it."
It would have worked just as well to say "A free-market economy, if you can keep it." We haven't been able to, partly because we have slowly transitioned from a Republic to a democracy, and one in which the people have figured out that they can use their votes to transfer wealth from the productive to themselves.
I'll have more on this topic next week at PJM.
Posted by Rand Simberg at 12:23 PMHere's a cure for that. Let's hope he's wrong. Part of the problem is that, because panics like this are to some degree psychological, pieces like this don't help, even if they're valid. It's sort of like the Heisenberg principle--the very act of diagnosing the problem can exacerbate it.
Posted by Rand Simberg at 10:54 AMSome useful thoughts from Rod Long, over at Cato Unbound.
As he points out, there is a broad-based mythology that defending capitalism is equivalent to defending "big business" when, by its nature, big business abhors capitalism (at least as understood by true free marketeers). Of course, I agree with Jonah Goldberg that we latter should abjure the term "capitalism," both because it is such a misunderstood word with a wide variance of definitions, and because it is fundamentally a Marxist concept.
A "free-market economy" (something that hasn't existed to a large degree in this country for many decades) is what should be defended and supported, and we should continue to push to get the country to move back in that direction to find our way out of our current travails (which really started back in the Depression Era). Just as one example, there's an interesting discussion over at Megan McArdle's place, here and here, on GM's straits (about which I've also had thoughts over the years, as someone who grew up with it). I think that, as one of the commenters over there notes, the roots of the destruction of the American auto industry lie in the Wagner Act:
GM and the UAW are a perfect illustration of bad government in action.
At some point, a collective decision was made that the unions should be given such expanded powers that they could destroy the company if they wanted (see the above post describing how a strike at a key plant could idle the whole company). What happens here? Well, naturally the union tries to extract as much as they can from the company with the tools available. The union doesn't profit from increasing profits and building a healthy company, it profits from building an overstaffed company that exists to benefit its employees. The union would have been better served if it divvied up the right to collect a union payout from GM among the workers of the time and let them sell the claims. Then the union could simply negotiate the maximum dividend possible for the holders of these claims. This way you have a rationally run company with the benefits going to the larger voting block (the workers) than the shareholders who are all presumably evil capitalists.What would have been much more honest and worked better would have been outright nationalization of GM when the rules were set up that the UAW could destroy the company. Instead you've got unclear property rights and consequent ill management.
It took a long time to kill the industry, but that doesn't mean that it wasn't the cause. Arsenic or mercury can kill over a long period of time as well, though death might actually occur from some other ailment that the toxin-ridden body is ill equipped to fight.
The toxin in this case may be a lot of things (perhaps even including "capitalism" by some warped fascistic definition) but it is an abomination to a free market, and it has destroyed the American auto industry.
[Update a few minutes later]
IBD says let GM go bankrupt:
Far from vanishing, many of GM's assets would be quickly purchased by competent foreign automakers eager to expand their capacity in what is the world's largest auto market. Happily, the list of well-run car companies, from Toyota to Nissan to Porsche, is long.
How this helps Michigan, the auto sector and smaller firms reliant on the latter's health is pretty clear. With capable auto executives finally overseeing GM's poorly deployed assets, the value and utility of each would rise, thus perpetuating the existence of jobs in the sector, all the while ensuring that other businesses that exist due to GM will enjoy more stable commercial relationships with competent management.So while the cries of certain Armageddon would be ear splitting in the event of a GM failure, the U.S. auto sector would actually emerge much healthier thanks to a change in ownership that would be the certain result of GM going under.
The problem of course, is that this will be another Enron, in that many people will be thrown out of work, and lose pensions (I should note, for the record, that as a Michigan native, I have close family members who may be in this situation). The political pressure to maintain the status quo will be intense, and unfortunately, given the fact that despite all of the talk about "change," the status-quo-ante types (at least when it comes to static economic circumstances) have just entrenched their power in Washington, that's probably the way it will go. If GM is going to get federal money, it should go toward buyouts of long-term employees, and then let the market work to redeploy its assets toward more useful purposes than maintaining an expensive company-town welfare state, that makes cars on the side.
[Update mid morning]
Matt Welch says to the barricades to defend free markets. Except that he uses the confusing word "capitalism."
I should add, that I consider George Bush's biggest failure not the events leading up to this crisis, but his response to it, in which (as Matt points out) he capitulated to those advocating government solutions to government-caused problems. Of course, it's on a par with "compassionate conservatism" and "comprehensive immigration reform" and "no child left behind" and "prescription drugs" and myriad other issues, large and small, on which he showed himself to be anything but a conservative (let alone a libertarian). Had he been a Democrat, the Dems would have been cheering all of his actions as the greatest thing since LBJ and the Great Society.
Speaking of compassionate conservatism (and the tone deafness of George Bush and Mike Gerson and others to how rightly offensive the phrase was to actual conservatives), imagine how well the Democrats would take to a nominee who ran on a platform of "logical liberalism."
[Early afternoon update]
Iain Murray has more thoughts on free markets and their relationship to liberty:
...as Jonah says, markets are more than this information delivery system. Where the Chicago School has gone wrong is in focusing purely on economic efficiency. As my boss Fred Smith said way back in 1983, "The Chicago School's case for antitrust policy . . . rests solely on economic efficiency, as if rights had nothing to do with the matter -- as if business had no right in principle to dispose of its property as it sees fit, but only a conditional freedom so long as it helps maximize some social utility function. That is to say, no business is entitled to its property if that property can be redeployed so as to expand output. With 'conservative,' 'pro-business' economists taking this view, who needs social democrats." In other words, if we value property rights, the free market is an essential consequence. And that is why market socialism never works, because it devalues property rights. Liberty demands property rights which demand free markets. We only interfere with that chain in defiance of history.
It is not a coincidence that communist nations are the most unfree on earth.
[Early evening update, particularly for Instapundit readers, who might want to look around the site]
I've talked in the past about the fact that my father was a GM exec, but I've never noted what he did there.
Here's a little background, which may be apocryphal, because I only knew it from my mother, but they met after the war in New York (he was from Brooklyn). She was a former WAC who had served in Egypt, and had decided to see a little more of the world before heading back to her home in Flint, Michigan.
He was standing on a soapbox in the Village, haranguing the crowd on the benefits of Marxism. As an economics major, raised on Keynes, she fell in love.
They married, and finished their graduate degrees, at various places (NYU, UCLA, other, his in Psych--Industrial Psych, hers in Econ). In the fifties he tried door-to-door in Lansing after moving to Michigan with his upper Midwest bride, but when he got an offer at A.C. Spark Plug in her home town (as a result of her brother, my uncle, being an engineer there) he took it, and settled into a middle-class lifestyle, during the best years of the company, in which he raised his family.
He moved up though the white-collar world at AC, in "personnel" (these days, it would be HR, which is one of the reasons that he could get me summer jobs there during college), until he got an offer to go to work for corporate in Detroit, a job for which he commuted sixty miles a day each way from Flint, and we never had to move. I know that this is no big deal of a commute in southern Cal, but for me, it was amazing. He died at an age slightly older than me (right now, for those reading in the future) that I can count on one hand, and not half of it, from a heart attack (his second--he had had his first about a decade earlier, in his forties). That was almost three decades ago.
His job?
Head of labor relations, and negotiator (perhaps chief negotiator, though (as Doctor Evil said) I can't vouch for that), with the UAW.
[Bumped to the top, because there's a lot of new stuff]
Posted by Rand Simberg at 01:40 PMWhich president will Barack Obama want to emulate? He has said that he admires Reagan, but only for his transformational qualities, not for his political beliefs. But if he persists in his apparent desire to implement some combination of Hoover and FDR policies (raising taxes on the productive, protectionism, enforcing high wages), he'll end up making a bad situation much worse, and end up being a one-termer for sure.
Posted by Rand Simberg at 11:12 AMIt's certainly plausible to me. Given how much of an overshoot there was, it wouldn't be surprising to see it dip that low before stabilizing. As I've long said, over a hundred bucks was unsustainable. I would hope it won't stay that way for long, though. It's harder to justify shale and new drilling (and conservation) at those prices.
Posted by Rand Simberg at 07:51 AMAnd I thought that card check was already pretty bad:
Under EFCA, the terms set by the arbitrator will be the furthest thing from a "contract." It won't be an agreement between management and labor. Rather, wages, hours and terms and conditions of employment will be dictated by a government appointed arbitrator. The mandate will be binding on the parties for two years. Neither the company nor the employees can reject it (At least when the Central Committee set the wages for tractor assembly workers in the Leningradskaya oblast there was always the possibility that the wages might change later that afternoon).
Currently, if employees don't like the tentative agreement negotiated between union leaders and management the employees can vote it down and instruct their leaders to go back to the bargaining table to get a better deal. Not so under EFCA. If the employees don't like the arbitrator's decree of a 2% wage increase, they're stuck. Similarly, if the company can't afford the arbitrator's command to pyramid overtime, the company's stuck. The consequences aren't difficult to imagine.
This is a small business owner's nightmare. As is the health insurance mandate. Obama will be a disaster, economically, at least if the Democrats get enough votes to block filibusters in the Senate.
[Update a couple minutes later]
Here's more on the job-destruction potential of Obama's health-care plans, from that bastion of right wingery, the New York Times:
the penalty in Massachusetts is picayune compared with what some health experts believe Senator Barack Obama, the Democratic presidential nominee, might impose as part of his plan to provide affordable coverage for the uninsured. Though Mr. Obama has not released details, economists believe he might require large and medium companies to contribute as much as 6 percent of their payrolls.
That, Mr. Ratner said, would be catastrophic to a low-margin business like his, which has 90 employees, 29 of them full-time workers who are offered health benefits."To all of a sudden whack 6 to 7 percent of payroll costs, forget it," he said. "If they do that, prices go up and employment goes down because nobody can absorb that."
Writ large, that is one of the significant concerns about Mr. Obama's health plan, which like this state's landmark 2006 law would subsidize coverage for the uninsured by taxing employers who do not cover their workers. And it is a primary reason that so-called play-or-pay proposals have had an unsteady history for nearly two decades.
This is 180 degrees from the direction that we need to go. Most of the problems of the current health-care system stem from its being tied so much to employment, which is an artifact of wage controls during World War II. The first critical step in fixing it is to decouple it from the job, so that plans are portable, and people are more connected with choosing their provider. McCain's plan isn't perfect, but it's a big step in the right direction, and the demagoguery of the Democrats on this issue (as on most issues) has been shameful.
Posted by Rand Simberg at 07:04 AMGreg Mankiw compares the Obama and McCain plans. Neither of them are great, but one is much better than the other.
Posted by Rand Simberg at 06:23 PMThe real reason for the GM/Chrysler merger? Not because it makes business sense (it doesn't) but because it will make them "too big to fail." So they set themselves up for failure with the merger, then the taxpayer gets to pick up the tab, and they remain uncompetitive.
Posted by Rand Simberg at 10:44 AMAmazon is having a power tool sale
Not that great for a survivalist, though, unless you can generate a lot of power. Let's hope we're not going back to hand tools soon.
Actually, I already have most of this stuff. I continue to be amazed at the cost, quality and innovativeness of tools since I was a kid. It has to have been a great contributor to national productivity, both professionally, and for the DIYers. And it wouldn't have happened without China. Another reason to hope that the (newly isolationist) Dems don't get full control of the government.
Posted by Rand Simberg at 04:49 PMListening to a McCain stump speech, he just used the line "...we didn't become a great nation by spreading the wealth, we became a great nation by creating new wealth."
Where has that John McCain been all fall? Or his whole previous life?
Posted by Rand Simberg at 10:17 AMI fully agree with Iain Murray:
While conservatives are angry about a number of things at the moment, they should be at least as angry that the Congressional Democrats who helped stoke the mortgage crisis are getting away with blaming everyone else for it. Today, Senator Chris Dodd, the prime recipient of GSE lobbying funds and proud holder of a sweetheart mortgage from Countrywide, is holding hearings where the witnesses will blame everyone but Dodd, Barney Frank and their cronies. Republicans asked to invite witnesses but were barred from doing so.
The notion that this mess is the fault of Republicans, and "deregulation" and the free market, is one of the biggest frauds ever perpetrated on the American people. And as a result, we could be heading toward both electoral and economic disaster.
[Update early afternoon]
Peter Schiff says don't blame capitalism:
Just as prices in a free market are set by supply and demand, financial and real estate markets are governed by the opposing tension between greed and fear. Everyone wants to make money, but everyone is also afraid of losing what he has. Although few would ascribe their desire for prosperity to greed, it is simply a rose by another name. Greed is the elemental motivation for the economic risk-taking and hard work that are essential to a vibrant economy.
But over the past generation, government has removed the necessary counterbalance of fear from the equation. Policies enacted by the Federal Reserve, the Federal Housing Administration, Fannie Mae and Freddie Mac (which were always government entities in disguise), and others created advantages for home-buying and selling and removed disincentives for lending and borrowing. The result was a credit and real estate bubble that could only grow -- until it could grow no more.Prominent among these wrongheaded advantages are the mortgage interest tax deduction and the exemption of real estate capital gains from taxable income. These policies create unnatural demand for home purchases and a (tax-free) incentive to speculate in real estate.
Similarly, the FHA, Fannie and Freddie were created to encourage lending by allowing primary lenders to turn their long-term risk over to the government. Absent this implicit guarantee, lenders would probably have been much more conservative in approving borrowers and setting interest terms, and in requiring documentation of incomes and higher down payments. Market forces would have kept out unqualified buyers and prevented home-price appreciation from exceeding the growth in household income.
Read the whole thing.
I disagree, though that the solution is to take away the home-mortgage interest deduction and the capital gains break. It would be much better to restore the deduction for all interest (as it is for business, and was for individuals until the tax "reform" in 1986). It's not fair to have to pay tax on interest earned as income, but not be able to deduct interest paid.
Also, rather than treating houses preferentially, peg all capital gains taxes to inflation, to eliminate having to pay a tax when the actual value hadn't increased.
Posted by Rand Simberg at 08:48 AMHow many times is he going to let Obama get away with this bullshit that he's going to cut taxes for people who don't pay income taxes? He's done it twice now. It's a frickin' handout and redistribution. As I said, John McCain could win this election if he weren't John McCain.
Sounding a little better on spending cuts. Talking about ending ethanol subsidies and tariffs on sugar (writing off Iowa...). He should have point out how he was going to veto spending bills that Bush wouldn't (another missed opportunity). Another missed opportunity was to point out that while earmarks are small, it's how Congress logrolls other members on big spending bills.
[Update]
McCain is actually doing much better now. But he really should stop talking about the "overhead projector in Chicago." People like planetariums, and it makes him look clueless about science.
[Update]
McCain just pointed out that Obama's solution (increase taxes, restrict trade) was Hooverlike. This is good in two ways: it helps separate him from Republicans and it's true.
[Update]
McCain is on fire on health care. Obama seems to think that having an employer providing health care is a wonderful thing, and that everyone agrees on that. But McCain had a great (non?)-Freudian slip. He called his opponent "Senator Government."
[Update]
The discussion on Roe almost veered into a discussion on federalism. But not quite. But McCain went after him on his vote on the bill to allow failed aborted babies to die. And Obama is obfuscating on his vote.
[Final update]
Not a great debate for McCain, but it was his best. And he's not out of it.
What was missing? Gun control. It would have been a big issue in key states.
Posted by Rand Simberg at 06:31 PMHere's a useful explanation of financial markets and the current crisis.
Posted by Rand Simberg at 08:46 AMOil closed below eighty bucks today. Which was inevitable.
[Wednesday morning update]
Below seventy two dollars this morning. That's going to put a crimp on Chavez' and Ahmadinejad's murderous ambitions.
Posted by Rand Simberg at 02:54 PMJohn Jurist writes (or at least implies) that there's just too much competition in the suborbital market:
An approach I favor is forming a university consortium analogous to those that design, build, and operate large cooperative research assets, such as telescopes and particle colliders. That consortium could develop a suborbital RLV or even a nanosat launcher to be used by consortium members for academic projects. Since the consortium would design and develop the vehicles, participating universities would be more likely to use them for student research under some type of cost-sharing arrangement with federal granting agencies.Dr. Steve Harrington proposed something a bit different recently:
If you took all the money invested in alt.space projects in the last 20 years, and invested in one project, it could succeed. More underfunded projects are not what we need. The solution is for an investment and industry group to develop a business plan and get a consortium to build a vehicle. There is a lot of talent, and many people willing to work for reduced wages and invest some of their own company's capital. Whether it is a sounding rocket, suborbital tourist vehicle or an orbit capable rocket, the final concept and go/no go decision should be made by accountants, not engineers or dreamers (Ref. 8).I would concur with Dr. Harrington's final remark except I would expand the decision making group to include management and business experts nominated by the consortium members with whatever technical input they needed.
Yes, good idea. After all, we all know that it's a waste of resources to have (for example) two grocery stores within a few blocks of each other. They could dramatically reduce overhead and reduce costs and prices if they would just close one of the stores and combine forces. In order to assure continued premium customer service, they could just assemble a board of accountants, and finest management and business experts to ensure that the needs of the people are met.
In the case of the RLV development, the consortium could hire the best technical experts, and spend the appropriate amount of money up front, on trade studies and analyses, to make sure that they are designing just the right vehicle for the market, since it will be a significant investment, and the consortium will only have enough money to do one vehicle development. They will also have to make sure that it satisfies the requirements of all the users, since it will be the only available vehicle. This will further increase the up-front analysis and development costs, and it may possibly result in higher operational costs as well, but what can be done? It's too inefficient to have more than one competing system. As John's analysis points out, we simply can't afford it.
Posted by Rand Simberg at 07:49 AMI made a crack in comments the other day that the market was tanking in anticipation of an Obama election. Some may have taken it seriously, but it was a joke.
I do think that markets react to potential election outcomes in general, but in this case, I suspect that there are much deeper issues going on, and given that John McCain has shown himself to be (as he has confessed in the past) as clueless on the economy and economics as Barack Obama, there's probably not much street preference one way or the other. The folks in the pits are probably not even thinking about the election at this point.
While I'm not a conservative, I sure wish that there was at least one in the race, in terms of the economy.
Posted by Rand Simberg at 05:29 PMThomas James has some space-related thoughts.
Posted by Rand Simberg at 06:57 AMUCLA economists have calculated how long FDR extended the Great Depression. Seven years.
Roosevelt's role in lifting the nation out of the Great Depression has been so revered that Time magazine readers cited it in 1999 when naming him the 20th century's second-most influential figure.
"This is exciting and valuable research," said Robert E. Lucas Jr., the 1995 Nobel Laureate in economics, and the John Dewey Distinguished Service Professor of Economics at the University of Chicago. "The prevention and cure of depressions is a central mission of macroeconomics, and if we can't understand what happened in the 1930s, how can we be sure it won't happen again?"..."The fact that the Depression dragged on for years convinced generations of economists and policy-makers that capitalism could not be trusted to recover from depressions and that significant government intervention was required to achieve good outcomes," Cole said. "Ironically, our work shows that the recovery would have been very rapid had the government not intervened."
Remember this the next time someone talks about a new "New Deal." The myth of Roosevelt is akin with the current idiotic nonsense being promulgated by Democrats that the financial crisis was a result of "deregulation."
[Update about 9 AM EDT]
Sebastian Mallaby has a nice corrective to the "deregulation" nonsense:
The key financiers in this game were not the mortgage lenders, the ratings agencies or the investment banks that created those now infamous mortgage securities. In different ways, these players were all peddling financial snake oil, but as Columbia University's Charles Calomiris observes, there will always be snake-oil salesmen. Rather, the key financiers were the ones who bought the toxic mortgage products. If they hadn't been willing to buy snake oil, nobody would have been peddling it.Who were the purchasers? They were by no means unregulated. U.S. investment banks, regulated by the Securities and Exchange Commission, bought piles of toxic waste. U.S. commercial banks, regulated by several agencies, including the Fed, also devoured large quantities. European banks, which faced a different and supposedly more up-to-date supervisory scheme, turn out to have been just as rash. By contrast, lightly regulated hedge funds resisted buying toxic waste for the most part -- though they are now vulnerable to the broader credit crunch because they operate with borrowed money.
If that doesn't convince you that deregulation is the wrong scapegoat, consider this: The appetite for toxic mortgages was fueled by Fannie Mae and Freddie Mac, the super-regulated housing finance companies. Calomiris calculates that Fannie and Freddie bought more than a third of the $3 trillion in junk mortgages created during the bubble and that they did so because heavy government oversight obliged them to push money toward marginal home purchasers. There's a vigorous argument about whether Calomiris's number is too high. But everyone concedes that Fannie and Freddie poured fuel on the fire to the tune of hundreds of billions of dollars.
As he points out, it's important to understand the actual cause, because if we misdiagnose the disease, we're likely to come up with nostrums that make it worse, just as FDR's "brain trust" did. And that's exactly the path we're on with Obama. McCain may make similar mistakes, but with him, at least it's not a sure thing.
[Mid-morning update]
Glenn Reynolds has some thoughts on the upcoming speculative bubble in regulation. I agree that we need to design the system to be much more fault tolerant.
Posted by Rand Simberg at 05:43 AMOn p.38 of this presentation, there's a breakdown of the contributions to the cost of Space Solar Power (SSP). Not surprisingly, the installation is more than half of the cost and another 20% is manufacturing cost of the solar array.
If we extract out the solar generation from SSP and instead of an antenna, have a passive microwave reflector, we can potentially get the cost of the reflector down to less than $1 billion. Let's say it's a flat spinning <8 gram per square meter perforated mylar single-mission heavy payload to GEO straw man.
If we spend $1 billion on a ground-based microwave antenna and another $1 billion on a rectenna, we have a 1 GW system that can function as transmission for a 40-year straight-line cost of 1.5 cents/kwh which is about 30% of the cost of SSP per watt with the viable scale of capital needed much smaller. (If you need a VC return, the price must be closer to ten cents per kwh.) The reflector would not be at capacity so additional transmission can be achieved for 2/3 of that. 1 GW beaming for $3 billion would be a pretty satisfying proof of concept.
There's plenty of power on the ground to beam to space that's cheap so the proof of concept can be economically viable at this scale. At Hawaii's buy price of more than $0.30/kwh and New Mexico's sell price of less than $0.10/kwh it would pay for itself pretty fast.
Space power beaming would therefore be shown to be economically viable without the space generation and thus be valuable as a proof of concept for transmission alone.
Posted by Sam Dinkin at 11:53 AMTom Sowell explains, as only he can:
Fannie Mae and Freddie Mac do not deserve to be bailed out, but neither do workers, families and businesses deserve to be put through the economic wringer by a collapse of credit markets, such as occurred during the Great Depression of the 1930s.
Neither do the voters deserve to be deceived on the eve of an election by the idea this is a failure of free markets that should be replaced by political micro-managing.
Nothing about this makes me more angry than the continued lies by the collectivists that this was a failure of the free market.
Posted by Rand Simberg at 06:49 AMI think that this isn't going to be an isolated case:
My husband's business is a canary in the coalmine. When tax policies are favorable to business, he hires more guys, buys more goods, etc. When he is taxed more heavily, he fires people, doesn't buy anything new, etc. Well, duh. So, at the mere thought of a President Obama, he has paid off his debt, canceled new spending, and jotted a list of whom to "let go."
The first of the guys will get the news tomorrow. And these are not minimum-wage earners. These are "rich" guys, making between $200,000 and $250,000 a year.
My husband will make sure that we're okay, money-wise, but he won't give himself a paycheck that will just be sent to Washington. He'll make sure that he's not in "rich guy" tax territory. So, he will not spend his money, not show a profit, and scale his workforce down to the bare minimum.Multiply this scenario across the country and you'll see the Obama effect: unemployment, recession, etc. No business owner will vote for this man, but many a "middle-class worker" will vote himself out of a job. Sad the Republican can't articulate this.
Unfortunately, the Republicans nominated the wrong candidate for that. Maybe the vice-presidential nominee can.
Posted by Rand Simberg at 01:40 PM...that John McCain should have kicked off on Friday by properly responding to Senator Obama's lies and demagoguery on the financial crisis. It's exactly what Fred Thompson would have done, but I fear that out of a misplaced sense of collegiality, McCain won't do it.
The problem is, that in his heart, McCain doesn't really believe in free markets, any more than his opponents do. He has an emotional stake in "honor" and "service" over profit, and it makes it tough for him (as Glenn said) to go for the jugular against the corrupt rent seekers and collectivists in Washington, of both parties. Instead, he placidly and pallidly aims for the capillary.
He really needs to read this. As he notes, the problem isn't capitalism. It's politicians.
Posted by Rand Simberg at 06:46 PMIn comments at the previous post on this subject, Karl Hallowell comments:
It's not government's job to suck up risk for a contractor. As I see it, if contractors really were giving their best cost estimates, then they're regularly overestimate prices not consistently underestimate them.
The other commenters who seem to think that designing a brand new UAV, or the first successful hit to kill missile (SRHIT/ERINT/PAC-3, not the dead end HOE), or an autonomous helicopter (all things I've been heavily involved with) is something that can and should be done on a fixed-price contract (after all, one bridge is like any other, right?) . . . it can maybe be done, but only if you're willing to let system development take a lot longer.I don't know who posted this, but it's unrealistic.
Let's give an example of how the real world works in salvaging ships on the high seas:
Salvage work has long been viewed as a form of legal piracy. The insurers of a disabled ship with valuable cargo will offer from 10 to 70 percent of the value of the ship and its cargo to anyone who can save it. If the salvage effort fails, they don't pay a dime. It's a risky business: As ships have gotten bigger and cargo more valuable, the expertise and resources required to mount a salvage effort have steadily increased. When a job went bad in 2004, Titan ended up with little more than the ship's bell as a souvenir. Around the company's headquarters in Fort Lauderdale, Florida, it's known as the $11.6 million bell.Exactly the scenario where it is claimed that fixed price contracts can't work. Huge risk, lots of uncertainty, time pressure. A similar example is oil well firefighters. As I see it, there's almost no circumstances when government needs to help the contractor with risk. The money, paid when the job is done right, does that. If it's not enough, then nobody takes the contract. Simple as that.
Yes. The reason that cost-plus contracts are preferred by government is that government, by its nature, has an aversion to profit. It's the same sort of economic ignorance that drives things like idiotic "anti-gouging" laws, and it results in the same false economy for the citizens and taxpayers.
The problem isn't that companies are unwilling to bid fixed price on high-tech ventures. The problem is that, in order to do so, they have to build enough profit into the bid to make it worth the risk. But the government views any profit over the standard one in cost-plus contracts (generally less than ten percent) as "obscene," and to allow a company to make more profit than that from a taxpayer-funded project is a "ripoff." So instead, they cap the profit, and reimburse costs, while also having to put into place an onerous oversight process, in terms of cost accounting and periodic customer reviews, that dramatically increases cost to the taxpayer, probably far beyond what they would be if they simply let it out fixed price and ignored the profit. I would argue that instead of the current model of cost-plus, lowest bidder, an acceptance of bid based on the technical merits of the proposal, history and quality of the bidding team, even if the bid cost is higher, will ultimately result in lower costs to the government (and taxpayer).
As I understand it, this is the battle that XCOR (hardly a risk-averse company, at least from a business standpoint) has been waging with NASA for years. XCOR wants to bid fixed price, and accept the risk (and the profits if they can hit their internal cost targets), while NASA wants them to be a cost-plus contractor, with all of the attendant increases in costs, and changes in corporate culture implied by that status.
This is the debate that will have to occur if John McCain wants to make any headway in his stated desire Friday night to get rid of cost-plus contracts. Unfortunately, he's not in a very good philosophical position to argue his case, because he's one of those economic simpletons in Washington who think that making money is ignoble, and that profits are evil, particularly when they're so high as to be "obscene."
Posted by Rand Simberg at 10:34 AMI keep hearing about shortages and lines in the south. The last time we had gas lines on any major scale was in the seventies, when oil prices were kept artificially low by federal fiat. Is that what's happening here? Are the "anti-gouging" laws keeping prices too low, and discouraging new supply? For instance, if you can't get any more for it in North Carolina than you can in Ohio, where's the incentive to spend the money to ship it in from there?
Can anyone in the areas where the lines are tell me?
Posted by Rand Simberg at 01:26 PMObama's plans would be pretty hard on us.
It's not surprising. He's never displayed any knowledge of, or interest in business. If anything, his attitude (and unfortunately, John McCain's as well) is that there is something ignoble about profits (hence his self-righteous preening about his choice of becoming a community organizer instead of "going to Wall Street").
Posted by Rand Simberg at 08:46 AMA very interesting essay by Roderick Long:
There's a popular historical legend that goes like this: Once upon a time (for this is how stories of this kind should begin), back in the 19th century, the United States economy was almost completely unregulated and laissez-faire. But then there arose a movement to subject business to regulatory restraint in the interests of workers and consumers, a movement that culminated in the presidencies of Wilson and the two Roosevelts.
This story comes in both left-wing and right-wing versions, depending on whether the government is seen as heroically rescuing the poor and weak from the rapacious clutches of unrestrained corporate power, or as unfairly imposing burdensome socialistic fetters on peaceful and productive enterprise. But both versions agree on the central narrative: a century of laissez-faire, followed by a flurry of anti-business legislation.Every part of this story is false.
Observant libertarians have long noted that in general, captains of industry are not capitalists (or to use Jonah Goldberg's (via whom I found his link) more accurate phrase, "free-market economists"--"capitalism" is a Marxist term), and never have been.
Posted by Rand Simberg at 08:05 AMNewt Gingrich says not so fast to Paulson's bailout plan. I particularly agree with this:
Four reform steps will have capital flowing with no government bureaucracy and no taxpayer burden.
First, suspend the mark-to-market rule which is insanely driving companies to unnecessary bankruptcy. If short selling can be suspended on 799 stocks (an arbitrary number and a warning of the rule by bureaucrats which is coming under the Paulson plan), the mark-to-market rule can be suspended for six months and then replaced with a more accurate three year rolling average mark-to-market.Second, repeal Sarbanes-Oxley. It failed with Freddy Mac. It failed with Fannie Mae. It failed with Bear Stearns. It failed with Lehman Brothers. It failed with AIG. It is crippling our entrepreneurial economy. I spent three days this week in Silicon Valley. Everyone agreed Sarbanes-Oxley was crippling the economy. One firm told me they would bring more than 20 companies public in the next year if the law was repealed. Its Sarbanes-Oxley's $3 million per startup annual accounting fee that is keeping these companies private.
Third, match our competitors in China and Singapore by going to a zero capital gains tax. Private capital will flood into Wall Street with zero capital gains and it will come at no cost to the taxpayer. Even if you believe in a static analytical model in which lower capital gains taxes mean lower revenues for the Treasury, a zero capital gains tax costs much less than the Paulson plan. And if you believe in a historic model (as I do), a zero capital gains tax would lead to a dramatic increase in federal revenue through a larger, more competitive and more prosperous economy.
Fourth, immediately pass an "all of the above" energy plan designed to bring home $500 billion of the $700 billion a year we are sending overseas. With that much energy income the American economy would boom and government revenues would grow.
Also, SOX was the disastrous result of the last time Congress decided that it had to "do something."
Posted by Rand Simberg at 01:28 PMJim Manzi has a good, albeit depressing, description of the financial crisis and its likely outcomes.
[Saturday morning update]
One bit in the piece that I found amusing (and a little depressing):
[They] Promulgated a temporary ban on naked shortselling for about 800 financial stocks (in related news, the new recommended medical practice when you discover that you have a fever is to smash the thermometer against the wall, since this makes the problem go away).
Yes, I don't think this was necessary, and it will probably have bad consequences.
Posted by Rand Simberg at 03:30 PMI've long thought that the resolution of most digital cameras has reached the point at which it's overkill, and there are a lot of other improvements that the camera needs. Unfortunately, the marketing people at Canon don't agree:
Canon engineers are being held back from developing new sensor technology by marketing departments in a "race for megapixels", claims an employee of the Japanese photography company.
The employee told Tech Digest that Canon have the technology to "blow the competition away" in terms of image sensors, but are instead being asked to focus on headline figures like the number of megapixels a camera has. When asked for his opinion on the Canon EOS 5D Mark II, which we covered this morning, the employee said:"I am hugely disappointed because once again Canon engineers are dictated by their marketing department and had to keep up with the megapixel race. They have the technology to blow the competition away by adapting the new 50D sensor tech in a full frame format and just easing off a little on the megapixels. Although no formal testing has been done on the new model yet, judging by the spec and technology used, it just seems to be as good or as bad as the competition - not beating them by a mile (which we used to)."
I'd rather have more speed and better S/N ratio myself.
There's an amusing discussion of this, and the perennial war between marketing and engineering, including examples from Dilbert, over at Free Republic.
Posted by Rand Simberg at 01:01 PMJoe Biden says that the financial crisis was caused by the Bush tax (rate) cuts.
Does someone besides Joe Biden want to explain that one to me?
At least he didn't blame Global Warming.
Posted by Rand Simberg at 12:13 PMCrude has fallen below $90/barrel. That's from a peak of almost a hundred fifty.
Of course, this will be no surprise to regular readers.
[Afternoon update]
Apropo some of the comments, here's a promising new technology for getting oil from shale and tar sands. I don't see a price per barrel, though.
Posted by Rand Simberg at 09:03 AMThat's what John McCain is. One of the reasons it's hard to get enthused about him. I suspect that Palin might be a little better.
[Update a while later]
Both presidential candidates are completely economically incoherent.
No surprise, since they're both economic ignorami. Though in Obama's case it's worse, because he thinks that he understands economics, and much of what he knows for damned sure is wrong.
Posted by Rand Simberg at 08:57 AMSo says First Trust, about the current financial problems on the Street. For what it's worth.
Posted by Rand Simberg at 09:40 AMGeorge Will has more on economic ignorance:
The indignant student, who had first gone to Home Depot for a flashlight, says it "didn't try to rip us off." It was, however, out of flashlights. Ruth suggests that the reason Big Box had flashlights was that its prices were high. If prices were left at regular levels, the people who would have got the flashlights would have been those who got to the store first. With the higher prices, "someone who had candles at home decided to do without the flashlight and left it there for you on the shelf." Neither Home Depot nor the student who was angry at Big Box had benefited from Home Depot's price restraint.
Capitalism, Ruth reminds him, is a profit and loss system.Corfam--Du Pont's fake leather that made awful shoes in the 1960s--and the Edsel quickly vanished. But, Ruth notes, "the post office and ethanol subsidies and agricultural price supports and mediocre public schools live forever." They are insulated from market forces; they are created, in defiance of those forces, by government, which can disregard prices, which means disregarding the rational allocation of resources. To disrupt markets is to tamper with the unseen source of the harmony that is all around us.The spontaneous emergence of social cooperation--the emergence of a system vastly more complex, responsive and efficient than any government could organize--is not universally acknowledged or appreciated. It discomforts a certain political sensibility, the one that exaggerates the importance of government and the competence of the political class.
Yes, an exaggeration that is reinforced by the propaganda inculcated into people by government schools.
Posted by Rand Simberg at 02:08 PMGeorge Bush's announcement this morning that the administration was concerned about "gouging" reminded me of why I wish that we'd had better options in the last two elections (and still do). I expect that kind of nonsense from Democrats, but you'd think that someone who was supposedly a businessman would know better. Or perhaps he does, and is just pandering. I'm not sure which is worse.
Every time we have a natural disaster like this, this idiotic topic comes up, and we once again have to explain Econ 101 to the products of our public school system, probably in futility. This time, it's Rich Hailey's turn.
Here's what I wrote about it a three years ago, in the wake of Katrina.
[Update late morning]
Jeez, I thought that David Asman was smarter than that. Now he's telling Fox viewers to take pictures of stations with high gas prices so that they can be reported to authorities. It's hard for me to believe that Neal Cavuto would do that.
[Another update a minute or so later]
You know, I think that this is an explanation for socialism and collectivism's continuing grip on the public mind, despite its long history of unending failure. There's just something in human psychology to which it naturally appeals, and rationality just can't break through. It just "feels" unfair for prices to go up in an emergency, regardless of the demonstrably bad consequences of attempting to legislate them.
[Late afternoon update]
Shannon Love explains how the gas station business works:
I'll say it one more time for those who can't be bothered to actually ask someone who owns a gas station. Gas stations set prices for the gas they sell today based on the wholesale price of the gas they will have to buy to replace it. Get it? The price you pay for a gallon today is the cost of the gallon the station will have buy to replace the one you just bought.
Gas stations sell gas at or near cost, so if they did not use replacement pricing any sudden spike in gas prices would shut them down and you couldn't get any gas. I simply do not know why our public and private talking heads cannot understand and communicate this simple fact.
Because either they don't know it, or they think that people don't want to hear it. They operate on razor-thin margins, and can't afford to hand out subsidized gas as charity, even if that wouldn't screw up the market. And note, for those who say it's "big oil" that is "maximizing profits" in the face of a national emergency, even if that were true (it's not) "big oil" isn't threatened with jail for "gouging." It's the gas station owner, who has no control over his wholesale gas costs. So people who demand that we crack down on gougers are essentially demanding that the station operators either operate at a loss, or pay fines, or go to jail. I don't know why anyone would want to be in that business in the face of so much public ignorance about it.
Posted by Rand Simberg at 07:47 AMJust a month ago, many Republicans were resigned to hoping at best for the possibility of John McCain eking out a win against Obama, and not losing too much ground on the Hill. Now it looks like regaining Congress is within the realm of possibility:
The issues raised by today's low approval ratings of Congress are reinforced by recent Gallup Poll findings that relatively few voters generally believe "most members" of Congress deserve re-election. That figure was only 36% in July, much lower than the 51% or better reading found in recent election years when the party of the sitting majority in Congress maintained power.
When the generic preference is only 3% among registered voters (not likely voters), the Donkeys are in big trouble, because registered voters almost always overstate actual support for Democrats at the polls.
McCain needs to start running hard against Pelosi and Reid. With all the nasty things that Reid has been saying about him lately, he shouldn't have to work hard to motivate himself to do so.
It would help, of course, if Boehner and McConnell could make some noises to demonstrate that they learned their lesson from two years ago, and that they're no longer going to be the party of pork and privilege. It's a real shame that it looks like Stephens is going to win his primary in Alaska.
Posted by Rand Simberg at 06:25 AMDid Mark Murray think about what he was writing?
Palin could be heard nearly squealing with delight in the front of the plane at the sight of three of her children at the foot of the stairs, and according to several aides, refused to stay inside the plane.
Emphasis mine.
Posted by Rand Simberg at 07:57 AMRestricting the top speed on automobiles "seems reasonably sensible" to Matthew Yglesias:
...of course the reason you're not allowed to go super-fast is that it isn't safe. A large proportion of car accidents are related to people driving too quickly. Thus, via Ezra Klein comes Kent Sepkowitz's suggestion that we design cars so as to make it impossible for them to drive over, say, 75 miles per hour.
Clearly spoken as someone woefully ignorant of the cause of accidents, and who probably doesn't drive much, at least outside a city, or in the west, or in mountains, or on curvy roads where rapid passing is occasionally necessary. Or someone to whom time (at least other peoples' time) has no value. I suspect that he agrees with Al Gore that cars are intrinsically evil, and wishes that everyone would ride a train, like those enlightened Europeans. It's similar to the idiocy (and yes, there's no other word for it) of a double nickel speed limit (something to which even Charles Krauthammer, who doesn't drive at all) has fallen prey.
Fortunately, most of his commenters take him to school.
Posted by Rand Simberg at 08:20 AMEngineer's salaries, taking into consideration education and responsibilities, the stress of accelerated delivery schedules and their direct impact on corporate profits and overall success of the company, seem absolutely inadequate.
Well, I've known a few who were. But no, not in general.
In many of these overpaid professions, there's some kind of government-induced market failure going on (e.g., longshoremen), but in a lot of cases, it's just the occasional irrationality of the market place.
Posted by Rand Simberg at 08:10 AMJohn Tierney on lunar and martian property rights.
Posted by Rand Simberg at 04:57 PMFrom George Will. I'm kind of intrigued by the idea of capping the pay of fascist CEOs (Lee Iacocca comes to mind as a poster boy).
Posted by Rand Simberg at 08:24 AMFood is a fuel, of course, though we don't think of it that way. But now that transportation is competing for it, it's having dire effects on everyone, but particularly the poor, largely as a result of idiotic government policies. This should be a good issue for John McCain, if he only understood economics.
Posted by Rand Simberg at 06:57 AMWhy the oil "shortage" is made in Washington.
Posted by Rand Simberg at 10:25 AMJim Manzi explains it to Barack Obama. Unfortunately, both presidential candidates are economic ignorami.
Posted by Rand Simberg at 10:31 AMIs it almost over? Let's hope so.
Posted by Rand Simberg at 07:30 AMSome interesting thoughts on the insane notion of banning it to save the planet. Also, comments about law students' economic literacy.
Posted by Rand Simberg at 07:08 AM...why can't we kick the fossil fuel habit? Well, we can, but not the way we put a man on the moon, and certainly not within a decade. On the thirty-ninth anniversary of the first landing, I explain.
[Afternoon update]
It's interesting to note that the original landing was on a Sunday as well. I don't know how many of the anniversaries have fallen on a Sunday, but I would guess five or so. It's not too late to plan to commemorate the event with a ceremony at dinner tonight, with friends and family. Also, a collection of remembrances here. If you're old enough to remember it yourself, you might want to add one.
Posted by Rand Simberg at 06:38 AMMaybe. These were clearly unsustainable prices--the only question was how long it would take them to drop. And what do you know? The market works:
Gas may be getting just a bit cheaper, but major changes in how Americans live and drive are already in motion.
Car buyers have been fleeing to more fuel-efficient models. U.S. sales of pickups and sport utility vehicles are down nearly 18 percent this year through June, while sales of small cars are up more than 10 percent.While slashing production of more-profitable trucks and SUVs, automakers have been scurrying to build their most fuel-efficient models faster.
Toyota Motor Corp., which hasn't been able to keep up with demand for its 46-miles-per-gallon Prius hybrid, said last week it will start producing the Prius in the U.S. and suspend truck and SUV production to meet changing consumer demands.
Ford Motor Co. and General Motors Corp. also have announced plans to increase small car production, and GM has said 18 of the 19 vehicles it is launching between now and 2010 are cars or crossovers.
And what do you know, they didn't do it because their intellectual superiors in Congress passed a law making them. They did it because gas was four bucks a gallon. Maybe people aren't the stupid sheep that technocrats think they are.
Posted by Rand Simberg at 06:24 AMSometimes it seems like it:
In front of a roomful of 500 General Motors employees -- of all places -- John McCain paraded his radical Green credentials this morning. McCain embraced California's lawsuit against the EPA demanding that states be allowed to set their own auto mileage standards.
"I guess at the end of the day, I support the states being able to do that," he said at the town hall meeting at GM's Technical Center in Warren, Mich.California's policy is strongly opposed by the auto industry because of the nightmare patchwork of regulatory standards such a proposal would set. The industry prefers national standards -- a position that McCain had supported until this morning. McCain's flip-flop on the issue (assuming he meant what he said, and his campaign doesn't quickly move to correct the gaffe) would put him at odds with the Bush administration and longstanding Republican policy.
No way he has a prayer of winning Michigan (and probably not Ohio, either) if he persists in this stupidity. And it's not going to give him California, either.
Posted by Rand Simberg at 09:04 AMI know what you're saying -- "who invited the fat chick to the Twister party?" Certainly, all of us (with the possible exception of Randy) wish she wasn't here. But it's important to remember that fat chicks are often an important source of party supplies, and we must take the good with the bad. In the same way, Fannie Mae supplies the critical financial weed and beer to keep our national economic party going.
The numbers are complex, but let me boil it down for the economic layperson. Fannie Mae is a government company type thing that has a large pile of money, which I will call "A". The first thing it does is create $20 million bonuses for high performance executives like Franklin Raines, James Johnson and Jamie Gorelick, which I will call "B." Next, it allocates an amount "C" to lobbyists to make sure important Congressmen always get a thoughtful holiday card from Fannie Mae. After subtracting B and C from A, they are left with D, which is lent to homebuyers. These homebuyers then pay back the amount E, which, when subtracted from D, leaves F, the amount Congress has to come up with. In order to keep this important financial system humming along at peak efficiency, it is necessary that you, the taxpayer, are F'ed.
RTWT, and save the Dave!
Posted by Rand Simberg at 06:37 AMThe president has lifted the executive order banning offshore drilling.
This puts Congress in a political fix. He's calling on them to lift the Congressional ban now, but that would require Congressional action. They can simply ignore it (though at their political peril). The neat thing is that they can't ignore the issue forever. There is a default position not to their liking. It will expire at the end of September anyway (as it does every fiscal year) and will have to be renewed with a Congressional vote. Usually, this is uncontroversial, but not this year. We'll see if they're willing to do it.
Posted by Rand Simberg at 09:35 AMJeff Foust wonders if new government energy initiatives will crowd out space budgets.
Maybe. His piece reminds me of an idea I've had for an essay on why energy independence isn't like landing a man on the moon.
In fact, I had a related comment over at Space Politics this morning, in response to a comment from someone named...Someone...that cost-plus contracts are a proven means of success in space:
I know alt.spacers see cost-plus as some sort of ultimate evil. But recognize its been successful in the past, from the Saturn V to the Pegasus. And the X-33 would likely have been finished and test flown if NASA had used its traditional cost-plus approach instead of the fixed price model they used. If NASA had funded the X-33/VentureStar under the same procurement model as the Shuttle it would be flying today.
To which I responded:
But recognize its been successful in the past, from the Saturn V to the Pegasus.
Only if by "successful," you mean it eventually results in very expensive working hardware. Not to mention that Pegasus was not developed on a cost-plus contract.And the X-33 would likely have been finished and test flown if NASA had used its traditional cost-plus approach instead of the fixed price model they used.
Perhaps. At a cost to the taxpayer of billions. And probably a radically different vehicle than the one originally proposed.
If NASA had funded the X-33/VentureStar under the same procurement model as the Shuttle it would be flying today.
Perhaps. And likely just as big an economic disaster (and perhaps safety one as well) as the Shuttle.
We don't like that form of procurement because historically, in terms of affordable access to space, it has repeatedly been proven not to work.
Anyway, I do need to write that essay. We're not going to get energy independence from government crash programs (though prizes may be useful).
Posted by Rand Simberg at 07:09 AMThe Dems are finally starting to come to their senses about energy production, but not quite:
One idea floated by Reid would require that whatever oil is drilled in newly opened areas would need to be sold in the United States.
This is pure, unadulterated economic ignorance. Senator Reid, go to the board and write one hundred times, "OIL IS FUNGIBLE." WTF difference does it make where the oil is sold? The important thing is to get it on the market. If we are pulling new oil off the north slope, it might make sense to ship it to Japan, improving our balance of trade with them, and relieving them of the cost of shipping it all the way from the Persian Gulf. It might in fact make sense to simply ship new oil from the Gulf of Mexico to Gulf refineries, but that should be a market decision, not an arbitrary and idiotic political one. "Energy independence" is an economic myth.
And then, we have this:
Democrats also want any compromise plan to include investments in clean and renewable energies, a crackdown on oil speculators and proof that the oil and gas companies are fully utilizing land that is already leased for exploration.
What does a "crackdown on oil speculators" mean? It's called a futures market, and a lot of people play. It serves a function of reducing risk for many in the industry. "Speculation" is simply a dirty word for "investment." This new scheme where people can buy gasoline ahead of time at a fixed price? That's speculation, folks.
And this:
"If they were showing in good faith that they were drilling on some of the 68 million acres they have now, it might change some of our attitudes," said Sen. Claire McCaskill (D-Mo.).
So, in order to get access to leases with high potential, they have to waste their money drilling on leases with low potential? Brilliant.
The only way to change the attitudes of people like this is Economics 101. And I doubt if even that would help.
Posted by Rand Simberg at 10:44 AM...and change. It looks like John McCain may have come to his senses, and dropped cap and trade. Let's just hope that he doesn't attempt to revive it after he wins.
Posted by Rand Simberg at 12:16 PM...causation?
Maybe. The problem is, McCain is likely to be as bad in some ways, with all of his stupid talk about "obscene" profits.
Posted by Rand Simberg at 06:08 AMMartin Feldstein explains why drilling now can reduce prices now.
Posted by Rand Simberg at 07:38 AMWho dare call it fascism? Jeffrey Lord does:
...when faced with a disagreeable problem (in this case the lack of jobs) the answer for Obama always seems to get back to the manipulation of the political process to achieve the desired result.
Are Obamalanders uncomfortable with the free-market driven success of talk radio? Then they will "figure out ways to use the political process" to shut it down. In the case of talk radio, how else to explain the threatening Reid-Obama letter to Rush Limbaugh's business partner? How else does one explain the attempt to retrieve the "Fairness Doctrine" from the dustbin of history? These are nothing more or less than the "use of the political process" to subvert someone else's freedom. Period.Are Obamaland followers hostile to oil? Do they hate SUVs? Do they think you have no right to heat or cool your own home beyond what they consider politically correct? Do they think you should pay $5 -- or $6 or $7 or $8 or more -- for gas at the pump to ensure you conform to the Obamaland world-view? Yes, they do think all of this and their Obamaland answer is inevitable. They will "use the political process" to stop drilling off shore in its tracks. So too with stopping the use of oil shale or ANWR or anything else that even hints at allowing average Americans their basic freedom to drive whatever vehicle wherever they damn well please whenever they damn well please. In Obamaland it is not only perfectly acceptable, it is gospel from the secular bible that they must use the political process to stop refineries from being built, to keep nuclear power plants from being built, to keep coal from being burned. Use the political process to forcibly mandate the temperature inside every single American home. As a matter of fact, why not just go all the way and nationalize the oil companies -- this actually being suggested by Obamaland's New York Congressman Maurice Hinchey.
He also has the full quote from Obama that I'd missed part of the first time around:
"We can't drive our SUVs and, you know, eat as much as we want and keep our homes on, you know, 72 degrees at all times, whether we're living in the desert or we're living in the tundra, and then just expect every other country is going to say OK, you know, you guys go ahead keep on using 25 percent of the world's energy, even though you only account for 3 percent of the population, and we'll be fine. Don't worry about us. That's not leadership."
This is economic idiocy. Why in the world would energy consumption be expected to correlate with population? Yes, we have much higher per-capita energy usage than much of the world (e.g., Africa). But we also produce much greater wealth per capita than much of the world, and much of that wealth goes to make the world wealthier, in many ways. The notion that we should only use energy in proportion to our population is economic ignorance of the first rank. In other words, it's exactly what I would expect from a Democrat, and particularly Obama. Though to be fair, there are a lot of economically ignorant Republicans as well, including their current standard bearer, by his own admission. But unlike Obama, he at least admits it.
Posted by Rand Simberg at 07:22 AMHas our oil consumption dropped to 2002 levels? We'll see what effect it has on the economy. It has to be hurting tourism.
[Late morning update]
Paul Dietz mentions Bob Zubrin's flex-fuel crusade in comments. It looks like both candidates may be on board with a mandate for this:
The really good news is that both Senators John McCain and Barak Obama have declared their support for the Open Fuel Standard that must be adopted to ensure that each of the roughly 17 million cars we buy in this country every year are Flexible Fuel Vehicles.Posted by Rand Simberg at 06:45 AM
Florida just bought 300 square miles of cane fields in the everglades to return them to wetlands. They paid $1.75 billion. That buys out US Sugar that was responsible for 10% of the US sugar lobby. In April, in response to one of Rand's posts, I wrote that we needed to find a way to buy out big sugar. For 6 MT times $0.10 implicit subsidy/lb, that's $1.2 billion/year. US Sugar's share of that is $120 million per year. So $1.75B is a pretty good price for their concession.
Sweet deal, Rand! Thanks for taking one for the team as a Floridian to lower sugar prices nationwide.
Posted by Sam Dinkin at 07:24 AMSome thoughts at The Speculist.
Posted by Rand Simberg at 06:29 AM...at Lileks' place:
It happened when it usually happens, too - every gets home, flips on the air conditioner and turns on the TV, and the brittle infrastructure, held together at the moment with masking tape and some alligator clips, spazzes out completely. This will continue - there's a controversy going on here about some new power lines and generating plants. A judge blocked the latter, because the utility hadn't invested enough in wind power, as per the law. That's the sort of sentence that makes your heart very heavy: a judge ruled that they can't build the power plant. I'm all for trying everything - wind, solar, nuclear, geothermal, switchgrass, algae, hydrogen, steroidally enhanced gerbils running in cages attached to generators, steam, hydro, shale, and installing small pedals in movie theaters people can push to power the projector, but DO SOMETHING. NOW.
The world has gone nuts. People complain about high energy costs, and the Democrats' response is to fight every sensible attempt to increase supply, and tell us that the price isn't high enough. And so far, they seem to be paying no penalty at the polls for it. It would help, at least a little, if we didn't have a faux Democrat (at least when it comes to economics) at the top of the Republican ticket.
Posted by Rand Simberg at 05:45 AMIf ethanol is so great, why doesn't he support its importation from Brazil? Surely it's not because he's in the pocket of ADM?
ADM is based in Illinois, the second-largest corn-producing state. Not long after arriving in the U.S. Senate, Obama flew twice on corporate jets owned by the nation's largest ethanol producer. Imagine if McCain flew on the corporate jets of Exxon Mobil.
Corn-based ethanol gets a 51-cents-a-gallon tax subsidy that will cost taxpayers $4.5 billion this year. McCain opposes ethanol subsidies while Obama supports them. McCain opposed them even though Iowa is the first caucus state. Obama, touted by Caroline Kennedy as another JFK, was no profile in courage in Iowa....Last year, as President Bush was about to sign an energy cooperation agreement with Brazil, Obama said the move would hurt "our country's drive toward energy independence."
Really? The only thing it might hurt is Obama's drive to the White House.
Must be that new politics. You know, "change"?
And it's also amusing to note that the Democrats don't want to wait for drilling to pay off, but they're perfectly happy to wait for switch grass.
[Mid-morning update]
If it's intended to cut the nation's energy bill, Obama's ethanol policy makes no sense, if it's intended to secure the nation's energy supplies, Obama's ethanol policy makes no sense, if it's designed to improve the nation's relationship with a major Latin American trading partner, Obama's ethanol policy makes no sense, but, if, on the other hand, it's just another example of good old porkbarrel politics, Obama's ethanol policy makes a great deal of sense.Posted by Rand Simberg at 05:11 AM
That's what Barack Obama, and anyone who supports US ethanol price supports and tariffs against Brazilian imports is.
I agree.
By the way, so are Algore and James Hansen...
Posted by Rand Simberg at 06:13 PMOff-shore drilling, or oil tankers? Of course, many "environmentalists" would like to ban both. And have us go back to chopping wood, and forty acres and a mule. As long as we aren't too cruel to the mule.
But it's pretty clear to me that off-shore drilling with modern technology is much lower risk, in terms of oil spills, than having foreign-flagged tankers operating in our waters. This kind of false sense of safety, and misplaced priority is common. For instance, some people avoid flying, because they fear it, and drive instead, vastly increasing their risk of being killed on the trip. I don't know whether people who oppose oil drilling are being similarly irrational, or if they simply recognize it as an easier target than ending oil imports, so they grab whatever low-hanging fruit they can to minimize our oil consumption (and drive up the price, which is perhaps part of the goal).
Also, as noted here, banning drilling off US shores doesn't eliminate the risk of spills from drilling. It just moves it to other (and perhaps even more environmentally sensitive) places.
Posted by Rand Simberg at 10:52 AMI have a new piece up over at Pajamas Media on space transportation and the Interstate Highway System.
Hey, it was Mike Griffin who made the analogy, not me.
I should also note that while the title is mine, the subheadline is theirs.
[Late afternoon update]
Only Mark Whittington would have the native talent to so misread this piece as to think that I was "expressing astonishment." Of course, it's not the first time that he's fantasized about my views.
[Another update]
Now Mark is fantasizing that I actually want, or expect NASA to build the Interstate to space.
Well, it's totally in character for him.
I sure wish he'd learn to read for comprehension.
Posted by Rand Simberg at 10:02 AM"Messrs. Obama and McCain both reveal a disturbing animus toward free markets and success."
Indeed.
Posted by Rand Simberg at 06:22 AMAlan Boyle has an interesting story on flood prediction. Well it is to me, anyway.
Robert Criss, a professor of earth and planetary sciences at Washington University in St. Louis, agreed that the forecasts have been "remarkably accurate" - within the limits of the system, that is. He noted that the flood wave is working its way down the Mississippi River at about walking speed, giving the forecasters time to analyze the water's course, and giviing emergency officials time to react.
"It's like a traffic jam. The cars move slowly through the jam, and this big stuff is coming our way slowly and inexorably," Criss said.
The damage will be in the billions. And of course, some will say that this is a sign of climate change. But the real reason that the cost of these disasters is increasing is not because the weather is any different than it has been in the past but rather because people foolishly build in flood plains, because they don't understand the nature of statistics. There is no such thing as a "hundred year flood," at least in the sense that you can expect that there will be one per century, and after you've had one, you're safe for another hundred years. All it means is that statistically, one would expect one to occur that often, on average. Having one does not inoculate you from having another the next year (or even the next month), any more than chances that the next coin flip will be heads is increased by a previous tail. It's fifty-fifty every flip, and it's one in a hundred every year (assuming that the estimate is correct). This is the same kind of thinking as the guy who always carried a bomb on the plane with him, on the logic that the chances that there would be an airplane with two bombs on it were minuscule.
A perfect example is the 2004 hurricane season, which I drove over from California in early September to enjoy. I arrived in Florida just in time to put up shutters and batten down the hatches in our new house, when Frances hit us.
It was the first time a major storm had hit the area in many years, and most of the people who had lived here, even long-time residents, had gotten complacent. In fact, I recall sitting next to someone on a plane to LA earlier that summer, shortly after we'd bought the house, but before the storms. He was a real estate agent in Palm Beach County, and I mentioned that one of the things I didn't like about moving to south Florida was the hurricanes. He waved it aside, saying, "we don't get hurricanes here." I just shook my head.
Anyway, three weeks later, just as we were getting power back on and cleaned up from Frances, we got hit by Jeanne, which made landfall in almost exactly the same place (up around Fort Pierce). So this was not only a "hundred year" (or perhaps a "thirty year") hurricane, but we had two of them within a month. And of course, the cost of hurricanes will continue to grow, not because hurricanes are getting worse, but because, as in the midwest, and partly out of statistical ignorance, we continue to provide them with ever more, and ever more expensive targets.
[Update a couple hours later]
Jeff Masters thinks that climate change is causing 500-year floods to become more frequent. I don't think we have enough data to know that for sure (particularly since things have actually been cooling down in the last few years), but as he points out, another anthropogenic effect is the draining of wetlands for farming and building of levees to protect them. Levees work fine (until they suddenly don't) but they intensify effects down stream.
Posted by Rand Simberg at 06:00 AMBruce Webster has an idea for a campaign to get Congress' attention.
Posted by Rand Simberg at 08:20 AMAnother jump in oil prices.
Think it has anything to do with the fact that both presidential candidates favor a hidden tax on energy and oppose expanding domestic oil production?
You know, in the past, when I've said that prices in this range are not sustainable, I always assumed that, at least at some point, sanity would reign in Washington. What a dumb assumption.
[Thursday morning update]
Wise words from Lileks:
...there's hope. An article in the paper last week said that the gyrations in the oil market may indicate that the laws of supply and demand no longer apply. Well, clever us, to live in an age where immutable laws are abolished with ease; no doubt faster-than-light travel is now possible as well. Whenever someone says that the old laws no longer apply, it's a sure sign that the laws are about to reassert themselves with brutal force.
Three-buck gas by October? Likely.
As Carl notes in comments, even when you know you're in a bubble, you don't know when it's going to pop.
[Update a few minutes later]
Anyone wondering why U.S. energy policy is so dysfunctional need only review Congress's recent antics. Members have debated ideas ranging from suing OPEC to the Senate's carbon tax-and-regulation monstrosity, to a windfall profits tax on oil companies, to new punishments for "price gouging" - everything except expanding domestic energy supplies.
Amid $135 oil, it ought to be an easy, bipartisan victory to lift the political restrictions on energy exploration and production. Record-high fuel costs are hitting consumers and business like a huge tax increase. Yet the U.S. remains one of the only countries in the world that chooses as a matter of policy to lock up its natural resources. The Chinese think we're insane and self-destructive, while the Saudis laugh all the way to the bank.
And unfortunately, both presidential candidates are economic ignorami:
Recent weeks have seen some GOP stirrings on Capitol Hill, but John McCain has so far refused to jettison his green posturings, such as his belief in carbon caps and his animus against offshore development. A good reason for a rethink would be $4 gas. At present, it is charitable to call Mr. McCain's energy ideas incoherent, and it may cost him the election.
Of course, Obama's even worse, but even if McCain wins, it will be a lot closer than it need be. And prices will continue to soar. Needlessly.
Posted by Rand Simberg at 02:08 PMIs the "wealth effect" a myth?
If so, it means that the popping of the housing bubble won't have the dire effect on economic growth that many have predicted.
Posted by Rand Simberg at 01:26 PM...that which can be accounted for by stupidity and ignorance. I agree with this commenter:
If you were referring to almost any other sitting Senator, I would agree. Boxer, however, may very well believe everything that she said. She's 18 different ways of stupid.
He's being unkind. I can think of several other Senators about as bad. Because the bill doesn't explicitly specify a price, she probably really does believe that it won't result in a price change, because people like her really do believe that they can, through legislation, outlaw the laws of economics. No doubt she also believes that if Congress were to simply pass a law making gasoline two bucks a gallon, it would work just fine. And I suspect that Joe Lieberman, bless his neoconservative heart, believes it as well.
Posted by Rand Simberg at 11:56 AMNo, even the premise was crazy:
While the premise of the 55mph speed limit was a perfectly valid one, the effectiveness of the rule was debatable. There is certainly no doubt that driving at a lower speed would consume less energy. The problem lies in the fact that the national 55mph speed limit was perhaps the most universally ignored law in history apart from prohibition.
Just what was it about the premise that was "valid"? That if everyone drove fifty five instead of seventy that it would save gas? Well, I guess. But so what? Why fifty five? Why not fifty? Why not forty five?
I have never seen any kind of quantitative analysis that provided a rationale for any particular speed limit (at least one designed to save gas and lives). What's magic about the double nickel? (In this regard, it is subject to the same reductio ad absurdum as the minimum wage). Hey, I have an idea that would save a lot of gasoline. Let's ban cars, motorcycles and trucks from the highways. Don't allow anything on them with an internal combustion engine. That would solve the problem. And it makes just as much sense as an arbitrary federal speed limit. The only difference is that the absurdity of the proposal is much more obvious.
Despite their lack of analysis, proponents also claimed that arbitrarily capping legal speeds at fifty five promoted "safety." The only rationale for this notion basically boiled down to "speed kills," which is a pithy phrase, marred only by the fact that it doesn't correspond to empirical reality. Even ignoring the very real fact that there was no significant increase in traffic fatalities after the idiotic law was repealed in the nineties (in fact, I think they went down), it doesn't take into account the fact that time is money. If truckers followed the law, it would add a day to a cross-country trip, which means a day's delay in the delivery of needed goods, and either more cost for the driver's time, if he's paid by the hour, or a cut in his profits if he's paid by the mile. If a long-distance commuter did so, it might add fifteen or twenty minutes each way. He might have to get up earlier, so the extra time spent behind the wheel might come out of sleep time, thus increasing the possibility of an accident due to drowsiness. Also, slower speed means longer trip times, which might mean driving later into the night to get to the same destination, again increasing the chance of drifting off.
At four dollars a gallon, if gas is really saved at fifty-five, there is plenty of incentive for individual people to slow down on their own, if it makes sense to do so overall. But they're in a position to make the trade off in a way that no legislator in Washington can ever be. We had a couple of decades in which to experiment with this foolish notion, and it was found wanting. Like Prohibition, let's leave it in the dustbin of history.
One other point. I remember when the Republicans won the Congress back in 1994. I had some hope that there would be at least some rollback from a lot of the statist nuttiness that had been accumulating since The New Deal and The Great Society. Those hopes were mostly forlorn, with the rare exception of welfare reform, and George Bush has put the final nails in the coffin of the Gingrich revolution. But one other rare exception was the repeal of the fifty-five speed limit. If that particular bit of idiocy is reinstated, I'll really feel that it was all for naught.
Posted by Rand Simberg at 11:16 AMYou know, it's almost like they don't want us to increase the supply. If the Republicans were smart, they could make this a potent campaign issue in the fall. Of course, if the Republicans were smart, I'd probably be a Republican.
Posted by Rand Simberg at 02:05 PMA brief survey of potential global warming solutions. What is more interesting to me than the engineering is the politics and ethics of all this. Asteroid diversion falls in the same category. But at least some of these things could drive a need for low-cost space access in an unprecedented manner.
But this is one that doesn't really seem to be in this category, unless it were mandated. It's more of a "think globally, act locally" approach:
On the opposite end of the spectrum is the ultra-low-tech approach of painting rooftops white to reflect sunlight.
We've been thinking about doing that anyway, just to reduce our air conditioning bill. With a gray cement tile roof, that soaks up a lot of sun, it's hotter than Hades's kitchen in the attic this time of year, and that could really cool things down.
Posted by Rand Simberg at 09:30 AM...once most of the former big fuel subsidizers have removed much or all of their subsidies, world demand for oil is likely to level off, or possibly even plunge. And if the latter scenario prevails, then the petroleum futures speculators will be running for the hills, in the midst of a bursting oil bubble, much like real estate speculators fled upon the bursting of our recent housing bubble in the States. All bubbles are self-correcting, one way or another.
Yes. Few people appreciate how much demand has been artificially spurred by subsidized fuel in many large countries. When their governments can no longer afford to continue to do so (as they can't for long at current prices), watch crude plunge.
Posted by Rand Simberg at 11:27 AMAt least in Virginia Postrel's parlance:
Obama's memoir is not a policy tome or a campaign biography but an emotional journey. It does not offer alternatives, only bleak observations and predictions. It is pessimistic, conservative, nostalgic. The theme running through Dreams from My Father is the search for order, for stability, for roots in an undisturbed pre-modern culture. How that yearning for stasis translates into presidential policy is not clear, but I worry.
Me, too. It's questionable whether most of his nostrums are really "change," but if they are, they're not change I can believe in.
Posted by Rand Simberg at 05:06 AMPut me in the latter camp.
Although the Climate Security Act does direct some spending towards low-carbon energy research, it is basically a wedgist scheme. If something like it is adopted by the next presidential administration, we will find out which side is right. If the wedgists are correct, cutting carbon dioxide emissions will produce a modest increase in energy prices resulting in the deployment of a wide variety of readily available low-carbon energy sources over the coming decades. If the breakthroughists are right, energy prices will soar provoking a political backlash. In which case, perhaps one need only peer across the Atlantic to the spreading protests against higher fuel prices in Europe to see the future.
Yup.
One of the most disturbing things about McCain is that he has bought completely into the hysterical climate-change claptrap, and is unamenable (so far at least) to reason.
Posted by Rand Simberg at 05:56 AMFor David Lazarus, from Virginia Postrel, who seems happy to be back in LA. I'm envious.
Posted by Rand Simberg at 05:36 AMThe browser wars return.
This particularly caught my eye:
Firefox 3.0, for example, runs more than twice as fast as the previous version while using less memory, Mozilla says.
The browser is also smarter and maintains three months of a user's browsing history to try to predict what site he or she may want to visit. Typing the word "football" into the browser, for example, quickly generates a list of all the sites visited with "football" in the name or description.Firefox has named this new tool the "awesome bar" and says it could replace the need for people to maintain long and messy lists of bookmarks. It will also personalize the browser for an individual user.
"Sitting at somebody else's computer and using their browser is going to become a very awkward experience," said Mitchell Baker, chairwoman of the Mozilla Foundation.
Sounds like a market opportunity to me. I have a few ideas about how to solve it.
Posted by Rand Simberg at 05:08 PMI'm sorry to hear about Senator Kennedy's bad news, and wish him and his family the best, but I and Dr. Hsieh have a question for him:
I wonder which country with morally superior "universal health care" he'll go to for his treatment? Will it be Canada, the UK, or Cuba?Posted by Rand Simberg at 12:38 PM
Both Barack and Michelle Obama have a collectivist mentality:
Jeff Dobbs, a little while back, saw Michelle Obama's statement that "The truth is, in order to get things like universal health care and a revamped education system, then someone is going to have to give up a piece of their pie so that someone else can have more."
...Barack Obama today: "We can't drive our SUVs and eat as much as we want and keep our homes on 72 degrees at all times ... and then just expect that other countries are going to say OK," Obama said.Would an Obama Administration really mean an end to "eating as much as we want?"
There is an implicit assumption here that, in order for one person (or country) to have more, another must thereby have less. This is the view of a person who views wealth not as something that is created, but something that simply exists, and the only important issue is how to divvy it up. But no one in Zimbabwe is starving because I took food away from them and ate it myself. They are starving in former Rhodesia, and in North Korea, and other places, because the governments there, in thrall to greed and the poisonous ideology of collectivism, have destroyed the agricultural sector.
What are the Obamas going to take away from us to give to someone else? And how will they decide from whom to take it, and to whom to give it? And what means will they choose to do so?
And which countries' approval are we seeking? Egypt, to whom we give billions a year in aid? France? Germany? The Europeans seemed to be well fed, last time I checked.
My mother, who used to tell me to clean my plate in the sixties because there were children starving in China, had her mother tell her to clean her plate during the depression because there were children starving in Europe. Who is it that Obama is asking (telling?) us to clean our plates (or better yet, put less on them) for? Will he set up rationing? Will Michelle be in charge of the rationing board and pie distribution?
Hungry stomachs want to know, before November.
The sad thing, of course, is that our agricultural policies, which actually increase the cost of our food (though we're wealthy enough to afford it, at least until the Obamas take over), are also complicit in destroying the agricultural sector of many third-world countries, by providing foreign aid in the form of subsidized grain and depressing the price of food there, making farming a non-viable economic activity. What will Barack do about that?
[Update a few minutes later]
This doesn't speak so much to their collectivism, but Charlotte Hays asks:
I loved Obama telling us how how "unacceptable" and "low class" it would be for us to to mention his wife's anti-American remarks. How's he gonna stop us? (I certainly hope he will have a tougher approach when negotiating with dictators!) And, come to think of it, this isn't the first time Obama has said that anti-American "snippets" by a close associate were taken out of context. We get to decide if we think this is relevant, not the candidate.
Do we really want to be bossed around by these arrogant people and their double standards for four years?
[Update in the afternoon]
Rachel Lucas and her commenters aren't very impressed by Obama's Calvin-ball campaign rules.
So I just want to know what happens if Republican's aren't "careful." Is he gonna give them karate? Write a strongly worded letter of disapproval?Posted by Rand Simberg at 06:46 AM
If I were George Bush, and Congress overrode my veto of the criminally outrageous agriculture bill, I'd take Tim Carney's suggestion, and have the Justice Department start investigating all those who vote to override for bribery. Republicans and Democrats alike.
Posted by Rand Simberg at 07:39 AMMore thoughts on "peak oil," and what I'll call the "peak oil constant," which seems to be twenty or thirty years (i.e., it's always predicted to be that far in the future).
[Update mid afternoon]
Manzi has a follow up, in response to a Georgetown professor. Bottom line:
What if we had reacted to the predictions throughout the 1970s and 80s that we would reach peak oil in about 2000? Do you think that some of these proposed changes would have slowed economic growth and prevented the world from being in the current position of paying an ever-dwindling share of total output for oil? What other difficult-to-anticipate changes might some these interventions have had? Could the idea of purposely restructuring the transportation, housing, and agricultural sectors of the U.S. economy based on a prediction for an event that we have proven to be very bad at predicting - and for which the world's leading experts refuse to provide anything other than very broad guidance - induce a sense of humility? It does in me.Posted by Rand Simberg at 06:34 AM
An FAQ. All of the campaigns should read it, though I suspect the very concept is anathema to both Senators Clinton and Obama.
Posted by Rand Simberg at 06:29 AMFrom George Will:
You say that even if global warming turns out to be no crisis (the World Meteorological Organization says global temperatures have not risen in a decade), even unnecessary measures taken to combat it will be beneficial because "then all we've done is give our kids a cleaner world." But what of the trillions of dollars those measures will cost in direct expenditures and diminished economic growth--hence diminished medical research, cultural investment, etc.? Given that Earth is always warming or cooling, what is its proper temperature, and how do you know?
You propose a "cap and trade" system to limit the carbon dioxide that many companies can emit. Is not your idea an energy- rationing proposal akin to Bill Clinton's BTU tax?
He has more, not related to climate change.
Also, a long paper on the futility of trading hot air.
Posted by Rand Simberg at 02:41 PMNot much, apparently.
It really does make it hard to justify their tuition. They should be giving out, and paying for a lot more scholarships.
Posted by Rand Simberg at 01:37 PMIs it approaching? A nickel a kW-hr would be pretty hard to beat.
Like Phil Bowermaster, this kind of thing is why I don't lose much sleep over peak oil.
[Update a few minutes later]
A lot of comments on the subject over at Randall Parker's place.
Posted by Rand Simberg at 08:05 AMHas the dollar hit the bottom?
Given that the Fed is signaling no more rate cuts, I think that it's a pretty good bet. Which means that it's also a peak for oil prices (at least if they remain denominated in dollars). And (more) bad news for the Dems in the fall.
Posted by Rand Simberg at 07:11 PMThere's a long piece on the the current state of space law over at the ABA Journal. I only have a couple issues with it. First, I don't know what they mean by this:
Even though the United States eventually outpaced the Soviet Union by putting men on the moon in 1969, the space race continued until the early 1990s.
No, the space race was essentially over by 1968 or so, once the Russians realized that they weren't going to beat us to the moon, and instead rewrote history to pretend that they'd never even been trying. There was no urgency or racing after that--had there been, NASA budgets would have been higher, and schedules faster. So I don't know what this sentence means, unless it just a vague reference to the fact that progress, such as it was, continue on both the US and Soviet side, until the fall of the Soviet Union.
On ITAR, I strongly disagree with Pam Meridith:
"I think the hysteria over ITARs is out of proportion," says Pamela L. Meredith, who co-chairs the space law practice group at Zuckert, Scoutt & RasenÂberger in Washington, D.C. "They've been around for a long time now, so people have had time to adjust."
No matter how much "time people have to adjust," it still adds time and cost to projects, and prevents many from happening altogether. And it has a disproportionate effect--like most regulations, big space businesses (who despite leftist mythology, are no fans of capitalism or free enterprise) don't necessarily dislike ITAR, because they can afford to meet the requirements, and they represent a barrier to entry to smaller businesses and newcomers, who generally can't. (Though there's also no question that it's cost Boeing a lot of satellite business.) And as a perfect case in point, consider Mike Gold at Bigelow (in a long, but quite interesting interview):
Res Communis: Can you comment on a company's cost of implementing ITAR?
Gold: Yes, absolutely. Paying so much for export control is a bit like being asked not just to dig your own grave, but to jump in it as well. Our best estimates are that we pay roughly $130.00 per hour, per person, for every hour that a government official monitors us or reviews our documentation during the day, plus overtime, which can add up on overseas trips. What amazes me is that when we travel to Russia for meetings, we sometimes travel with not one, but two government officials, monitoring every word we say. Then, across the table from us are the Russians, all great folks, who came out of a Communist system, and they have no explicit monitors. If we were to have brought someone down from Mars to attend our meetings, and asked them which of these two nations represented the free country, the Martian would point to the Russians. The U.S. holds itself out as the bastion of freedom. But when I am sitting there at those meetings I have to wonder: which is the free country? Now again, this is a problem of policy not personnel. The monitors we get are often good, smart people, who can even be quite helpful at times. However, what I want is for these monitors to be able to spend their limited time and resources focusing on military sensitive technologies that really matter rather than wasting their efforts on us. The Russians basically do this. They have the unique policy of protecting information that is actually sensitive. They don't care about metal coffee tables. It makes a lot more sense. And, in regard to the financial costs, you know, the KGB may have spied on you back in the Soviet days, but at least they had the courtesy to do it for free. It is unfathomable to me what we have to pay for export control review and monitoring.Res Communis: You do cover their travel expenses also?
Gold: Absolutely, including airfare and hotel. Specifically, in 2006, the year of the Genesis I campaign, we paid over $160,000 in monitoring fees alone. In 2007, when the Genesis II launch campaign took place, we paid the government nearly $150,000 for monitoring and reviews. Thanks to Mr. Bigelow's generosity and commitment, we're able to afford such fees, but there are a lot of small companies that can't. This is why the ITAR has stifled innovation and stunted development in the American aerospace sector. The ITAR should be re-named "The Full Employment for European and Foreign Aerospace Workers Act."
Res Communis: As between a new space company like Bigelow and the big aerospace corporations, is the ITAR burden disproportionate for the new companies?
Gold: Everyone has problems with it, but a large, well established company is better able to absorb the expenses and can pass the cost on to their customers relatively easily. Anecdotally, I have spoken to a number of friends and colleagues at small aerospace businesses and start-ups. They tell me that they don't even look at international collaboration because they know they can't afford to work through the export control problems without a hoard of attorneys. Frankly, it took a lot of work and diligence and a little bit of luck on our own part to have been able to survive the ITAR gauntlet with just myself, my deputy, and some limited support from outside counsel.
And because Bigelow is wealthy, and willing to foot the bill, he can afford it. Most startups aren't in this position. This is just one of the many ways that federal policy has been disastrous, and continues to help bind us to the planet.
Posted by Rand Simberg at 08:36 AMThere's certainly no reason to think that much has changed based on this latest call for it:
PV technology has improved considerably since this idea was developed adding to the argument that this source of energy should be revisited. In addition, the economics of the cost of energy have changed. According to Dr. Neville Marzwell and his colleagues at the Jet Propulsion Lab, an SSP system could generate energy at a cost including cost of construction of 60 to 80 cents per kilowatt-hour at the outset. He believes that "in 15 to 25 years we can lower that cost to 7 to 10 cents per kWh." The average cost of residential electricity was 9.86 cents per kWh in the U.S. in 2006.
The problem (as always) is that this doesn't account for the costs of competing energy sources dropping even more. And of course, the notion of building SPS with the existing space transportation infrastructure remains ludicrous. Get the costs of access down (a good idea for a lot of other reasons), and then see if it makes sense. Unfortunately, current space policy (or at least the vast amount of expenditures on space transportation) seems aimed at increasing the cost of access to space.
[Via Ken Silber]
[Early evening update]
Rand's approach is just clearly wrong. There are no market incentives to decrease the cost of space travel, outside the COTS competition.
Nope, none at all. How will we ever do it without the government?
Oh, wait! How about the millions of people who want to take a trip, and can afford to do so if the price comes down? Mark ignores that one, though, because it doesn't require NASA getting billions of dollars, or giving them out for a few flights via COTS, that will do very little to significantly reduce the cost of access.
Posted by Rand Simberg at 12:43 PMThere's an interesting post over at New Scientist on the new eugenicists. What's even more interesting, though, are the numerous comments, which repeat many of the myths about population growth and control, and feasibility of mitigating it through space technology, including space (to use the politically incorrect word) colonization.
I don't really have time to critique in any detail, other than to note that anyone who makes feasibility arguments on the latter subject by referring to Shuttle costs is completely clueless. Sadly though, years ago, Carl Sagan did exactly that.
Posted by Rand Simberg at 08:35 AMRob Bailey has an interview with Peter Thiel. I agree with him that "transhumanist" is a misleading word, and it's not useful to use it until there's agreement on what is human. Unlike people like Asimov (and Kass) I don't believe that we lose our humanity when we live indefinitely long.
I would have been interested to hear his thoughts on space.
Posted by Rand Simberg at 06:35 AMI hope you're sitting down.
People are driving less because of higher gas prices.
Gee, somebody should write a book
David Freddoso is still angry about our insane and, in my opinion, criminal ethanol and sugar policies:
The problem is that our sugar industry has even better lobbyists than big ethanol. They enjoy price supports, which we pay for both through the Treasury and in the supermarket. The price of our sugar is usually twice that of the world market. The sugar growers love it -- even if they cannot sell all of their sugar, they have a guaranteed government buyer at an inflated price. The corn growers love it too, because high U.S. sugar prices push our food industries to use high-fructose corn syrup (ever seen that on a product label?) as an alternative sweetener -- yet another artificial support for the world price of corn.
Not to mention wreaking havoc on the Everglades. Price-supported sugar cane is using up a lot of the water that both south Floridian humans and animals need, and they do this with the same political clout that they use to get the subsidies and tariffs, for an industry that is not all that big in terms of the economy.
Even if we want ethanol, we can't solve the problem by importing sugar, because there are tariffs in place. We can't import the ethanol itself because there's a high tariff against that, too. Wherever you turn, there's no way out -- Americans don't enjoy economic freedom, we live in a managed economy.
It makes me especially proud of my country when I see Sen. Chuck Grassley (R-Iowa) call foreign delegates' concerns over a potential doubling of world hunger "a joke..."
Let's call these people out for what they are--Republicans and Democrats alike--fascists. Not that there's anything wrong with that.
[Update a few minutes later]
[Update early evening]
Oh, wonderful:
Key House and Senate farm bill negotiators reached agreement today on the main elements of the farm bill...[T]he five-year bill would raise the target prices and loan rates for northern crops beginning in 2010, raise the sugar loan rate three-quarters of a cent and include a sugar-to-ethanol program.
Oh, that's just great. We have a program that makes us overpay for sugar, and now we're going to start a new program to subsidize the ethanol we create from it -- because without the subsidy, the inflated sugar price we've created will make the ethanol unprofitable.
Just when you think it can't get any worse, they always find a way.
Posted by Rand Simberg at 09:19 AMDeroy Murdock writes on the ethanol scam, and its global effects on food and fuel prices.
[Update a few minutes later]
If this pans out, ethanol will make a lot more sense, won't be competing with food, and won't require any subsidies:
Along with cellulose, the cyanobacteria developed by Professor R. Malcolm Brown Jr. and Dr. David Nobles Jr. secrete glucose and sucrose. These simple sugars are the major sources used to produce ethanol.
"The cyanobacterium is potentially a very inexpensive source for sugars to use for ethanol and designer fuels," says Nobles, a research associate in the Section of Microbiology and Molecular Genetics.Brown and Nobles say their cyanobacteria can be grown in production facilities on non-agricultural lands using salty water unsuitable for human consumption or crops.
Bring it on.
[Evening update]
David Freddoso has an appropriately outraged follow-up to the Murdock piece:
Our government's negligence and perhaps even malicious misdirection of societal resources toward a worthless, unwanted product -- ethanol -- will cause millions of people to go hungry tonight.
The way things are going, this could become the worst chapter yet in the sad, ruinous history of our bipartisan agricultural welfare programs. For those who write in and protest that free-market capitalism is an uncompassionate, un-Christian economic system, I submit that you are currently witnessing the alternative.
Indeed. End the tariffs, end the subsidies. Let the market work.
Posted by Rand Simberg at 01:15 PMVirginia Postrel writes about the economic ignorance of the global warm-mongers, a group that unfortunately includes all three presidential candidates. I just hope that Phil Gramm or someone can get McCain to come to his senses on the issue once he's actually in office.
The connection between higher prices for energy and reduced carbon dioxide emissions may not have hit the national consciousness yet, but the LAT's Margo Roosevelt reports that California utilities--and eventually their customers--are beginning to realize this isn't just a symbolic issue.
...The DWP, to whom I pay my electric bills, wants out of the carbon dioxide caps. It apparently thinks the law shouldn't apply to socialist enterprises.
Isn't that always the way? The laws are for "the little people."
Posted by Rand Simberg at 05:05 AMSometimes, you just have to think that these people's brains are broken.
Posted by Rand Simberg at 03:29 PMWith a computer mouse, you can precisely position the cursor wherever you want. The motion of the cursor exactly mimics the motion of the mouse in your hand. It is a positional controller.
But in many computer games, you have no direct control over position. The joystick controller only controls the rate of motion. You have to provide a direction, and speed, and hope that it will get to the desired location at the desired time. As anyone who has played such games knows, position control using a rate controller is much less precise, and often not even accurate if you're not a good judge of such things.
In last night's political debate (as in almost all discussions of this topic), there was a lot of talk about "cutting taxes," and "raising taxes." Not to pick on him in particular, but as an example, here's the reporting by Jim Geraghty:
Hillary laughs heartily at McCain's comment about "they're going to raise your taxes, and they have the aud-ic-i-ty, the audacity, to hope you don't mind!"
With her laugh, she triggered a thousand primal screams on liberal blogs.Steph asks if she'll make a pledge to never raise taxes for those making under $200,000 per year. She says she's "absolutely committed to not raising taxes on those making less than $200,000."
Obama echoes the pledge, and says he'll cut taxes for those folks.
I don't trust either, but I'm rather surprised that they both were willing to be pinned down in the equivalent of "read my lips, no new taxes."
Wow. Charlie Gibson notes that when the capital gains taxes were cut under both Clinton and Bush, revenues went up.
These are the GREATEST DEBATE QUESTIONS EVER.
Wow. Hillary: "I would not raise the capital gains tax above 20 percent, if I would raise it at all... I don't want to raise taxes on everyone." She rips Obama's plan to raise payroll taxes.
Emphasis mine, in all cases. Every one of these statements is absurd. No one, not the mighty Hillary, not the saintly Obama, has the power to raise or cut taxes. They don't have a tax revenue controller. All they can do is increase or decrease tax rates. And they can't predict with certainty whether or not this will increase, or decrease "taxes" (that is, tax revenues). The absurdity of leaving out this key word is demonstrated starkly in Charlie Gibson's statement: "when the capital gains taxes were cut, revenues went up." How can that be? If taxes are cut, by definition, revenues have to go down. But if he had said that when capital gains tax rates are cut, revenues go up, this is perfectly sensible (though counterintuitive to people who don't understand that tax rates modify behavior).
I expect Democrats (and journalists, who are generally Democrats) to play such word games, but I'm always disappointed when Republicans and so-called conservatives go along with it. People who want lower tax rates (and a more vibrant economy) have to demand them, and stop talking about lower taxes. Yes, it would be nice to cut off funding to the federal government (at least if we could get spending under control), but that's a separate issue. By conflating tax revenues with tax rates, we grant far too much power to the big government types, when we should instead be pointing out their powerlessness. There are many unintended consequences of government action, and it is always useful to point out that this is just one more--that the federal government cannot directly control how much it taxes people (that is, how much money it actually confiscates)--it can only control the the rate at which it does so.
This is just one more example of how we small-government types have to start taking back the language.
Posted by Rand Simberg at 06:43 AMIn Monday's part 1 of "VSE and the Retirement of Baby Boomers," Charles Miller and Jeff Foust port the conventional wisdom about budgeting to the space discussion. These are two of the most well-read, connected and smart people on space topics. I'd like to give folks addressing this issue some more texture to add some items that are not part of the conventional intergenerational budget debate which can be summarized perennially as "vote for me or things will all go to hell pretty soon if they aren't already there", but every year real personal income rises and real government spending minus interest payments rise; life expectancy goes up and almost all the Cassandras are proven wrong, but by then they've long since moved on to the next pending calamity. Here are the unconventional texture points:
ATK is making noises about commercializing Ares 1. Unsurprisingly, it's full of bovine excrement right off the bat:
Ron Dittemore, president of ATK Launch Systems, said the human-rating that led NASA to build the Ares I first stage around the shuttle booster should also be attractive to other customers with "high-value" payloads, including the Defense Dept. and the National Reconnaissance Office (NRO).
"Ares I can deliver humans, can deliver payload to low Earth orbit; it can deliver payload to geosynchronous Earth orbit and beyond - planetary missions - it's got that much capability," Dittemore said at the 24th National Space Symposium here. "And what's unique is that since we're designing this vehicle with human reliability, proven demonstrated systems, high-value payload customers may see a real attractiveness to putting either DOD or NRO payloads on this launch system."
First of all, the Shuttle booster is not "human rated." The Shuttle itself is not, and never has been, human-rated (I've said it before, and I'll say it again: I wish that we could expunge the phrase "human rating" from our vocabulary--very few phrases in the space business are as misunderstood and misused by so many as this one). What he means is that the fact that they have been willing to use the SRB for the Shuttle (despite the fact that in the case of Challenger, it destroyed the vehicle and killed the crew) led them to decide that it was reliable enough to use for Ares.
One of the things that people don't understand about "human rating" is that it is not (just) about reliability, which is the probability of mission success. Human rating is about safety, which is a different thing. It is about the ability to know when the mission is about to go sour, and the ability to safely get away from the vehicle before it does. So while reliability is nice, what's much more important is warning time and escapability, from the launch pad all the way to orbit (something that the Shuttle has never had, which is why it's not human rated).
But satellites aren't going to have a launch escape system, so they don't care about human rating. What they care about is reliability, and I have seen zero evidence that Ares is going to be more reliable than either Delta IV or Atlas V. Human rating the latter two vehicles will not involve making them more reliable--it will involve putting in the systems needed for adequate failure onset detection (FOSD) and ensuring that they have adequate performance to eliminate abort blackout zones throughout their trajectory (something much more difficult for the Delta than the Atlas, due to to its underpowered second stage). So from a mission assurance standpoint, Ares has nothing to offer to a satellite owner over the current commercial vehicles.
Moreover, there is no discussion of cost. Even if they can get away with not having to amortize development, because the government paid for it and it's sunk, how much of an army will a NASA-developed/operated vehicle require? History would indicate a pretty large one, particularly given the politics of the situation. So will a commercial launch have to pay its share of the annual fixed operating costs, or will ATK (unfairly) be able to subsidize and undercut the ULA by only paying marginal costs for the launch, and having NASA pay the freight for the rest? And it will have to use the VAB for processing, and the NASA pad for launch. Will NASA be reimbursed for the use of its facilities? How much?
This seems like a huge potential bucket of worms, and all because NASA decided that it had to develop its own launch vehicle.
Is ATK serious? I doubt it. I suspect that this is just a PR move to maintain political support for it among the rubes inside the Beltway who don't understand these issues, to show that it has applications beyond the NASA lunar (and ISS) missions. Unfortunately, it may work.
[Update a couple minutes later]
Oh, and how could I forget this? How thrilled will the satellite owners be to put their bird on the paint mixer that is the Ares 1, on top of that five-segment solid, when they can get a smooth ride on a Delta or Atlas?
Posted by Rand Simberg at 08:15 AMRobert Bidinotto wants me to boycott Starbucks. It's a worthy cause, I guess, but I've been boycotting Starbucks ever since they opened their first store. I've never purchased anything there for my own personal consumption, with the possible exception of a bottle of water once.
The simple reason is that they have never offered anything for sale in which I have an interest in consuming. It's nothing but various forms of coffee, which I don't drink, and high-glycemic carbs, which I tend to avoid, particularly since there is no protein on offer to go with them (in my limited experience--I suppose it's possible that that's changed). And I'm not that into the "coffee house" experience.
So I can't really help make a dent in reducing their sales, because it's not possible for me to purchase less from them than I already do. If everyone were like me, they wouldn't exist at all to denigrate the capitalism that has made them so successful. But maybe some of my pro-free-market readers can reduce their consumption.
It occurs to me, while I'm on the subject, to write about a topic on which I've often mused, but never posted--what the world would be like if everyone were like me. Well, obviously, it would be a lot more boring place. With no s3x, other than self congress, because there's no way that I would get it on with me.
Just off the top of my head, there would be no rap music. In fact, most popular music wouldn't be popular at all. No dance clubs. There would be college football, assuming that some of me were willing and able to play (not obvious, as my athletic ability is marginal), but probably not pro. There would be baseball (again, my skills permitting), but no hockey or basketball. Or boxing or wrestling, or martial arts. There would be Formula 1, but no NASCAR. Lots of hiking trails in the mountains. No one would live in south Florida.
No coffee houses, as noted above, or coffee production, period. Same thing with tea. No tree nuts would be grown or harvested, because I'm allergic. The Asian restaurants would be much better, as would Mexican ones (they'd all be Sonoran style). No wraps or vegetarian places.
It would also be a much messier place, because I'm kind of a slob.
On the up side, though, traffic would move much faster, and much more smoothly. And we'd all get on and off airplanes extremely expeditiously. And there would be no wars, both because (I know that this will surprise some of the trolls here) I'm not that into them, and I'm not sure what we'd fight about. Oh, and we'd have a sensible space program.
So, what would the world be like if it consisted of only you?
Posted by Rand Simberg at 10:06 AMAcademia has already been greatly damaged by post-modernists and an extreme leftist bias over the past few decades, but fortunately math and science have been spared, to date. Those days may be coming to an end, though, as Christina Hoff Sommers warns about the potential Title IXing of science, based (ironically) on shoddy science (similar to the "comparable worth" myth).
Posted by Rand Simberg at 08:03 AMJohn Carmack mentioned this at the conference a week and a half ago, but I don't think I reported it, at least not in any detail. Armadillo is willing to sell vehicles to anyone who wants to fly them (presumably subject to ITAR restrictions):
The way to look at it is as a "rocket trainer", rather than a vehicle that can perform any kind of real lunar or suborbital mission. We don't pretend that the vehicles could actually land on the moon, but if you want to hack on a real, flying system, there is a lot of value to be had.
The price is $500k. The experience of the Lunar Lander Challenge shows quite clearly that you aren't likely to do it yourself for less, even if you spend a couple years at it. Several intelligent and competent people thought otherwise, and have been proven incorrect.You can have either a module or a quad, at your choice. The quad has more hover duration, but it is more of a hassle to operate. A module could be fulfilled right now, a quad would take about three months to build, since we are still planning on using Pixel for LLC this year and other tasks. The engine will be one of our new film cooled stainless chambers, and we will warrant it for ten flights. If it blows up or burns through in that time frame, we will replace it. We will not replace the vehicle if it crashes, but historically our engine problems have been visible at startup, and you should have an opportunity to abort the flight. Ground support equipment is included, except for the lox dewar(s), which would be specific to your local lox vendor. We will test the vehicle ourselves, then train your crew to operate it. You get copies of our experimental permit applications and information about the insurance policies we use for permitted flights. Details on modifications to the flight control software are negotiable.
If he got a big order, or multiple customers who wanted delivery ASAP, I wonder how he'd respond? Would he ramp up production (with the intrinsic risks to quality), or keep supply constant and crank up the price? As I've said for a long time, at some point this is going to have to transition from a hobby to a business for him, and it seems to me that this has the potential to force that decision, if he has a significant number of takers.
I also wonder how much new engines will cost, assuming that they're only good for ten flights (he doesn't say that, but it's all he's willing to warrant them for). Let's say that the engines are half the cost of the vehicle. That would mean a cost of $25K a flight to amortize the engines, which is a lot more than propellant costs. It seems to me that if he only thinks that he can get ten flights, engine life is where his emphasis needs to be for reducing operating costs. It's also hard to see how he can charge the same amount for a module as a quad, since the latter has four engines in it. I'd really like to understand more about this proposition.
He follows up the offer with his assessment of the industry (and his competition), but I'll save my thoughts on that for another post.
Posted by Rand Simberg at 05:38 AMIf this is true, it's a huge story. It certainly seems plausible. I've always claimed that oil reserves are driven much more by technology advances than by consumption rate:
n the next 30 days the USGS (U.S. Geological Survey) will release a new report giving an accurate resource assessment of the Bakken Oil Formation that covers North Dakota and portions of South Dakota and Montana. With new horizontal drilling technology it is believed that from 175 to 500 billion barrels of recoverable oil are held in this 200,000 square mile reserve that was initially discovered in 1951. The USGS did an initial study back in 1999 that estimated 400 billion recoverable barrels were present but with prices bottoming out at $10 a barrel back then the report was dismissed because of the higher cost of horizontal drilling techniques that would be needed, estimated at $20-$40 a barrel.
It was not until 2007, when EOG Resources of Texas started a frenzy when they drilled a single well in Parshal N.D. that is expected to yield 700,000 barrels of oil that real excitement and money started to flow in North Dakota. Marathon Oil is investing $1.5 billion and drilling 300 new wells in what is expected to be one of the greatest booms in Oil discovery since Oil was discovered in Saudi Arabia in 1938.
It's also a story that will enrage those who want us to tighten up our hair shirts.
Posted by Rand Simberg at 12:32 PMWhy is Barack Obama against drug legalization?
I'm running through the issues, and I can't find a single one on which I agree with him, other than that blacks should take more responsibility for their own lives.
That's great but, sorry, it's just not enough. Just another non-federalist fascist.
This comment probably explains his position:
The only black dude and admitted former drug experimenter in the race cannot afford to look soft on drugs.
Yup. New politics.
Can someone pass the Kool-Aid?
Posted by Rand Simberg at 03:25 PMCould Jeremiah Wright explain to me how boycotting Walmart improves the quality of life in the third world?
Posted by Rand Simberg at 09:15 AMMike Griffin is worried about losing a Shuttle crew if the program is extended:
"Given that our inherent risk assessment of flying any shuttle mission is about a 1-in-75 fatality risk, if you were to fly 10 more flights, you would have a very substantial risk of losing a crew. I don't want to do that."
If we accept his risk number, that translates into a 13% chance over ten flights. That doesn't seem "substantial" to me. There are a lot of good reasons to not extend the program, but risk of crew loss isn't one of them. I'm sure that most of the astronauts would be happy to take the risk, and the real loss wouldn't be astronauts (of whom we have a large oversupply), but the loss of another orbiter, which would almost certainly end the program, because they probably couldn't manage with only two left. If what they're doing is important enough to risk an orbiter, that is almost literally irreplaceable, it's surely important enough to risk crew, who are all volunteers, and fully informed of the risk.
When I was watching coverage of the cranewreck in Manhattan yesterday, they cited a statistic from the Bureau of Labor statistics that there were forty-three construction deaths last year (I think in New York alone). Can someone explain to me why is it acceptable to kill construction workers, but not astronauts?
On the other hand, here's one thing that I do agree with Mike on: the last thing we need is another space race.
Posted by Rand Simberg at 08:11 AMDavid Freddoso has some thoughts on Boeing's loss of the tanker contract, and free trade.
Posted by Rand Simberg at 02:52 PMA paper on interstellar trade, three decades old. By Paul Krugman, back before he went nuts.
[Via occasional commenter Jane Bernstein]
Posted by Rand Simberg at 08:58 AMYesterday, I speculated that Spitzer's downfall would cheer up Wall Street. Well, I guess they finally decided to party today. Of course, that potentially inflationary gusher of liquidity today probably didn't hurt, either.
Posted by Rand Simberg at 02:08 PMThe next house project (not counting landscaping, which we may be hiring someone to do) is molding, both replacing base and installing crown. It was a nice excuse to go out and buy a nice Craftsman 10" compound dual-bevel laser miter saw, because Sears was having a sale. I thought about getting a 12 inch, because it wasn't that much more, but it took up more room, and the blades were a lot more (though with carbide, it might have been a one-time purchase, given my low usage level). And I couldn't really justify it--the ten-inch will do just fine for almost anything I need to do in terms of beveling or mitering. If I need to bevel bigger things, a table saw will do the job. I guess I'm not Tim the Tool Man, even though I am from southeast Michigan.
I continue to be amazed at how low cost good tools have become--particularly tools (and power tools) that didn't even exist when I was a kid. I suspect that this isn't factored into inflation much, but it really does add to the national wealth when people can improve their productivity at little cost. In California in the nineties, I did some base molding with nothing but a circular saw, but it was a pain in the ass, and I'm sure that this will do a much better job. Anyway, if blogging seems light, that will be one of the reasons.
Posted by Rand Simberg at 01:50 PMIt's not insurance.
Nothing new here to people familiar with the situation, but many don't seem to understand the problem. But this is the origin of it:
Health insurance started to change, though, during the Truman administration. (I hasten to mention that I wasn't actually there: I was born during the Eisenhower administration, when the process had only gotten started.) Truman wanted to implement the progressive new notion of a national health care plan, but couldn't get it through; at the same time, post-war wage controls were still on, so employers bidding for new workers had to find other ways to compete.
Through a sequence of compromises, what came out of it was a system in which companies and only companies could buy health insurance and health care for their employees, and deduct the cost as a business expense. My father's music store and the steel mill across town could buy health insurance, basically, at a discount. (My uncle the butcher couldn't; he wasn't a "business.")Years pass. (Insert visual of wind-blown calendar leaves here.) Medical care becomes more complicated, legal conditions change, and a lot of things that used to be major medical issues that mostly affected the life insurance rates become things that could be cured, or at least managed. Increasingly, what was "major medical" insurance became, simply, health insurance; we expected the insurance companies not just to pay for unexpected events, but for the normal sort of day-to-day maintenance we all need.
People will pay to repair their car, or their pets, or appliances out of pocket, but somehow, over the past decades they've come to believe that it's a fundamental human right to have someone else pay for your doctor visits. Until we cut off this disastrous government policy of tying health insurance to employment, and allow everyone to deduct medical expenses on a level playing field, and get people to understand that we have to return to the model of health insurance the problem will not be solved.
Posted by Rand Simberg at 08:27 AMElizabeth Karmel has some thoughts on barbecue:
Restaurateurs don't necessarily want you to eat the whole thing; they are giving us what we've asked for. Americans don't like restaurants that serve small portions. Whether they eat it all or should eat it all is another matter; consumers vote with their dollars and like it or not, American consumers love and buy big portions.
I've discussed this before, but the reason that restaurants serve so much food is related to the reason that the Space Shuttle (and space launch in general) cost so much. How's that for a topic segue? It always comes down to marginal cost.
The Space Shuttle is expensive per flight, because they have to support all of the overhead in Houston and the Cape, but fly very few times. But the marginal cost (the cost of flying the next Shuttle flight, given that you're already flying) is probably about a hundred fifty million or so (the cost of the expended hardware, basically, and specific crew training) which is much less than that average cost (typically well over half a billion). Same thing applies to the space station. Back in the nineties (before Freedom became ISS) they were trying to cut five billion dollars out of the projected thirty-billion dollar development budget. Joe Talbot, the man at Langley who was tasked with coming up with a plan to do so, told me (in an exasperated tone), "that's the cost of the hardware." In other words, they could cut out the hardware, and only spend twenty-five billion, and have no station at all. Or they could spend a little more money (thirty-five billion instead of thirty billion) and double its size. Being a government program, the budget cutters tend to make more of the former sorts of decisions than the latter ones.
It's different for a business, even though the economic issues are exactly the same, because they're driven by actual customers.
Even if a restaurant served you no food at all, if all you did was come in and take up table space and staff time for a certain period of time, they'd still have to charge you quite a bit, because much of the cost of a restaurant meal is overhead to cover costs of rent, utilities, staff salaries, etc. The cost of the food itself (unless it's a very high-end restaurant, where you're eating lobster, and filet, and larks-tongue bisque with a truffle reduction) isn't all that much. They could cut the portions in half, but they wouldn't be able to cut the price of the meal by half. Conversely (and this is what the market drives, as Elizabeth says), they can double the portions while adding very little to the price. That's the economics behind "super sizing" soft drinks and fries--you're simply adding a little sugar and spuds, which are very cheap, to the meal whose overhead has already been covered by the basic order.
And of course, I think that one of the (many) causes of the obesity epidemic in the country is the fact that as we've grown wealthier, we go out to eat a lot more. When the portions are large, you're going to have a tendency to eat it. A lot of us would be better off simply sharing a meal with our dinner companions, but the restaurants discourage this, for obvious reasons--they don't get enough to cover their overhead costs if everyone does it. When you're cooking for yourself, you not only have a better idea of the cost of the meal, because you're using food that you purchased, but it's also easier to quit eating and just put the leftovers in the fridge, rather than have to ask for a doggie bag and hope that you get it home soon enough.
Bottom line, if you really want to lose weight (and save money) don't eat out.
[Update]
There's a good point in comments:
I have these same problems cooking for myself. It's hard to buy things in quantities for one or two portions. You end up with three or four servings.... (Re: try to cook a real meal for one).
Yeah, that's another overhead problem. Unless you're making something fancy where individual items are being created (e.g., home-made ravioli) or labor intensive (peeling/deveining shrimp) it doesn't take much more effort to cook for two, or four, than for one. The basic overhead of meal preparation is the same. It takes me about half a minute to clean/cut a potato, so adding a couple more for a lot more mashed potatoes, all done in the same mixing bowl, is no big deal, and baking a chicken is baking a chicken, whether for one of four. This is one of the benefits of marriage (or at least cohabiting).
I cook dinner almost every night, but interestingly, I rarely cook breakfast, because it seems like a lot of work, (frying bacon, making coffee, sectioning grapefruit, hashing browns, frying eggs, making/buttering toast, most of which all has to come out about the same time) for not that great a meal. I would never do it just for myself, and with the two of us, I still generally reserve it for weekends.
Another good point, from the same comment:
...the combo of A and B has been sending me to fast food format restaurants. I can pay little and buy by the item (re: any portion size I want). If I only want one chicken taco... I can buy one chicken taco (probably for $1-$2)... If I want two or three, they can do that too...
I've been noticing that, too. I've never ordered a "meal" at a fast food place, because they don't have anything I want to drink (I don't do soft drinks, and don't like iced tea--in restaurants, if I don't have beer or wine, I drink water). I generally order a sandwich a la carte, and sometimes a small fry. But I've seen that Taco Bell has a lot of individual, reasonably priced items, and other places have "dollar menus" as well, so perhaps they're also trying to satisfy that end of the market. One of my favorites is Checker's (around here, anyway, also known as Rally's in some parts of the country), where they sell a double fish sandwich for a little over two bucks. There are enough customers that they can afford to sell them to those who want them without fully amortizing the overhead, or if they do, at low margin, and it expands their potential customer base.
One other point. It used to be that Mexican restaurants were one of the best ones to have for exactly this reasons. You could charge a low price for a meal with very cheap ingredients (corn meal, ground...meat, rice and beans), but still have great margins. A lot of them have started to get greedy lately, though. You used to be able to find a really cheap, decent hole-in-the-wall Mexican place, but it's getting harder and harder, at least in my experience. Of course, since moving to south Florida, I don't have as much variety to choose from as I did in LA.
[Update at 5:20 PM EST]
This is another good point from a commenter:
Cooking for one or two can be done, but it involves cooking for four and freezing for three.
Yup. I've made a big pan of lasagna for myself (used to do it a lot in college). Eat some, put some in the fridge, freeze the rest. And this was in the pre-microwave (at least for struggling students) days.
[6 PM update]
One other point, that I should have made in the original post. The things that get supersized (high-glycemic carbs) are not just the cheapest things to add to the meal, they're the worst things for us to eat, from the standpoint of weight gain, inducement of diabetes and increase in artery risk. And the things that we need more of (proteins) are relatively expensive. The basic economics of food (at least at the current state of technology) militates against a healthy diet. This is also one of the reasons that the "poor" in this country are both overweight and malnourished (scare quotes because "poor" is relative. No one in the US is truly poor, compared to much of the world).
Posted by Rand Simberg at 12:30 PMOver at Reason, the sad tale of a free-loader wannabe:
The group was now "out of food, hadn't slept in days and were really cold," and decided, in a grubby version of Dunkirk, to abandon the mission and head back to England. Boyles is disappointed-but not deterred. He is, the BBC reports, planning "to walk around the coast of Britain instead, learning French as he goes, so he can try again next year." At which point the cycle begins anew, when, upon reaching Baden-Baden, the poor lad will realize that he should have also studied German.
As Wilde said in another context, one would have to have a heart of stone to read this and not laugh out loud.
Posted by Rand Simberg at 10:22 AMIs Obama demagoguing NAFTA just to win the nomination? Will he continue to do so in the general election, if he gets the nomination?
Well, at least I'm glad to see that he's not as bad on free trade as his campaign rhetoric suggests. But one wonders what other flowery things he's saying that he doesn't really mean.
Posted by Rand Simberg at 10:02 AMRich Karlgaard thinks that's what's going on, and the cure for it is supply-side tax-rate cuts. He doesn't call them that, though--he makes the mistake of calling them "tax cuts," even though it's clear that he knows that's not what they necessarily are:
Conservatives generally avoid the class warfare talk, but they do fall into two other traps about supply side tax cuts. One trap is that tax cuts add to the federal deficit. There is no evidence of this. The evidence is either neutral or points the other way. Government tax receipts after supply side cuts have been enacted go up, not down.
I've kvetched about this before.
By definition, if revenues went up, it's not a tax "cut." It's a tax increase, achieved through lower rates but faster economic growth and an increase in GDP. Sloppy language like this is one of the things that makes it hard to sell the concept.
Posted by Rand Simberg at 12:38 PMAs for the NRA logo, it's a reminder of the happy days of FDR's attempts to revive the economy by pouring a bowl of alphabet soup over its face. The NRA, among other things, was intended to prevent the depredations of competition, and "allowed industry heads to collectively set minimum prices," as this rather scant wikipedia entry notes. (The same page relates the story of the tailor who was arrested for charging 35 cents to press a suit; the NRA rules specified the price at 40 cents. So he was arrested. Consider that the next time someone complains that liberty and civil rights have been eliminated in the last 7 years.)Posted by Rand Simberg at 06:16 AM
Hope I'll see some of you at the Space Access conference in Phoenix next month.
[Update at 9:30 AM]
Attendees will get to hear John Carmack talk about cool vehicles like this one.
Posted by Rand Simberg at 05:33 AMA fascinating and very useful article on the value of waste. It's must reading for anyone who wants to entrepreneur on the web, in my opinion. I found the byline amusing:
Chris Anderson (canderson@wired.com) is the editor in chief of Wired and author of The Long Tail
Will he be giving the book away?
[Via Geek Press]
Posted by Rand Simberg at 05:12 AMDriving, or walking? John Tierney stirs up a hornet's nest of vegans and other morally overrighteous high-horse riders (see comments). I mean, to question Ed Begley, Jr. Isn't that just the height of apostacy?
This reminds me of a piece that I've been thinking of writing about overall energy and fuel costs, including human fuel. With the ethanol boondoggle, we've gone back to the point at which we're using crops for transportation (something we largely left behind at the end of the nineteenth century) and we now have increasing prices in both food and fuel as they compete with each other for the same farmland. This isn't a good trend for the Third World (consider that one of the effects of the ethanol subsidies has been a dramatic increase in corn and tortilla costs in Mexico, making a poor country even more so).
Posted by Rand Simberg at 12:18 PMZimbabwe's inflation rate is 100,000%:
In Africa's fastest shrinking economy, per capita gross domestic product in Zimbabwe fell from about $200 in 1996 to about $9 a head last year.
What a disaster Mugabe has been. It shows how easy it is to destroy a once-vibrant country (Rhodesia was the bread basket of southern Africa) with insane government policies. And the sad thing is that his fellow African autocrats refuse to denounce him. I'll bet that if there was a free and fair election there today, the people would vote Ian Smith back in.
Posted by Rand Simberg at 06:42 AMAn interesting discussion of the current economics.
Posted by Rand Simberg at 05:44 AMAs Clark says, I don't know why anyone would think that space scientists or astronauts are experts on business. I don't really care what Kathy Sullivan thinks the prospects are for suborbital tourism, and if I thought that astronauts' opinions on the matter were of value, I can find many astronauts (including John Herrington, Rick Searfoss, etc.) who would disagree with her.
And who is this "Alvin" Aldrin of which they speak? Is that Andy's evil twin? When I do a search for "Alvin Aldrin" I only get one hit--this article.
A couple other questions for Alvin/Andy. What numbers was he using for the Raptor cost? Marginal, or average per-unit? It makes a big difference.
In addition, I always get annoyed when people use a military fighter as a cost analogue for a spaceship. A lot of that dollar-per-pound number for the plane comes from something in it that weighs nothing at all--software. The avionics for the weapons systems, and the defensive systems are non-trivial in cost as well. Designing a combat aircraft, designed to kill other things and avoid being actively killed by other things, is an entirely different problem than designing a vehicle that has to only contend with passive and predictable nature (and pretty benign nature, for the most part, at least for suborbital). I'd bet that Burt's own cost numbers for the SS2 already put the lie to Andy's chart.
[Late afternoon update]
Jeff Foust has a much more extensive writeup of the discussion, which he apparently attended. As I suspected, it was Andy, not Alvin, Aldrin.
Posted by Rand Simberg at 08:39 AMIs this the future of air travel?
Engineers created the A2 with the failures of its doomed supersonic predecessor, the Concorde, very much in mind. Reaction Engines's technical director, Richard Varvill, and his colleagues believe that the Concorde was phased out because of a couple major limitations. First, it couldn't fly far enough. "The range was inadequate to do trans-Pacific routes, which is where a lot of the potential market is thought to be for a supersonic transport," Varvill explains. Second, the Concorde's engines were efficient only at its Mach-2 cruising speed, which meant that when it was poking along overland at Mach 0.9 to avoid producing sonic booms, it got horrible gas mileage. "The [A2] engine has two modes because we're very conscious of the Concorde experience," he says.
Those two modes--a combination of turbojet and ramjet propulsion systems--would both make the A2 efficient at slower speeds and give it incredible speed capabilities. (Engineers didn't include windows in the design because only space-shuttle windows, which are too heavy for use in an airliner, can withstand the heat the A2 would encounter.) In the A2's first mode, its four Scimitar engines send incoming air through bypass ducts to turbines. These turbines produce thrust much like today's conventional jet engines--by using the turbine to compress incoming air and then mixing it with fuel to achieve combustion--and that's enough to get the jet in the air and up to Mach 2.5. Once it reaches Mach 2.5, the A2 switches into its second mode and does the job it was built for. Incoming air is rerouted directly to the engine's core. Now that the plane is traveling at supersonic speed, the air gets rammed through the engine with enough pressure to sustain combustion at speeds of up to Mach 5.
A combination turbofan/ramjet. Hokay.
If I understand this properly, the idea is to fly fast subsonic over land to avoid breaking windows, and then to go like a bat out of hell over the water. When I look at that design, I have to wonder how they can really get the range, with all of the drag that is implied from those huge delta wings, not to mention the wave drag at Mach 5. I also wonder where they put the hydrogen--that stuff is very fluffy, and needs large tanks. It's probably not wet wing (it would be very structurally inefficient), which is why the fuselage must be so huge, to provide enough volume in there for it.
Sorry, but I don't think that this will be economically viable. As is discussed in comments and the article, hydrogen is not an energy source--it's an energy storage method, and it's unclear how they'll generate it without a greenhouse footprint. Moreover, it's not as "green" as claimed, because dihydrogen monoxide itself is a greenhouse gas. I'll bet that this thing has to fly at sixty thousand feet or more to get itself sufficiently out of the atmosphere to mitigate the drag problem, and that's not a place where you want to be injecting a lot of water.
This concept doesn't learn the true lessons of Concorde: like Shuttle, a lot of people have learned lessons from Concorde, but the wrong ones. The correct lesson is that we need to get rid of shock waves and drag. Once we do that, we'll be able to cruise at reasonable speeds (say, Mach 2.5) everywhere, over both land and water, so we won't have to build the vehicle out of exotic materials and eliminate windows. We'll also be able to have fast transcontinental trips (two hours coast to coast) which is another huge market that this concept doesn't address at all. Finally, it has to do it with a reasonable lift/drag ratio, so that ticket prices will be affordable. And I think that the fuel issue is superfluous--Jet A will be just fine for the planet, as long as fuel consumption is reasonable, which makes the vehicle design much easier, with much more dense fuel.
Fortunately, I've been working for over a decade with a company that thinks it knows how to do this, and I'm hoping that we'll be able to start to move forward on it very soon.
[Via Clark Lindsey]
[Update in the late afternoon]
In response to the question in comments, there's not much publicly available on the web about shock-free supersonics, but here's a piece I wrote a few years ago on the subject.
Posted by Rand Simberg at 08:13 AMHalf of UK men would give up sex for six months for a fifty-inch television.
You know, if that's the deal, considering the first twenty years of my life, someone owes me a screen the size of a drive-in theater.
Posted by Rand Simberg at 01:05 PMSome thoughts from Arnold Kling.
Someone has to be the hegemon. The goal should be to ensure that it is one that maximizes individual freedom and productivity.
Posted by Rand Simberg at 07:17 AM...and property rights. Some thoughts on the beginning of commerce and trade from Donald Sensing.
Posted by Rand Simberg at 05:51 AMMy pick for the Presidential race, Giuliani, has bowed out. I like his tax policies. Not that I thought that he could get them adopted, just that I thought that he could achieve what Bush achieved--slightly lower marginal and average taxes for 10 more years. Before you write me off as an elitist who doesn't like graduated income taxes (which I don't deny--but bear with me), I agree with Laffer on this point. Taxes are above the monopoly rate. This is expected since there are four (or more) toll takers: Federal income taxes, state income or sales taxes, county sales and/or property taxes, and city sales, income and/or property taxes. When you add up the various employer and employee taxes (federal only) on receiving the last dollar (ignoring the sales and capital gains taxes associated with saving or spending it), they add up in the top bracket to 35% federal + 2.9% Medicare including employer match. That is, if I get $100 in gross in the top tax bracket, I'll have to pay $36.45 in tax and my employer will have to pay $1.45. If we frame the percentage like sales tax, I am taking home $63.55 and together, my employer and I are paying $37.90. That is a equivalent to a 59.6% sales tax on everything I buy. In other words, to get a dollar, we have to pay 59.6 cents to the government. I assert that this portion of total taxation alone is above the monopoly rate. Tax cutters would have a very easy time getting tax rates cut (and, perhaps counter intuitively, taxes increased) if they could re-frame the tax code to show tax as a percentage of net income at the margin instead of gross.
Do we really despise envy so much that we would rather have the rich indulge in additional leisure than provide the maximum amount to the Treasury?
Posted by Sam Dinkin at 07:16 PMHere's an interesting article on the economics of repugnance. As Sally Satel (and her donor, Virginia Postrel) have pointed out, an unwillingness to allow a market in kidneys is murdering thousands every year, to help ease the stomach of so-called biomedical "ethicists."
Note to Leon Kass, and others: the "yuck" factor, like all emotions, should be viewed as suggestions, not commands.
Posted by Rand Simberg at 10:28 AMBob Zubrin is still selling flex-fueled cars (at least conceptually), which might be a good idea, but I wish that he weren't doing so with over-the-top rhetoric and economic ignorance. Here's the very first graf:
Venezuelan dictator Hugo Chavez recently joined Iranian president Mahmoud Amadinejad in threatening to raise oil prices to $200 per barrel. The threat should be taken quite seriously. With no practical transportation fuel alternative to petroleum available to the world market, the OPEC oil cartel has already been successful in raising prices an order of magnitude since 1999, with a 50 percent increase effected in 2007 alone.
I disagree that this threat should be taken seriously. The notion that oil can ever get to a sustainable $200/barrel, in inflation and currency-adjusted terms, is ludicrous, regardless of the clearly malign intent of Hugo and Mahmoud. They are not capable of achieving this. No one is.
First of all, they don't control the world's oil markets. The Saudis (and increasingly, the Iraqis) will have a major say as well. But even if you could get an agreement within OPEC to do so (a ludicrous notion in itself, because the individual members tend to look after their own interests), it still would never happen. First, many states would cheat. But more importantly, the current price is unsustainable at near-term (over the next decade or two) projected demand levels because there are many new sources that are available at production costs much lower than current prices (e.g., tar sands and shale in the western US and Canada). The only reason that they haven't brought down the price yet is that they're only starting to come on line.
And if the price did somehow get to that value (as the Saudis understand, even if economically ignorant boobs like Ahmadinejad and Chavez don't) it would cause a recession that would depress world wide demand. Also, unless you can drive the price of oil to zero, it's not going to starve the oil dictators of their oil revenues. The only way to do that is to take away their oil (as we did with Saddam). I'm not necessarily proposing that we do so--just pointing out the only realistic way to accomplish it.
On top of this, much of the price rise that Bob Zubrin decries is due to the weak dollar, and has nothing to do with either supply or demand of oil.
Maybe such overblown rhetoric and economic nonsense will sell the concept for him; it's certainly worked to good effect for the global warm-mongers--but I'd be more persuaded if he'd be more realistic. There are a lot of good arguments for ending the burning of oil for transportation as soon as we can, and I wish that he'd stick to them, instead of doing an impression of Gary North.
Posted by Rand Simberg at 11:54 AMSome people never learn. Unfortunately, the comments don't apply just to Hillary, but to Democrats in general. And even more unfortunately, to far too many Republicans and so-called conservatives as well.
Posted by Rand Simberg at 06:48 AMWe're still not approaching "peak oil":
A landmark study of more than 800 oilfields by Cambridge Energy Research Associates (Cera) has concluded that rates of decline are only 4.5 per cent a year, almost half the rate previously believed, leading the consultancy to conclude that oil output will continue to rise over the next decade.Peter Jackson, the report's author, said: “We will be able to grow supply to well over 100million barrels per day by 2017.” Current world oil output is in the region of 85million barrels a day.
The optimistic view of the world's oil resource was also given support by BP's chief economist, Peter Davies, who dismissed theories of “Peak Oil” as fallacious. Instead, he gave warning that world oil production would peak as demand weakened, because of political constraints, including taxation and government efforts to reduce greenhouse gas emissions.
That would imply falling prices, to me. I stand by my prediction that oil will never be sustained for long at its current price levels (adjusting for inflation and exchange rates).
Posted by Rand Simberg at 08:42 AMRand's analysis of the restatement of the purchasing power parity (PPP) calculation for China is incomplete. As I've pointed out before, the revised 2006 PPP calculation with the economy measured at PPP nearly three times instead of four times as large as at official exchange rates still leaves China with a $2.5 trillion dollar economy (2006) at official exchange rates and $6 trillion if you consider most of what we and the Chinese buy is cheaper in dollars to buy in China than it is in the US. The relevant numbers for long term strategic security are the industrial production growth rate (from the CIA World Factbook on Intelligence) at 22%/year, the labor force of 800 million of which 45% do agriculture (2005) versus less than 1% for the US and the 11%/year real growth rate.
This indicates that China has a lot of head room as its agricultural sector mechanizes and rationalizes farm size. It has a lot of head room because per capita GDP is either $1,900/year at official exchange rates or $4,500/year at PPP. At 8% faster GDP growth than the US, it will catch us in 10 years in PPP or by 2030 at the official exchange rate. At that point it will still have substantial headroom to grow for another decade much faster than the US because per capita GDP at that point will only be 1/4 the US per capita GDP.
Like finding out that Iran doesn't want a bomb, this new statistic is a red herring. China is still on the rise. It's vainglory to hope they just topple themselves like Russia. Just because Iran doesn't want a bomb (if it doesn't) it still has a nuclear program and could have one if it wanted in a quite short period of time. Just because we recalculated the statistics to show that China has a smaller economy, it is still growing fast and with the revised calculations rates likely to grow even faster.
I am sure that single-party government will be a drag on China, but they can still field a super power's worth of hardware once they exceed our GDP. It may take them a while once they are spending as much as the US is on defense to catch up to our technology level, but a tech advantage is not always decisive. Especially if they start outspending us 2 to 1 a decade later while their per-capita GDP is still half of ours.
Posted by Sam Dinkin at 04:57 PM...not a bogus one, is what is needed to solve the subprime crisis.
Posted by Rand Simberg at 07:36 AMTaylor Dinerman worries about sufficient support for the International Space Station in today's The Space Review:
The ISS is humanity’s one toehold in space. It can be used a real “world-class laboratory” or it can be allowed to spin around until, through lack of investment and high-level attention, it is deorbited like Russia’s Mir. That would be more than a tragedy; it would be a stupid waste.
Would the ISS fetch a positive price if it were auctioned off with the encumbrance it had to be deorbited by 2025? Maybe. But that price would likely be far less than the cost of a US commitment to keep the station operational. Keeping the station operational because of its high sunk cost would be a 'stupid waste' too.
NASA can buy a bunch of time on a Bigelow hab for a fraction of the $20 billion or so NASA plans to spend on ISS through 2017 much less another 3-8 years. Perhaps it would be better to privatize the US portion of ISS early rather than support it enough or support it at all.
I don't really believe in "peak oil," though I'll buy the concept of peak cheap oil. But Randall Parker does, and thinks we're there, and is worried about the transition. Lot of good discussion in comments.
In my opinion, it will only be a problem if the government mucks with the market too much. Unfortunately, at least based on their behavior in the seventies, that's not an unlikely possibility.
Posted by Rand Simberg at 08:23 AMTom Friedman thinks that if Obama gets the nomination, he should keep Dick Cheney as the VP. Well, not really, but I do agree with him that the administration's policy toward Iran does seem confused and confusing. It's kind of like "indecisive cop/bad cop."
But what I really wanted to comment on was this strange sentence:
Mr. Obama would also be more effective if he not only stressed how much further he was ready to go than the Bush team to engage Iran, but also how much further he would be ready to go in bringing meaningful leverage on Iran — by, say, opting for a gasoline tax that would help bring down the price of oil...
He states this as though it should be obvious that raising gas taxes would bring down oil prices. Sorry, I don't get it.
Is the idea that by increasing taxes, it will reduce demand, and hence lower prices? Well, it may reduce demand (and economic growth, perhaps rendering it negative), but the real problem with oil prices (in addition to the supply-disruption risk in the Middle East) is a burgeoning of demand in fast-growing China, India and other places. Like Kyoto, it won't do much good for us to tighten our belts here when we're becoming an ever-shrinking part of the demand for oil world wide. It would have been nice for him to explain why this would be a sensible policy.
Posted by Rand Simberg at 06:34 AMI've always found it a little surprising how unthinkingly we use helium, when it really is in short supply on the planet. Party balloons are fun, but at some point I do expect the price to rise to the point at which it will only have industrial uses (including for space activities). It could certainly liven up parties if we switch over to hydrogen balloons...
There's plenty of helium to be mined out in the solar system, but it would be an interesting challenge to import it back down into the gravity well. I suppose it would just be done in pressurized tanks.
Posted by Rand Simberg at 08:41 AM...for those looking for bad economic news. Productivity is surging:
The Labor Department reported that productivity -- the amount of output per hour of work -- jumped at an annual rate of 4.9 percent in the July-September quarter. That was double the 2.2 percent rise in the second quarter and represented the fastest surge in worker efficiency since 2003.At the same time, wage pressures eased with unit labor costs dropping at an annual rate of 0.2 percent, the best showing in more than a year.
I blame George Bush.
Posted by Rand Simberg at 07:51 AMRand observed that "one of [his] biggest mistakes in life was not recognizing early that the most effective way to achieve my goals would have been to get wealthy first, then to apply that wealth toward them". The basic economics point is that if you earn as much money as possible by specializing in what the economy will pay you the most for, you can often hire a specialist to do far more good with the money you made than you could have doing the good personally.
Another way to state this is doing nice things is fun; nice is an economic good. So if you want a pleasant job, other people who like pleasant jobs will compete and drive the price down until the low pay makes it unpleasant enough to clear the market.
This makes Bill Gates's career change to spend his fortune a global tragedy worse than the monetary damage of Hurricane Katrina. He is likely to be much closer to average in his ability to make the world better by giving, compared to making the world better by making better software and operating systems.
The salary offered to you for different occupations summarizes what the economy values most from you. Accountants and lawyers may seem less useful than teachers and engineers, but that is a fallacy of confusing the average value of a teacher--which may be very high--to the market price of a teacher which will be much lower if there are lots of people who want to be teachers.
Posted by Sam Dinkin at 11:48 AMGlenn,
I enjoyed your space property rights article. I am a big advocate of space property rights [here, here and here].
I don't think a race is useful.
Optimal space development includes sustainability. An auction would provide money that could be used to subsidize space development. That would include the option to not go there which seems to be worth quite a bit. Also, what does first possession mean as far as the extent of the claim?
A race does have an advantage if you are in favor of speedy space development that the money spent on the race is off of the property rights regime's books so beyond the paws of the administrative bureaucrats. On the other hand, they can be captured as easily as the UN or the Olympic committee.
I do not agree that space outside of GEO slots has uncertain value. It's very close to zero. There is less activity dependent on space than there is in Louisiana. The Moon, for example, with regular commerce decades off, would be worth at most half what the technology that will allow economical transportation is worth. Since that's a gleam in the inventor's father's eye, it's basically worthless. Less than the fee simple real estate in New Orleans. (Perhaps $100 billion, but that's 0.15% of global annual GDP. On the order of US telecoms spectrum, not on the order of global oil revenue. Perhaps $500 million. If it's encumbered to allow exploration, perhaps nothing.) Like spectrum, it's worthless without technology to use it. So it's like blocking intellectual property. Only worth something if there is something to block. Lunar commerce=$30 million from Google.
You're right that it could be worth a lot or a little. Suppose there's 100 residents and 13,000 visitors annually in 2107 like Antarctica today. Let's say it costs 20% of the US annual per capita income in 2107 to visit (twice for population and four times for per capita income growth the $4000 for half a double room on a cruise to Antarctica today). That would be about $32,000 in today's dollars or $600,000 in 2107 dollars. So the Moon would be worth about $400 million in tourism and another $100 million in science in today's dollars (or about $10 billion in 2107 dollars). If the property owner could extract half that as monopoly rents after paying off transportation development costs prior to 2107, that's $5 billion per year in 100 years. At 25% annual discount for risky activities, that's worth about $4 today. If private development of the Moon is only 10 years away (extrapolating private Lunar development after private suborbital flight to be like the time from Yuri Gargarin's flight to Apollo 11), then the Moon's worth billions.
The first possession rule you propose prevents the property market from functioning as an information market prior to possession which is precisely the time when information is at its most diffuse (though certainly not its most valuable--that's later).
Auctioning allows there to be an owner who can provide money to a transporter to develop who would then benefit from an exclusive franchise. By buying cheap property, a default industrial policy is bootstrapped. If land is cheap enough on the Moon, I can buy it all up and then, in effect, have a monopoly on telecoms, transportation and just about every other service. With a race, there may never be sufficient ownership for the policy to encourage development.
Auctioning allows the prestige value of owning the Moon to be enjoyed before transportation is available. Auctioning creates a market history that can turn the land into a mortgageable asset. Auctioning allows Lunar property law to develop while waiting for transportation to emerge. Auctioning creates a tax base. Auctioning creates stakeholders. Auctions create funds that can be used to log roll with objectors.
Patents are special because no one knows what they are before they are created. For telecoms spectrum, companies, land, and so on, where almost all the value of the world economy is, races are not used. And where they are used (e.g., Argentina telecom spectrum), the results are dreadful waste. It's just a special kind of beauty contest. Before telecoms auctions there were hearings to award telecoms spectrum. Do we really want money being thrown away in a competitive process that is only loosely related to societies' goal for space? An auction results in money transfers only and has very low waste. The owners can then go about normal development. Like buying land in modern Austin instead of a land rush in Oklahoma. For property rights that can be well defined and easily surveyed, a race is counterproductive.
Sam
Posted by Sam Dinkin at 08:53 PMThe mortgage-backed securities price drop reflects the natural tendancy of people to be sloppy with other people's money. In this case, it was primarily the mortgage brokers shoveling out other people's money to borrowers and hedge funds asking not quite enough questions about who is monitoring the borrowers before shoveling their investors money to purchase the loans. These capitalist swashbucklers should be lionized, not villified. If the US economy is not utilizing all of its productive capacity, we need to find some way to nudge it to work harder. If prime borrowers have borrowed all the money they want, then the extra money to get the economy moving has to be lent to subprime borrowers or monetary policy will be pushing on a string like in Japan where the nominal interest rate has been zero for a while and the real interest rate negative.
So expect the extra money to go into irrational stocks or to risky borrowers. If it doesn't go to them and Congress isn't swift enough to write everyone another $300 check, then we will just have idle capacity. Without a housing boom, instead of an overhang of houses that would be in danger of being foreclosed, we would have fewer houses, more unemployment, lower wages and lower GDP. We should continue to figure out ways to get money into the hands of people who will spend it even if they are speculators, sub prime borrowers, exuberant speculators and intrepid entrepreneurs.
Personally, I am in favor of subsidizing all consumer borrowing so that the benefits of rate cuts don't accrue disproportionately to creditworthy borrowers. But whether it's health care, green cleanup, space settlement or defense that you think needs more money spent on it, to just leave capacity idle is in my opinion even worse than spending it on my last choice.
Posted by Sam Dinkin at 10:29 AMIt occurred to me as a programmed payments in one month in advance into Quicken software that the credit card issuers are fighting the last war. The reason I am programming my payments one month in advance is that I have about 15 minutes from the time I receive my bill to write a check, plop it in an express mail envelope, then race after the mail carrier to send it back the same day to avoid a late fee.
The late fees were rolling in bulking up bottom lines at Chase and others. The reason they implemented these fees was that interest rates were low so they jerked customers on late fees to raise revenues. The interest rate far exceeds the paycheck loan rates. $40 on a one-day late $400 payment is 128 quadrillion percent annual interest.
But now they are faced with an anxious set of commercial paper buyers and collateralized debt obligation buyers demanding to know the credit quality of the borrowers. Well, it sucks. Because it has become impossible to pay a credit card bill on time without a flow of quantum entangled photons becoming disentangled selectively at the instant you get your bill so you can pay it faster than the speed of light. Credit card issuers, do you feel that petard? It's going to get hoisted a lot higher.
Posted by Sam Dinkin at 01:12 PMThere are a lot of comments on Sam's post earlier about China and India, but Gerald Hibbs has some cold water to splash on the Chinese' problem, that I thought I'd move up to post level:
Right, every inch of China is covered with them growing something. Terraced hillsides are standard. As we whisk by on the train you can see them farming the way their grandparents did. Often you see the cliff dotted with caves. What are those? They live there. It is fascinating to watch and incredibly sad.Meanwhile, government officials talk about how they are lifting a million people a year out of poverty. A million people a year! That is staggering. Even more so when you realize that they are over 1000 years away from lifting everyone in China out of poverty at that rate.
Kids on the farm on making their way to the city and finding it a hard row to hoe -- especially since it is technically illegal to move like that without permission. We watched a documentary that followed one kid. Someone else in the village had gone to the city for a year and came home with enough money to get married and buy a house for his new wife. Off this young man -- an only son -- went where he worked illegally on a high rise construction project and slept in a worker's dorm with no heat. He eventually went home because he couldn't take the bitter winter cold.
We already hear of riots everywhere in China. Well, some details and statistics/conjecture leak out from foreign websites. Chinese government officals admitted to about 74,000 in 2004. Many rural people have television and they watch it filled with commercials for stuff they can't afford (like pretty much everything as the average peasant makes about $150 a year) and modern TV soaps showing spoiled rich young people fighting over the prettiest girl. At the same time there is such a disparity between boy/girl births -- especially in rural areas reaching sometimes 120 boys to 80 girls -- that a poor (and heaven forbid stupid or ugly) village boy has little chance of marriage. It is made even worse by the fact that women are now getting into college and excelling. Why worse? Well, those boys are even more out in the cold then they were before. The women in China are going to experience a power shift in this generation like no other in history. I hope they live through it. I've seen any number of stories about girls kidnapped and sold as "wives." My own wife was almost kidnapped off the street when she was younger.
How much longer can the condition continue? Especially when the people see the endless corruption. Guanxi, or relationships, are everything. I know one guy whose group paid a $10,000 bribe to be allowed to exploit an oil well his group owned. Someone else paid more, and had better relationship, and they were forced to sell for almost for pennies on the dollar. Now the people with more money and guanxi are running the oil well and getting richer. He lost much of his family's life savings in that debacle.
I want to be optimistic but the situation is so inherently unstable. Imagine the gleaming cities of 20 years from now with hundreds upon hundreds of millions of peasants knowing they and their children are shut out. Or even worse know that they will know the shame of being a "branchless tree" (Chinese description of a man without a family.) Interesting times indeed. If anyone can give me a reasonable explanation of how this can end well short of a singularity -- and molecular manufacturing to instantly provide economic parity -- I'd love to hear it.
Fortunately, some kind of singularity-like event is likely to bail them (and the rest of us) out. Unfortunately, given the history of technological solutions, it will bring new problems of its own. The future is likely to be (in the words of the ancient Chinese curse) interesting times.
Posted by Rand Simberg at 02:31 PM'Industrial Revolution' is a misnomer. Industry was just a thing to do after agriculture became easier. China and India are about half way through their 'Agricultural Revolution'. According to the CIA World Factbook, a 45% of the 800 million labor force out of China's 1.3 billion and 60% of India's 500 million labor force out of 1.1 billion still work in agriculture. In the US, France and Poland the comparable numbers are 0.7%, 4.1%, and 16.1%. In the next couple of decades, we can expect Chinese and Indian algricultural sectors to achieve 100% labor efficiency improvements putting a total of 350 million people into manufacturing and services which will be a 50% rise. Over the next 100 years, we can expect them to catch up to France and put 96% of their labor forces away from agriculture. These are conservative predictions.
The corresponding aggressive predictions follow. If China's per capita GDP continues to grow at 10% per year, it will catch up to the US in per capita GDP in about 20 years. If that happens in both China and India, we can expect a total of 600 million Chinese and Indian more people to be in the global non-farm labor force at that time. That latter number is an optimistic assessment which would require a 10,000% improvement in agricultural labor productivity (100x) from these two countries to bring them by 2027 to up to US 2007 agricultural productivity.
I also noticed that total fertility per woman in China is 1.75 and India is 2.75. Life expectancy is about six years lower in India, but 2.75*68 is a lot more than 1.75*73. If you throw in Hong Kong and Macao, China is even further ahead in life expectancy and income. Like the old Chinese curse, we may live in interesting times.
Posted by Sam Dinkin at 11:12 AMI talk a lot about marginal costs, because it's an unappreciated factor in space access costs, but it's also one in health care, given the lunatic way the current health insurance (including government health insurance) system is set up.
Posted by Rand Simberg at 07:40 AMFrom Economist's top story:
Arsonists certainly have strong motives for starting blazes. Rising incomes have fuelled a construction boom. Demand is high for land near the sea to build second homes. Although Greek law states that builders cannot put up homes on forest land, developers are practised at getting around the rules.Because Greece still lacks a land registry covering the whole country—a programme to put this right paid for by the European Union is moving at snail’s pace—it is easy to have burned land reclassified as farmland, which can then be sold for development.
This is music to my ears because it shows that the real estate market is hot in Greece despite the subprime Alt-A problems in the US--if you don't mind a fire sale. Makes polonium assassination seem downright civilized in comparison.
The experience in stopping the poaching of natural resources is to allow sales to fund protection of the remainder. My solution: privatize the forests, tax the carbon output and subsidize the carbon storage. If it works for ivory tusks, maybe it will work for ebony. Or we can stick with the Jerry Lee Lewis approach to forestry conservation.
Posted by Sam Dinkin at 11:57 AMYesterday Nader Elhefnawy explored in "Diversifying our planetary portfolio" what technologies would enable a space settlement to be self sufficient. This is an ill-posed question as he partly sees:
“Species survival” is a strong argument for eventual space colonization—but given the sheer scale and technical demands of the task, a questionable justification for the most probable kinds of near-term investment in space. Indeed, it would even be a questionable justification for the most probable sorts of missions to the moon and Mars (which may actually be less attractive locales for colonies than fully-customizable “O’Neill cylinders”).
The assumption he then makes is that the goal is best achieved by cutting the costs of a self-sufficient settlement by cutting the mass required.
No, the cultural, technical, political and financial challenges of putting civilization on the path to long term survival via space settlement is not primarily about engineering. A self-sustaining space economy will naturally grow into one that is nearly self sufficient. The key in-situ resource is money. If the space economy can sell its tourism, entertainment or other services, more and more life preserving equipment will be sent to space simply to support normal economic activity.
I think there will be a cultural shift as the economic activity grows. Once space population hits critical mass, the continued growth of the space economy and population will be seen as inevitable. Then settlement can continue as an accepted and routine activity. Transportation costs will fall with volume of traffic and ark building won't be so expensive. Prior to that point, the best way to reduce the net cost of settlement building is to find the "killer app" for space that pays for the investment necessary rather than focusing on reducing cost.
Posted by Sam Dinkin at 09:11 AMWhat's surprising about this is the source: Rolling Stone.
Posted by Rand Simberg at 10:09 AMThe cover story inThe Economist this week predicts that population will peak this century:
Last year the United Nations said it thought the world's average fertility would fall below replacement by 2025. Demographers expect the global population to peak at around 10 billion (it is now 6.5 billion) by mid-century.
This peak is only temporary. Fertility plotted vs. money income is U-shaped. Poor can't afford family planning, but the rich want to have kids.
They further opine:
States should not be in the business of pushing people to have babies.
Yes they should. A baby will become a taxpayer and a useful citizen. Zero population growth did far more to hold back development of China and India than Reagan's (anti-) family planning policies.
We can grow food indoors, reuse our water and get the energy to do it from carbon free sources. The carrying capacity of the Earth is easily one trillion people. At the current rate of waste heat per person, we would be generating only 2% of what we get from the Sun. We could site 72 billion at the density of the Netherlands, 3.8 trillion at the density of Manhattan with the current land area.
A populous world is a rich world. There will be greater grand challenges that can be tackled. There will be more people to conceive more ideas. A world with one trillion people at the current standard of living would have GDP of $10,000 trillion or $10 quadrillion dollars a year. If 0.2% of that was spent on space exploration that would be $20 trillion/year. At $20,000/kg, that's enough to lift one billion kg. At $200/kg, that's enough to allow one billion people to emigrate to space every year.
A populous world can be the Garden of Eden to settle a harsh solar system and galaxy.
What policy should be used to achieve higher population? I shun family planning restrictions. Greater credit and liquidity would be a good start. Letting families borrow at subsidized rates to support kids would be sensible. It's a natural extension of our education policy to offer loans to create skilled labor. Since the government has better credit than the typical set of new parents, the program can be run at a profit before taking into account its effect on growth.
If national accounting were modified to capitalize future tax revenue based on population, then policies that encourage the birthrate (and immigration) would arrive at Congress as a way to "pay for" favored programs. In fact, increased birth and immigration rates will reduce the national debt per capita even faster than in total. Changing the budget rules so that the debt ceiling is per capita based on the anticipated population would be even more effective.
Some targeted policies would be the following:
Simply making the country more attractive through better policies will increase the birthrate.
The best The Economist can come up with is urban planning, higher retirement age and opening of the labor force to women.
No. If citizens of Japan (and the US) want their cultures to thrive, they must open their doors to immigration and use their genius industrial and tax policies to grow the most important resource they have: their population.
Posted by Sam Dinkin at 12:47 PMI don't think so, despite Derb's hand wringing. He relies on this overwrought analysis, which doesn't have that figure anywhere in it that I can see.
The analyst is mixing up oil prices and gas prices in that scare story. But he also completely ignores alternate sources, such as shale and tar sands, which are in huge supply (larger than crude oil reserves) in places like Colorado and Wyoming, and Alberta, and profitable at thirty bucks a barrel. This effectively puts a ceiling on oil prices in the long term, and the longer prices stay where they currently are, the more and faster those sources will be expanding capacity.
I not only don't think we'll have a hundred dollars a barrel next November--I don't think that we'll ever do so, in inflation-adjusted terms, at least not for any significant (a few weeks at most, in panicked response to some event) period of time.
Posted by Rand Simberg at 09:53 AMIs it the end of the Phillips Curve? If so, I won't miss it.
Posted by Rand Simberg at 07:50 AMChina is doing some major tinkering with fiscal policy according to today's Wall Street Journal. To try to moderate the flow out of bank savings into their stock market, they are decreasing the tax rate on savings from 20% to 10% and increasing the savings interest rate.
This will indeed get people to save more in the banks. But it will also give them more future cash from the lower taxes and higher returns. This may make them more confident about speculating in the stock market. This means that China's mountain of cash will continue to grow. Here's a report that China's savings rate is 55%.
If you think about the combination of pension products (6% to get all the 401k matching seems typical), Social Security (12.4%) and Medicare (2.9%) we are doing a good bit of forced savings. If you add in home equity, most US workers in their prime are socking away 30% if you don't deduct the debt they're taking on.
Our population doesn't have a huge demographic bulge brought about by a one-child policy, industrialization and massive improvements in life expectancy. The upshot is China will have very high savings until the inverted pyramid kids (one kid who is the only kid of two parents who are each the only kids of two grand parents) get to the workforce. They can expect bequests, a healthy mortgage loan market and modern employee benefits. In the mean time, no amount of cajoling from Chinese or American treasury and central banking officials is going to curb the Chinese savings rate much.
The impact means cheap money across the board for another 20 years. According to the CIA World Factbook $180 billion of their savings is going abroad net. Since they get about $65 billion in foreign direct investment, they get to invest almost $250 billion a year abroad.
They have $1 trillion in bank reserves and gold compared to US's $70 billion. They have about $300 billion in government debt or $1.2 trillion at purchasing power parity (PPP), compared to $10 trillion US. China has a vastly undervalued currency with gross domestic product (GDP) PPP estimated at $10 trillion at about 4 times the official exchange rate which puts their GDP at current fixed exchange rates at $2.5 trillion.
In short, with a floating exchange rate, China would have the world's second biggest economy. And that is without the benefit of substantial deficit spending, a stock market, consumer credit, a public pension system up to western standards, a health care finance system up to western standards or any of a number of multipliers that the US already has.
In the next few years, we can look forward to China becoming an economic super power and not slowing its growth (10.7%) until it rises from $7700 per capita PPP GDP to that of Poland ($14k, 5.8%) or France ($27k, 2.1%). That is respectively twice and three and a half times what it is today. With four times as many people that's 2-3 times as big an economy as ours in the next 40 years.
Can the US manage a peaceful decline and start playing the role of junior partner in defense alliances?
Posted by Sam Dinkin at 10:51 AMThe Bear Stearns bailout and failure respectively of two hedge funds with hundreds of millions (formerly) of equity and $10 billion+ of debt is causing some new soul searching among risk managers about the continuing sub prime overlending. The credit card issuer risk managers are taking the opportunity to tighten consumer credit for credit cards and probably soon other kinds of consumer credit.
By tightening credit card terms and mortgage terms, banks exacerbate the difficulty that sub prime borrowers may have making their house payment and refinancing their loans when teaser rates end. As lenders tighten terms, there will be a knock on effect of more sour loans. This is a game with a distinct first-mover advantage. Many consumers even in the sub prime market have more than one credit card. If Barclays credit cards (e.g., Juniper, US Air, Barnes&Noble, etc.) tighten their credit standards, Chase and Bank of America tighten their balance transfer requirements, banks that keep their offers open longest may be the ones that suffer in the event of a rise in consumer bankruptcy. Oddly, all of the acquisitions by Chase, Bank of America and others of competing credit card issuers means that they have internalized a higher share of the pain than in the last recession, but they are still fighting the last war.
The credit card and mortgage defaults may, in turn, dry up some sources of liquidity for hedge funds that buy credit card and mortgage backed securities and other consumer debt. There is still plenty of money gushing into the global financial system (China's government and consumers are socking away a lot of money in anticipation of a labor shortage when they retire and no trillion dollar social security program to help them and expect India, Pakistan and Indonesia to join them as their demographic bulge matures coincident with speedy growth). So unwinding the sub prime fiasco will just increase the appetite for return and dollar denominated assets in other sectors of the world economy. But that's small consolation for the millions of people caught in a credit crunch. A politician cleaning up bad credit is going to lose votes when voters find out the alternative is no credit.
My proposal is for there to be a federal car loan program and a federal health care loan program.
By becoming the credit insurer of last resort in major areas of consumer spending, the government can borrow at lower rates than consumers, give the consumers a lower rate and pocket a share of the spread.
Ideally, we could dispense with all the applications for what the money's for (college, house, small business, etc.) and just give every citizen a line of credit for any purpose whatsoever. It wouldn't be subsidized--this could be neutral or revenue positive for the US government. I recommend that the money be administered by IRS. Just check a box to take out a loan from the Government at tax time. I don't think it's in the US's interest to exempt the new loans from bankruptcy laws (or any other federal loan), but that will have to wait for another entry.
Posted by Sam Dinkin at 10:07 AMOn Intrade, here's the standings for the 2008 election (security pays 100 if individual is elected):
- 32.7 Clinton
- 17.4 Obama
- 16.0 Thompson
- 13.2 Giuliani
- 9.5 Romney
- 7.6 Gore
- 4.7 McCain
- 3.1 Edwards
- 1.2 Bloomberg
Adds up to 105. Could some partisans be trying to raise their favorite's numbers?
Posted by Sam Dinkin at 07:41 PMEconomics is the only subject where two economists can share a Nobel Prize saying opposing things.
Roberto Alazar
But all the big names (25 all told including a bevy of Nobel winners) agree on this:
Prediction markets are markets for contracts that yield payments based on the outcome of an uncertain future event, such as a presidential election. Using these markets as forecasting tools could substantially improve decision making in the private and public sectors.We argue that U.S. regulators should lower barriers to the creation and design of prediction markets by creating a safe harbor for certain types of small stakes markets. We believe our proposed change has the potential to stimulate innovation in the design and use of prediction markets throughout the economy, and in the process to provide information that will benefit the private sector and government alike.
Amen. Too late for Poindexter.
Posted by Sam Dinkin at 07:27 PMThese kinds of complaints betray an ignorance of business economics. One would expect that from Congress, but it would be nice to think that the American people are smarter (sadly, what with the clamor for "anti-gouging laws" and the like, there's little evidence of it on the ground).
As Peter Suderman points out, the problem is that the cost of adding a cable channel is extremely low relative to providing the service in the first place. Like him (and no doubt many others) I am paying for many channels that I never watch, and will never watch, and wish that I could dump them for a lower satellite bill. But that's not how the business model works.
It's similar to the restaurant problem (which to my mind is one of the causes of the "obesity epidemic" among Americans, to the degree that it exists). The bulk of the cost of eating in a restaurant (unless it's serving larks' tongue pie and pan-fried snail darter) is overhead: rent, lighting, environmental control, power for cooking and refrigerating, wages, benefits, etc. I'm not sufficiently familiar with the business to know the exact numbers, but it wouldn't surprise me if the cost of a meal, at least in a small place, was sixty to seventy percent overhead, with the rest going to the cost of the food itself. Say that it's three quarters. That means that if you provide twice as much food, you only increase the cost of the meal by twenty-five percent (and the converse is that if you provided no food at all, but merely the ambiance and pleasure of having people wait on you, the price of a twenty-dollar meal would still be fifteen bucks).
There are various ways to compete in the restaurant industry, including branding, food quality, atmosphere, service, but one that's of value to a lot of people is food quantity. Based on the economics described above, the latter is one of the cheapest things to increase, and much less costly than hiring better chefs, or classier waitpeople, or investing in a branding. This is particularly the case when you increase the quantities of really cheap food, such as starches and sugar. The fast food industry figured this out a while ago, with "biggie drinks" and "supersizing." Giving the customer an extra potato's worth of fries, or another spoon of corn sugar with flavored water added only pennies to the meal cost, but seemed to many customers to provide a bargain.
This is in fact why Mexican restaurants have such high profit margins relative to other cuisines. You rarely get good-quality meat (and if you do, you pay a lot more for the dish). It's usually bits of chicken parts, shredded beef or pork, or (in some of the less reputable places) "meat"..., disguised in a hot sauce, and wrapped in a flat unrisen bread made of corn or wheat, combined with rice and beans. You can get stuffed with unhealthy high-glycemic carbs. Not to mention, of course, filling you up pre-meal on sectioned deep-fried corn tortillas and a chopped tomato sauce. It used to be that Mexican meals were cheap, relative to others, but once it became trendy, they started to make a killing, particularly the chains, charging as much for this low-cost meal as other restaurants do for meat that you can actually identify (at least as regards to species).
What's worse is that these are exactly the kinds of excess calories that we don't need. If they upped the protein, it would be much healthier for us, but that would cost much more (though even there, they've managed it, with double and triple burgers, but you'll notice that there's a much bigger price jump for these, since the meat and cheese are the most expensive parts of a burger). I've often wished that I could get a cheaper, smaller meal, but like the case of the bundled cable or satellite channels, the economics militate against it.
By the way, it should also be noted that misunderstandings of the difference between fixed and variable costs also lies at the root of many people's ignorance about the source of high space launch costs, even among professionals in the space industry.
Posted by Rand Simberg at 07:30 AMI landed at the Ft. Lauderdale airport yesterday and there was a sign that said that to decrease water use, the airport has changed its thermostat from 74 to 78. Call me hopelessly brown, but it seems to me that they can attract more money to pay for more water via tourism if their airport is comfortable rather than politically correct. Water can be recycled, pulled out of the ocean and the air. The economic value of the savings is summarized by the market price for more water which is still measured in hundreds of dollars per acre foot. An acre foot is enough water to cover an acre one foot deep, or 325,851, gallons putting the price of water in gallons per cent. Skimping on use is pain for no gain. Or is masochism the main point of being Green?
Posted by Sam Dinkin at 02:09 PMFood prices are up as corn prices have doubled to $4.50/bushel with the $0.51/gallon of ethanol subsidy. As the US is (soon to be was) a huge corn exporter, this is causing higher prices worldwide. Foreign Affairs in the May/June issue says that could lead to doubling the world hungry from 600 million to 1.2 billion. They hope that
relying more on sugar cane to produce ethanol in tropical countries would be more efficient than using corn and would not involve using a staple crop.
No, if sugar cane is more profitable than corn, it will also outcompete staples for land and labor until the price of staples is hungry high.
Scientific American makes the same mistake in the June issue:
[Jatropha, an oil crop] favors hot, dry conditions and hence an unlikely threat to rain forests. There is no trade-off between food and fuel either, because the oil is poisonous.
No, Jatropha will pull away farm equipment, labor and land from other crops driving up the price of every other crop.
Ethanol is an OK energy delivery system to convert solar energy, but if biofuels stay competitive with petroleum (via subsidies for now), all arable land will be converted to corn and other energy crops until the food crop prices are driven up enough to be competitive with the energy crops.
The only way to bring the corn price down is to either bring a multiple of the current acreage under cultivation (all US arable land devoted to corn would get us 12% of petroleum consumption) or reducing the corn/ethanol subsidy.
Posted by Sam Dinkin at 12:02 PMTaylor Dinerman calls for space solar power in this week's The Space Review. He trots out hydrogen as an alternative energy source. No--it's an alternative energy delivery method. Last time I checked, to get hydrogen, we had to use another fuel source and lose energy to crack the hydrogen. To make space solar power viable, we need an advance that will advantage space solar power to terrestrial solar power. Does this meet the objective:
One technology that might radically reduce the weight requirements for these systems is the technique pioneered at the University of Notre Dame where single-walled carbon nanotubes are added to a film made of titanium-dioxide nanoparticles, doubling the efficiency of converting ultraviolet light into electrons. Any solar cell technology that could reach conversion factors of over 50% or even higher would reduce the size and weight of an SPS and thus make it easier and cheaper to build and launch.
It also makes terrestrial solar power potentially reach conversion factors of over 50% too. To make space solar better than terrestrial solar, we need launch costs to be no more than 3x manufacturing costs per kg if space solar is 4x as efficient. With manufacturing costs $350/kg, we need launch costs $1000/kg to make space solar viable.
Posted by Sam Dinkin at 11:13 AMI've never been very thrilled with the idea of converting food to fuel. This article explains why:
President Bush has set a target of replacing 15 percent of domestic gasoline use with biofuels (ethanol and biodiesel) during the next 10 years, which would require almost a fivefold increase in mandatory biofuel use, to about 35 billion gallons. With current technology, almost all of this biofuel would have to come from corn because there is no feasible alternative. However, achieving the 15 percent goal would require the entire current US corn crop, which represents a whopping 40 percent of the world's corn supply. This would do more than create mere market distortions; the irresistible pressure to divert corn from food to fuel would create unprecedented turmoil.Thus, it is no surprise that the price of corn has doubled in the past year – from $2 to $4 a bushel. We are already seeing upward pressure on food prices as the demand for ethanol boosts the demand for corn. Until the recent ethanol boom, more than 60 percent of the annual US corn harvest was fed domestically to cattle, hogs, and chickens or used in food or beverages. Thousands of food items contain corn or corn byproducts. In Mexico, where corn is a staple food, the price of tortillas has skyrocketed because US corn has been diverted to ethanol production.
Though, come to think of it, given that rising tortilla prices is one more cause for Mexicans to flee north, maybe, for the Bush administration, it's not an unintended consequence.
Just kidding.
I think.
Posted by Rand Simberg at 08:50 AM...why ain't you rich?
An explanation. And good advice. It's not new, but too many people (particularly in the inner cities, due to a dysfunctional culture) haven't yet figured it out.
Posted by Rand Simberg at 02:46 PMArnold Kling writes about the little-known history of prostitution insurance.
Posted by Rand Simberg at 05:37 AMCould be. Of course, if we leave it up to the Dems, they'll screw it up by raising taxes.
Posted by Rand Simberg at 12:10 PMEastern Market apparently burned down over the weekend. I had many a good crab cake there, but I agree that the government should not be involved in rebuilding it.
Good for Congressman Campbell.
I also think we need to look into this suspicious event. Were there government documents buried underneath? Were the Jews warned away? Where was Dick Cheney? Was it made of steel?
Posted by Rand Simberg at 07:06 AMBrink Lindsey is blogging again, to help promote his new book, which looks quite interesting. He's thumbing his nose at the socialists on their holiday by celebrating freedom.
[Update in the evening]
Take back the day. Here's a web site dedicated to the remembrance of the millions of people who died in the hoped-for furtherance of a naive and well-intentioned but ultimately vile and evil (hmmmmm...I just noticed that those two words are anagrams) totalitarian ideology, and one that stood in utter defiance to human nature, and was therefore the most inhuman of all.
Posted by Rand Simberg at 11:42 AMBy eliminating federal disaster relief.
An interesting argument. I know that a lot of people are being priced out of the housing market here in south Florida by outrageous and rising insurance costs. Basically, it's another form of outlawing gambling. Of course, the mortgage companies are driving this as well, for obvious reasons. The question is whether or not they're properly assessing the actuarial risk, and how much federal regulation is preventing the market from working by not allowing an insurance company to take a flier by offering offering lower rates. Or maybe, the market is finally recognizing the risk of building in such places.
Posted by Rand Simberg at 01:23 PMNew York Times says in an editorial that student loans should be subject to sunshine laws, careful policing and ethics rules that make it a crime to take money for access to colleges. This is misguided. Colleges will voluntarily step forward to show that their processes are clean now that there is focus on the issue. Those that don't should be spared the regulatory burden. Students will go to the school that gives them the best overall package. Competition will steer students to the schools with the best policy--taking into account both student loan rates and what the school does less of due to the way it administers the loans.
Posted by Sam Dinkin at 12:33 PM"[W]hat the world’s scientists are telling us, with increasing confidence, is that the costs of doing nothing will be far greater than the costs of acting now," according to today's New York Times. This is a red herring. Carbon dioxide is a massive global sink with a half-life of 3-9 decades (which gives you an idea of the uncertainty in climate models) so that our 6 billion tons per year results in a steady state of US carbon dioxide of about 600 billion tons. If we cut carbon dioxide 1 billion tons/year immediately at a cost of $20 billion/year we end up with 580 billion tons in 20 years at a 60 year half life. If we have no cuts for ten years, then 2 billion/year for 10 years, we'll also have 580 billion ton. That suggests that 2 tons/year permanent reduction in ten years is worth about the same as a one ton per year permanent reduction today. That suggests immediate carbon abatement has about a 7% rate of return versus abating later. Not terrible, but not terribly immediate. Time to pick some low hanging fruit.
So how much is a ton of abatement worth? Doom sayers say priceless, but how do we attribute lives lost to carbon and lives saved to carbon abatement? Doom sayers predict desertification, hunger and hurricanes. I predict richer nations with moving crop patterns and moving populations. A degree or so a decade is small beer compared to the price of corn doubling. Who is dying and why is carbon abatement cheaper than shipping barges of wheat from Canada to Africa and Latin America?
14 bushels of wheat (350 kg) costs $63 or $6.3 billion to feed 100 million people. $6 billion in carbon dioxide offsets at $20/ton only would cut 1% of current world production. It might be a lot cheaper to fix the famine later than the climate now.
Posted by Sam Dinkin at 04:31 PMOn our idiotic water policies. And I didn't even get into the sugar problem and our lack of cisterns or reuse of gray water for irrigation.
Posted by Rand Simberg at 08:48 AMJohn Carmack's announcement of a modular rocket that can reach suborbital space for $25,000 per module is revolutionary. Each module can independently reach suborbital space. Group the modules together and any size or shaped payload can reach suborbital space. The cost to get to space is $250 per module in fuel costs.
In a video that John said will be posted to his web site, he showed the modules being hooked together in a square arrays. These arrays can then be stacked for staging.
He predicts that he will produce the Armadillo orbital "Sputnik" which John also referred to as Mitchell Burnside-Clapp's DYANN--Do You All Notice Now?
There are two revolutions here. The first is an open source garage revolution. With a small warehouse and a budget closer to Charlie Farmer's in Farmer Astronaut than COTS winners RpK and SpaceX, Armadillo in a humble, matter-of-fact tone is brashly announcing an orbital program.
The second is the price of the revolution. At $25,000 per module, the capital cost per delta V is unprecedented and substantially lower than RpK or SpaceX.
This revolution was incrementally developed in plain sight and demonstrated in plain sight. No one thought Carmack's Pixel and Texel were minimum concept proofs for a 64-module version. No one thought that by looking at the specifications they were seeing the ultimate cheap first stage and second stage and third stage.
Carmack thinks he can get the mass ratio down from 27 to 15 with some low cost evolutionary modifications. At 15-1, he can loft "Pixel 2" onto a suborbital trajectory with a 64-module first-stage lifter made up of 16 Pixels arrayed in a 4-4 grid or 8x8 single modules. Pixel 2 will be full of fuel and be the second stage. On top of Pixel will be a single module with a 25 lb. payload that will make it all the way to orbit. The cost for this delivery? The capital costs would be about $1.7 million if he can stay under $25,000 per module. If only the first stage is reusable, the cost per flight would be $150,000. If the first and second stage are reusable, the cost per flight would be $60,000. For a three stage system, that is a not very revolutionary price of $2400 per pound to orbit (albeit revolutionary vs. old space of $10,000+ per pound though.)
If they achieve a two-stage to orbit system where the second stage is also reusable, that would deliver a 100 lb payload to orbit for $35,000. That is roughly half fuel and oxidizer and half capital assuming a 100 flight lifetime. $350/lb is revolutionary. If this could be scaled up to Spacex Falcon IX payload size of 22,770 lbs., that's $8 million or $22 million for a Falcon IX heavy sized payload of 62,500 lbs. An array of 100x100 modules supporting a second stage array of 25x25 modules boggles the mind and would cost $265 million in capital costs at $25,000 each. The flight rate assumptions would not be invalidated, however, because the vehicle could be broken up to support the suborbital tourism industry and smaller orbital payloads.
On the optimistic side, this price is before mass production. This mass ratio is before switching to methane (a 10% improvement in ISP over alcohol and a 50+% fuel price drop too). Google revolutionized servers by using modular white box CPUs. Now Carmack is making a bid to do the same thing. Nevertheless, Henry Vanderbilt cautions me that there is a long way to go from a view graph to orbit.
---------Update 3/24/07 7:00 MST---------
A wide plane requires a bunch of successively stronger connectors moving inward and results in very little additional payload delivered by the outside modules. This is especially true with a square grid which require more connections moving in from the corners than a hexagonal one. Other possibilities are more stages so connections are shorter and more vertical and larger, taller modules for lower stages.
Posted by Sam Dinkin at 06:09 AMClean coal which was a $10 billion subsidy issue in the last election is developing. It involves capturing carbon dioxide by first burning it with liquid oxygen. Buy LOX stock. I like Air Liquide. There are two technologies: one rich: they inject steam, use heat to split off the oxygen to burn the coal and use the hydrogen to generate more electricity. The other lean: just use more LOX.
Both are idiotic from an economic standpoint. To add a hydrogen system and make the coal crazy hot enough to split water will use a lot of LOX at $1/gallon or so. Clean coal is an attempt to minimize the carbon output per electricity instead of the carbon output per money. Better than producing 1,000,000 barrels of CO2 via clean coal, would be to generate 3,000,000 barrels of carbon dioxide enriched air. Underground storage of air is a lot cheaper than buying hundreds-of-dollars-a-ton of LOX to burn $20/ton coal. We ought to be able to achieve sequestration for under $5/ton of CO2. And the plant modification is low-tech. Just direct the exhaust into a pipeline to inject it into the ground.
Posted by Sam Dinkin at 07:23 AM...with Arnold Kling. One example:
Few people appreciate what a profound and disturbing puzzle the Depression posed. The non-economist has no trouble getting her mind around the notion of a shortage of jobs. But for an economist, such a shortage is nonsense. If there is an excess supply of, say, construction workers, then the wage of construction workers should adjust downward. As the wage rate sinks, the demand for construction workers rises, and the supply of people willing to work in construction falls. As the competitive process unfolds, bidding down wage rates, eventually supply and demand will balance.Posted by Rand Simberg at 08:10 AMIn theory, at any rate, unemployment -- an excess supply of labor -- should accordingly be self-correcting. But evidently, as the Great Depression showed, the labor market lacks in practice the adjustment mechanisms that are supposed to work in theory.
There are hundreds of theories that try to explain the apparent inflexibility of labor markets. But I have never forgotten a suggestion made by Robert Solow. He pointed out that you never see an unemployed worker walk up to an employer and say, "If you let me have that guy's job, I'll work for 10 percent less money." There are self-imposed ethical limits on competition.
If you think about it, there are probably countless self-imposed ethical precepts that affect our economic behavior. Chances are, without the habits incorporating these ethical precepts, our market system would collapse altogether. Like the water in which a fish swims, our commercial morality is invisible to us. But it is essential.
Professor Postrel has an interesting post on the best way to deal with carbon, assuming that we should:
Let’s suppose you’ve been swept up in the recent frenzy and decided that it actually makes sense to apply coercive regulations to reduce human carbon dioxide emissions. Let’s further suppose that you’ve caught up to the 21st century and know that imposing specific technology standards on particular sources of emissions is a sign of policy incompetence: You know that market-ish mechanisms can do a much better job than technology standards of allocating clean-up tasks to the lowest-cost producers; you know that market-ish mechanisms provide incentives for private innovation in emissions control while technology standards stifle better ideas.Congratulations! You are now about where the public policy debate has fallen these days — naive about the quality of the natural science involved but possessing a sound insight about the smartest way to do a foolish thing.
Read the rest.
Posted by Rand Simberg at 04:41 AMHere's a paper with twenty of them. A useful corrective to economic ignorance.
[Via Lynne Kiesling]
Posted by Rand Simberg at 06:04 AMIf only it worked. Robin Hanson has a brilliant solution to stock market volatility:
Congress could give some well-regarded "best and brightest" regulators a big pile of cash, say $100 billion, and have them correct prices by trading, buying when they think prices should rise and selling when they think prices should fall. If regulators really do know how to choose good price pushes, then not only will they correct "biased" stock prices, they will increase their pile of cash, and we won't need to give them any more.If, however, regulators lose their pile of cash, let them come back to Congress begging for more, explaining how they had it all wrong before, but now they know when to push prices up versus down. And after very some public hang-wringing, let Congress give them another $100 billion to work with. And if regulators come back a few years later asking for even more money, explaining how they had it all wrong again, but now they know how to do it right, let Congress given them another very public scolding, along with another $100 billion.
And if regulators lose that pile, maybe Congress and the public will have had enough, and will quit the price fixing business. Fool me once, shame on you; fool me thrice, shame on me. The $300 billion will have been well worth it to clearly show regulator inefficiency, especially since that money would just have been transferred to financial speculators, the people who really rationalize stock prices.
Sadly, though, I suspect that many still wouldn't get the clue.
Posted by Rand Simberg at 03:05 PMLileks writes about his trip to Trader Joe's:
I bought some sauces, including a pasta sauce that turned out to be too brackish for my tastes, and a bottle of three-buck Chuck
I could swear that just last year, on my many trips to CA, it was still two-buck Chuck. When did it go up, and why by fifty percent? I know, it's only a buck, but still.
[Update in the afternoon]
And speaking of Trader Joe's, when are they going to start opening stores in south Florida? I'd think there'd be a huge market for them in Boca. I wonder if it has something to do with the state liquor regs? Looking at their site, it appears that the closest one is in Georgia.
Posted by Rand Simberg at 05:58 AMSounds like a bad day for the market. Of course, it never helps when the exchange for a major trading partner starts the day down almost ten percent.
[Update]
This is not investment advice (oh, no) but this is probably a buying opportunity.
Posted by Rand Simberg at 12:50 PMDon't be a science fiction writer.
Posted by Rand Simberg at 06:49 PMBrian Doherty writes about the lives of Milton Friedman.
Posted by Rand Simberg at 05:24 AMIn Venezuela. Somebody needs to tell socialist authoritarians like Chavez that that trick never works.
Posted by Rand Simberg at 11:13 AMLarry Kudlow gave a speech on Sunday in DC on "the greatest story never told." He's starting to tell it. You'd think that, with the Democrats running the Hill, the media would like to talk about the great economy now. But I guess they're still afraid of George Bush getting any credit. (Not that presidents have that much to do with the state of the economy, contra all the people who foolishly didn't want Clinton removed from office because we had a high stock market, but the tax cuts certainly helped.)
Posted by Rand Simberg at 02:04 PM...and global warming. An interesting post from Jane Galt.
[Mid morning update]
Randall Parker has further global warming thoughts.
Posted by Rand Simberg at 06:35 AMProfessor Postrel writes about the myth of physics envy in economics.
Posted by Rand Simberg at 05:33 AMFor people looking for...you know...actual bad economic news. Oil prices are at their lowest level in a year and a half:
U.S. crude fell $1.63 to $54.46 a barrel on the New York Mercantile Exchange, after tumbling more than $2 earlier in the session. Brent crude traded down $1.28 at $54.32.Both international benchmarks were at their lowest since June 2005.
"$55 was very strong support that has been broken and below that is not much," said Olivier Jakob of Petromatrix. "If we close below $55, the next big support level isn't until $50."
Weather forecaster DTN Meteorologist predicted above normal temperatures for the rest of the week in the U.S. Northeast, extending an extraordinary streak of mild winter weather in the world's largest heating oil market.
U.S. heating oil demand will run about a third below normal this week, the National Weather Service said Monday.
The steep price drop has rung alarm bells in OPEC producers and the group's president, the United Arab Emirates, is discussing further action with member states. But traders remained doubtful that OPEC could turn the tide.
I blame George Bush.
No, really. I mean, it's caused by global warming, right? And isn't that his fault?
Seriously, this does point out that GW, even if it's occurring, is not an all-bad thing. We generally use fossil fuels for heat, whereas air conditioning is generated by electricity, which can be produced with nuclear and other means. It's a complicated world we live in.
Posted by Rand Simberg at 08:50 AMAn interesting essay from Arnold Kling:
One of my strongly-held beliefs, for which I tend to attract supporting evidence and repel contrary arguments, is that markets process information more effectively than does the political process. Perhaps it as an exaggeration to refer to the market as the "world of truth," as Tim Harford does in The Undercover Economist. However, it strikes me that it is easier for market forces to drive a bad firm out of business than it is for political forces to extinguish a policy that fails to meet the objectives that purportedly drive its enactment.Those who believe in the wisdom of the political process might argue that the competition between political elites--between Democrats and Republicans or between Krugman and Limbaugh--promotes reasonable outcomes. However, I suspect that the net result of this competition is to lead to greater accretion of government power, giving the elites more to fight over. Politics ultimately becomes a competition to promise the undeliverable, whether it be better public education, inexpensive health care, or government suppression of drug abuse or sexual immorality.
Emphasis mine. That's why it's so important to get a private space industry going. A government space program will inevitably be captured by its rent seekers, and be almost invariably ineffective (and even counterproductive) in its stated goals, particularly given how unimportant those goals are to the body politic.
Posted by Rand Simberg at 06:54 AMIs the end of the Euro in sight? I'm actually surprised that it's lasted this long.
Posted by Rand Simberg at 07:34 AMWith all the bashing of Walmart and other chains, Virginia Postrel has some palliative thoughts.
Posted by Rand Simberg at 06:14 AMToday's Journal has one for Milton Friedman.
Posted by Rand Simberg at 06:12 AMI'm hearing that Milton Friedman died last night. RIP and condolences to Rose.
More thoughts later.
[5 PM Update]
Glenn has some relevant links
As many have noted, he wasn't just an economist, but (like Hayek) a tireless fighter for human liberty.
[Update at 7:30 PM EST]
Here's another link roundup. Here's one from Brian Doherty:
Undoubtedly the most successful and influential proponent of libertarian thought in the 20th century, Milton Friedman, died last night at age 94. His successes as both a technical economist and libertarian polemicist are enormous. We can thank him, in large part, for happy events from the elimination of the draft to the conquest of inflation. Just a quick note now–his impact was staggering, and there could never be enough words said in praise of him.
And as is pointed out, the collectivist ghouls at Democratic Underground are partying.
[Late update]
For the uninitiated, here's a list of Milton Friedman books
Jacob Weisberg writes about the illiberal, Lou-Dobbs Democrats:
For some reason, economic nationalists never seem to complain about job-killing Dutch or Irish competition. The targets of their anger are consistently China and Mexico, with occasionally whacks at Dubai, Oman, Peru, and Vietnam....Economic nationalism is not unique to Democrats—nor is it a new theme. The protectionist wing of the party emerged in the 1980s when America's manufacturing decline was first linked to imports and foreign competition. For years, the protectionist urge was exemplified by Richard Gephardt (who focused on Japan and Korea rather than China). But during his 1992 campaign, Bill Clinton made a key decision to support NAFTA. Clinton espoused a strong free-trade position and embraced globalization through his presidency. This set the direction for his party, despite significant resistance in Congress. Clinton's argument was always that government should address the negative consequences of open trade through worker retraining programs and by providing benefits not tied to employers, like health care and portable pensions. But that human-capital part of Clinton's globalization agenda never went anywhere, which partially explains the current backlash.
Free trade was one of the few things that the Clinton administration actually got right (at least, in the absence of pressure from the Republicans). Aside from the war, this is one of the worst potential consequences of the election.
[Via Virginia]
[Update at 8:15 Mountain Time]
Jeff Flake says that one of the reasons that the Repuplicans lost Congress is that they forgot these lessons as well:
The Farm Bill probably provides the best example of where we've gone wrong, and what we need to do to hew back to our first principles.During the 1990s, then-Sen. Phil Gramm accurately described U.S. farm policy as "enough to make a Russian Commissar puke." The Republicans assembled the "Freedom to Farm Act," which, starting in 1996, put U.S. farmers on a glide path toward an end to subsidies. Somewhere between the field and the silo, however, we became mired in the political mud. In 2002, we repealed the Freedom to Farm Act and in its place installed the "Farm Security Act" -- those who value the adage about trading freedom for security can pause and shudder here -- with even more lavish subsidies.
Now, with reauthorization of the Farm Bill on the horizon next year, we have to decide whether we will up the ante with Democrats in terms of red state/blue state politics in the heartland, or whether we believe our own rhetoric about free markets. This debate will have implications larger than the fiscal one. Most notably, it will determine if we are serious about the future of free trade.
But it's about more than that. Read the whole thing.
Posted by Rand Simberg at 05:57 AMAccording to the betting at Tradesports, the Republicans have a 66-69% chance of retaining the Senate, which is down from a few days ago.Yet the Democrats are ahead in all of Tradesports’ closest Senate races...
Probably not. Of course, as the Lindgren notes, and is discussed extensively in comments, the individual races are individual, whereas the Senate overall is a joint probability of them. And there's little way to figure out how independent they are of each other.
Posted by Rand Simberg at 11:39 AMAn interesting essay at the Journal.
Posted by Rand Simberg at 05:02 AMWith oil prices plunging, and new discoveries occurring, it's time to take a fresh look at the ethanol boondoggle.
Posted by Rand Simberg at 04:07 PMChicken Little
"The sky is falling"
Prices could plunge:
...many of the conditions that drove investors to bid up oil prices are ebbing. Tensions over Israel, Lebanon and Nigeria are easing. The hurricane season has presented no threat so far to the Gulf of Mexico. The U.S. peak summer driving season is over, so gasoline demand is falling.With fear of supply disruptions ebbing, oil prices began sliding. With oil inventories high, refiners that turn oil into gasoline are expected to cut production. As refiners cut production, oil companies increasingly risk getting stuck with excess oil supplies. There's already anecdotal evidence of oil companies chartering tankers to store excess oil.
All this is turning financial markets increasingly bearish on oil.
"If we continue to build inventories, and if we have a warm winter like we had last winter, you could see a large fall in the price of oil," said Gary Pokoik, who manages Hedge Ventures Energy in Los Angeles, an energy hedge fund. "I think there is still a lot of risk in the market."
As it stands now, the recent oil-price slump has brought the national average for a gallon of unleaded gasoline down to $2.59, according to the AAA motor club. In the Seattle area, prices per gallon have fallen to $2.856 currently from $3.071 a month ago, a decline of 7 percent, according to AAA.
Should oil traders fear that this downward price spiral will get worse and run for the exits by selling off their futures contracts, Verleger said, it's not unthinkable that oil prices could return to $15 or less a barrel, at least temporarily. That could mean gasoline prices as low as $1.15 per gallon.
I, of course, blame George Bush. Like the booming economy, it's all part of the evil Rethuglican plot to maintain control of the government, and not relinquish power this fall. Speaking of which, maybe I should put up a Bruce Gagnon countdown clock. It would be updated daily, counting the number of days that Bruce remains correct, and the number of days that Bush has continually refused to relinquish his power since January, 2001.
Posted by Rand Simberg at 09:34 AMIn a "man bites dog" moment, Lester Brown gets something right:
Just a single fill of ethanol for a four-wheel drive SUV, says Brown, uses enough grain to feed one person for an entire year. This year the amount of US corn going to make the fuel will equal what it sells abroad; traditionally its exports have helped feed 100 - mostly poor - countries.From next year, the amount used to run American cars will exceed exports, and soon it is likely to reduce what is available to help feed poor people overseas. The number of ethanol plants built or planned in the corn-belt state of Iowa will use virtually all the state's crop.
This will not only cut food supplies, but drive up the process of grain, making hungry people compete with the owners of gas-guzzlers. Already spending 70 per cent of their meagre incomes on food, they simply cannot afford to do so.
Time to stop this latest nuttiness in farm subsidies.
Posted by Rand Simberg at 08:32 AMThe original poverty line was based on having enough money to select a nutritious diet in 1963. It was $3,100/year for a family of four with two adults and two children. In 2005, it was $19,800. In constant 2005 dollars using the consumer price index, the 1963 poverty line would be $18,900. Using the GDP deflator (which is based on changing rather than fixed buying patterns), we get $15,400. That is, a family at the poverty line today will buy different items today implying a $4,400 improvement in the standard of living from 1963 to 2005.
Life expectancy has gone up almost 5 years over that time. The white/black life expectancy ratio has been converging from 1.11 to about 1.07 over the same period.
Both the GDP deflator and life expectancy measures indicate those below the poverty line are getting better off in an absolute sense. A couple more are in this week's Economist. The definition of poverty evolves over time and is more of a curve than a line so that there will alway be people in poverty.
Posted by Sam Dinkin at 03:33 AMSo writeth Jane Galt (not the first time she's clamored for this).
While undoubtedly the discovery that most of the tax burden falls on employees will be for some a strike against the tax, and for others a sign that we need some stiff laws to force those corporations to place the burden elsewhere, it seems to me that this piece of information makes the corporate income tax no less attractive than it was before--which is to say, not at all. Levying a corporate income tax is a very inefficient way to do what we want, which is to redistribute money from the company's richer owners, customers, and managers to its poorer employees.(All right, maybe we don't all want to do this; no doubt many of my readers are even now cringing in horror at the thought. But let us posit, for the sake of discussion, that we do want to do this, because that is at heart of all the arguments I have ever heard in favour of the corporate income tax, and even assuming the ends, the means make no sense.)
I agree. The corporate income tax is nuts, and arguments for it are born purely of economic ignorance.
Posted by Rand Simberg at 06:01 AMHas the oil fever finally peaked?
...the recent record-high prices have fueled a boom in exploration. And as that boom begins to yield more oil, the industry will gain a greater ability to ramp up production in one place in order to make up for any shortfall elsewhere.This should reduce the impact of a supply disruption in, say, Iran or Nigeria, and ease what experts refer to as the security premium that's currently build into oil prices.
"That [premium] is in the neighborhood of $25 dollars a barrel," said James Williams, an energy economist at the consultancy WTRG Economics. "That number would go away, or most of it would go away, if we had more spare production capacity."
And that's not even considering shale and the tar sands, which are now coming on line, and will remain that way, as long as prices don't drop back into the twenties.
Posted by Rand Simberg at 11:16 AMProperty prices are rising fast in Eastern Europe according to Financial Times:
...property prices in Riga, the Latvian capital, surged by 45.3% in the year to June, following on from a rise of 73.5% in the preceding year, with growth also buoyant in Bulgaria and Estonia. Mr. Bailey [head of residential research at Knight Frank] attributed this to a "levelling up" of prices across Europe, particularly in the former eastern bloc nations that have joined the European Union. "Wage inflation, growing prosperity and access to less constrained mortgage finance have all contributed to rapidly rising prices," he said.
The same transformation could occur wherever property rights are dim and mortgage rates are high. I am thinking of Jamaica, Lebanon, Mexico, Iraq and many, many other places around the globe. Dollarize (or Euro-ize) the economy, offer subsidized mortgages, low property and capital gains taxes for houses, no rent control and put home improvement shows on TV and we will have a global home boom. These are sitting assets that can be taxed and repossessed. They create a home ownership culture, security of a locked door and a place to hang mosquito netting. $30,000 of cinder block housing for every 4th person on the globe would be $45T. This is the head end of the promise of capitalism with liquid lending.
Posted by Sam Dinkin at 08:19 PMDon Boudreaux says that we need to ignore global warming:
Those of us who recognize these important benefits of capitalism -- those of us who understand that capitalism's true greatness lies not (as many critics insinuate) in producing oceans of pointless trinkets and baubles but in making the lives of ordinary people richer and fuller and longer -- are reluctant to yield power to governments to tackle global warming. We worry that this power will kill the goose that's laying this golden egg.If you think that such a worry is exaggerated, recall the language Al Gore used in his book "Earth in the Balance." The former Vice President asserted that we are suffering an "environmental crisis" that can be avoided only if we "drastically change our civilization and our way of thinking."
"Drastically change our civilization." Hmmm. This sounds like a call to significantly scale back markets, trade and industrial activities in order to lessen humankind's "footprint" on the Earth and its environment. We can, no doubt, make our environmental footprint smaller -- but how great a benefit will this achievement be if it returns us to the ages-old condition of high mortality and morbidity?
I wasn't sure whether to file this under "Science And Society," or "Economics." Had to go with the latter (particularly since so much of the global warming debate is entirely devoid of this topic).
Posted by Rand Simberg at 11:06 AMI know a lot about solar power and trust me, space solar power is not a good option.
Elon Musk, Aug 3, 2006
When Caltech looked at the sailboat that lost the America's Cup, they found that it had less drag being dragged backwards than forwards.
The case for beaming solar power to Earth is bad. So bad that it actually works better to beam from Earth to space.
A coal plant costs about $0.75/watt peak capacity ($1B for a 750MW plant), plus $0.07/Watt Year (Wy) in coal to run all the time. Space solar costs about $202.5/watt. Let's make the heroic assumption that we can build and launch 100,000 kg satellites. If we need a team of 12 people earning $15 an hour to take care of the satellite ground operations ongoing, then we can keep the $360k in wages to $0.07/Wy.
What about $100/kg launch costs (1% of now) $0.025 manufacturing costs (1% of now) where we can expect the floor of orbital transport prices to be for decades because that is 10% of the price of the existing suborbital flights that have $10 million in deposits. Surely at $10,000 to orbit, there would be enough takers to sell out capacity until a major construction push on orbital launch capacity was made. At $2.025/watt, and 10% interest, coal prices would still need to triple to make the math work. That is, we need a factor of 300 through some combination of lower launch and manufacturing costs, watts/kg, coal taxes or emissions credits.
On the other hand, we get about 8% energy efficiency sending power from the Earth to the Moon. That translates to $1.80/Wy for Earth power on the Moon vs. $20.32/Wy for solar (at the pole!). Add $175/w for lasers and $313/w for mirrors (or about $100 million for four 2.5 meter mirrors and 8 2.4 kW lasers), then we can increase comm. sat. launch payload by 50% to save a good fraction of $1 billion per year in launch costs and billions more by having longer lived satellites and lower insurance costs. In the mean time, we can run satellites whose batteries have gone down or whose solar panels never fully deployed for longer and with more function ($500 million/year estimated value).
So shoot the energy into space to colonize space and the Moon. When the prices for space manufacturing come down to Earth, then we can talk about space solar.
Posted by Sam Dinkin at 08:26 AMThe Economist this week takes on the myth that we need our education system and economy to produce more scientists and engineers. If scientists and engineers are so valuable, why do they make less money than doctors, lawyers and business consultants? I shudder every time I hear doom predicted because of Asian engineers.
...doomsayers are guilty of the “techno-fetishism and techno-nationalism” described in 1995 by two economists, Sylvia Ostry and Richard Nelson. This consists, first, of paying too much attention to the upstream development of new inventions and technologies by scientists and engineers, and too little to the downstream process of turning these inventions into products that tempt people to part with their money, and, second, of the belief that national leadership in upstream activities is the same thing as leadership in generating economic value from innovation.Posted by Sam Dinkin at 09:36 AM
Since people like pennies, but the Mint is losing money on them, let the Mint publish a specification for pennies and let people make their own.
Posted by Sam Dinkin at 06:56 AMRich Lowry is a man after my own heart.
[Update at 11:30 Pacific]
Here's a more recent post from me on the subject.
Posted by Rand Simberg at 10:55 AM...must be spinning in its little tiny coffin, at the recent economic growth and deficit reduction numbers:
Did you know that just over the past 11 quarters, dating back to the June 2003 Bush tax cuts, America has increased the size of its entire economy by 20 percent? In less than three years, the U.S. economic pie has expanded by $2.2 trillion, an output add-on that is roughly the same size as the total Chinese economy, and much larger than the total economic size of nations like India, Mexico, Ireland, and Belgium....here’s another suppressed fact: Since the 2003 tax cuts, tax-revenue collections from the expanding economy have been surging at double-digit rates while the deficit is constantly being revised downward.
And I'll bet that the Norwegian whaling industry does as well. A whale was shot down while being watched by tourist whale watchers:
Jan Kristiansen, who represents the whalers, defended the shootings. He claimed the whalers were simply taking advantage of the nice weather, when the hunting is best."Many of the whaling boats had been tied up at the dock for several days, waiting for better weather," he said. "When it finally came, we have to make the most of it."
Kristiansen claimed that he and the other whalers "don't have anything against the whale safari boats... but it's important to get across that it's the extreme opponents of whaling that travel out to see whales.
"We can't prevent them from being against the hunt, and they can't prevent us from hunting."
He's obviously never met American environmentalists.
And, yes, I did have trouble finding a category for this one.
Posted by Rand Simberg at 04:58 PMEnviroidiots are shocked and disappointed to discover that Europe isn't meeting its Kyoto goals.
Missing CO2 targets makes baby Algore cry. Baby Jesus doesn't give a rip, though...
Posted by Rand Simberg at 02:42 PMI've heard a number of people warn us that oil prices could double, or triple, in the event of a new disturbance (e.g., Iran) in the Middle East. I think that this is ludicrous. So does Larry Kudlow. He explains.
Posted by Rand Simberg at 02:16 PMSupply-side economics works:
The country was facing the largest projected deficit in history when Bush promised to halve it as a percentage of GDP by 2009. Due to high wartime spending and the residual effects of the 2000–01 recession, the White House expected the 2004 deficit to reach $521 billion, or 4.5 percent of GDP. Bush’s goal was to reduce this to 2.25 percent by 2009.After all the beans were finally counted, the 2004 deficit came in at $413 billion—roughly 3.5 percent of GDP. The economy had begun expanding, partly in response to Bush’s tax cuts, creating jobs and boosting revenue. This trend continued into the next year, pushing the deficit down to $319 billion in 2005.
This year, the projections look even better. Through the first eight months of this budget year, the deficit is $227 billion—16.7 percent lower than this time last year. That’s largely because government revenues in these eight months have reached $1.545 trillion, up 12.9 percent from last year.
Of course, as the editorial points out, that's no excuse not to get spending under control.
Posted by Rand Simberg at 07:49 PMThe Economist Friday said:
In a rare instance of economic consensus, almost everyone now agrees that the current-account balance, which was over $800 billion in the red at the end of last year, is unsustainable.
They should know that there is no such thing as a consensus of economists. I am not a macro guy, but if the US economy continues to generate capital (intellectual property, companies with lots of educated workers, houses, etc.) at a tremendous rate, then the capital surplus will result in other countries giving us non-capital goods in exchange for our capital goods. A capital surplus and a trade deficit are the same thing.
For all our regulation, taxes and flaws in our judicial system, most of the rest of the globe has less rule of law, higher taxes and more flaws in their judicial systems. The US is a great place to make safer investments like real estate and blue chip corporate bonds. Do you think the Norweigians and Saudis invest their huge current account surplus in their own respectively not so dynamic and not so productive economies?
As I said before, our human and physical captial stock is growing by a lot. Even though the average house price went down for one quarter, it has been growing at 6.5% in money terms for 43 years or 2.1% accounting for inflation. That leads to $440 billion in appreciation of the existing capital stock. The number of homes has also been growing. I estimate this by looking at the home ownership rate, the number of people per household and the growing population. Together they indicate we add another 1.8% a year to the housing stock in numbers. (This could be offset by less rental housing capital, but I doubt it.) So that is about $800 billion we are adding to the housing capital stock and residential housing construction is just 3-4% of GDP.
We can grow the US owned capital stock forever and have plenty left over to sell to foreigners.
Posted by Sam Dinkin at 02:11 AMEvery year, I do an annual column on taxes. It is a little later this year than last year and all I can say in my defense is that I filed an extension and that Austin is in the hurricane affected areas (at least according to the IRS).
I have a surefire way for taxes to be reduced. Republicans claim to be for low taxes. Democrats should be. Do Democrats really want Republicans to spend more than $2 trillion every year that they are in power on their own things?
Here's the three point plan:
1. Express tax owed as a percent of the dollar you get to keep as opposed to the last dollar of "gross" income. I put gross in quotes because for most people everything beyond net goes straight to the Government in the form of payroll deductions. In my book, if you don't get it, it's not income.
In the top tax bracket (ignoring various phaseouts), if you take home $0.65, you pay $0.35 in income taxes for the privilege. That's a 54% tax rate if you look at it like sales tax. If you add in medicare, it's a 57% tax rate. You and your employer pay $36.45 for you to take home $63.55.
Government expenditure can be reported as 25% of private GDP instead of 20% of the economy.
Living in a city where more than 50% of property taxes leave the jurisdiction, I can say from experience that people get real mad when more than 50% of anything is going away (or more than 100% of what stays in the district). Framing it that way will reduce taxes.
2. Report employer "contributions" toward social security and medicare as a percent of net take home pay and lump it together as a sum. Paying 16.6% of take home pay seems more like a crisis than 6.2% and 1.45% of "your share". I put "contributions" and "your share" in quotes because an employer considers the entire cost of an employee. If that money was not paid as taxes, that could be paid as salary and the employer would still be hiring.
3. Have all people file quarterly tax returns and write a check for their taxes. Dick Thaler has done research showing that the more often people consider their st0ck market portfolio, the more unhappy they become even if the daily fluctuations even out and people make a bundle. They turn out to be extra sensitive to small losses and become more unhappy frequently they consider them.
This can be turned to advantage for tax cutters if people are forced to consider the burden of taxes more than once a year. If instead of direct payroll deductions, taxes were put in a notional federal checking account and taxpayers had to write a big check every quarter instead of be pleasantly surprised by a small refund, we would see a lot of unhappy people.
The Mugabe (mis)government has come up with a novel solution to inflation:
Official sources said the recent 150 percent pay rise for soldiers, teachers, policemen and nurses had put a strain on money supply.Reserve Bank officials told IRIN that plans to print about Zim$60 trillion (about US$592.9 million) were briefly delayed after the government failed to secure foreign currency to buy ink and special paper for printing money.
Brings a whole new meaning to the phrase "not worth the paper it's printed on."
This whole article almost reads like something from the Onion, it seems so absurd, but it seems to be a real story. Has any nation in recent history declined so far as the current Zimbabwe has from the Rhodesia of the sixties, then one of the richest nations on the African continent?
Posted by Rand Simberg at 09:27 AMThe Senate immigration bill extends Davis Bacon to private businesses. In addition to being a blatant violation of federalism (though sadly no more so than much other federal legislation), this would be a disaster for small businesses nationwide. Encourage your congressperson to kill it in the House.
Posted by Rand Simberg at 08:46 AMEpstein in WSJ and Satel in NYT both say something needs to be done about kidneys (reversing the Ethicist's stand). They both look to big payments to kidney sellers as a way to stop "6,500 excess deaths" due to lack of kidneys.
It is against the law to offer "valuable consideration". Kidney buyers can take the matter into their own hands and not wait for a law change. Instead of a "valuable" consideration for a sold kidney, consider the following proposal:
It would work like life insurance in reverse. Kidney buyers would pay lots of people a consideration that doesn't trigger the "valuable" language. In the absense of a kidney being delivered on death if one is available, the estate of the deceased would owe a payment. Some donors might sign the commitment without a consideration just to create a strong incentive for their family to honor their wishes with regard to donation.
The proposal is not sensitive to the needs of the grieving family, but I would rather have 3250 irate families than 6500 extra prematurely grieving ones due to a lack of kidneys.
Posted by Sam Dinkin at 06:56 AMThomas Sowell asks if thinking has become obsolete.
I doubt if this is a new phenomenon. I suspect that it's been a problem down the ages, as have many aspects of human nature.
[Update a couple minutes later]
More evidence for my proposition.
Posted by Rand Simberg at 08:01 PMThe carbon emission offset market in Europe is in crisis because of an unexpected 50% price drop in the last couple of weeks. True to Europe, the traders are demanding government intervention to prop up the price(!) of carbon offsets. While it is true that the governments can afford to buy more, why would they want to? The high price of hydrocarbons will curb carbon emissions.
Assuming that the coal/methane/nuclear balance continues to move toward nuclear for electricity, high gasoline prices mean less carbon. So either we will run out of oil or we will have high CO2, not both.
Posted by Sam Dinkin at 04:46 AMThis is really a shame, because in the context of modern lifestyles and medicine, he wasn't that old. I was a devoted Wall Street Week fan for decades.
Despite his loss of the ultimate battle, I'll always remember him as the eternal optimist, an attitude well justified by events.
Posted by Rand Simberg at 10:15 PMAccording to this, pennies are now worth less than their cost of manufacture. My rule for getting rid of a coin is the point at which you can no longer purchase anything with a single one of it. In fact, at this point, with multi-hundred-thousand-dollar houses, and new cars costing over twenty thousand dollars, is there even anything that you can buy with a nickel any more?
Time to can the coin, and come up with some other way to honor Mr. Lincoln.
Posted by Rand Simberg at 07:54 AMIn The Ethicist column in the New York Times Magazine last month, Randy Cohen talked about organ transplant sales being unethical:
For a system of acquiring organs to be ethical, it must be equitable, which is not the case when one economic class is exploited (and put at significant medical risk) for the benefit of another. And exploitation it is when the seller is not making a truly voluntary decision but responding to financial desperation.
Organs are different than jobs. But the difference is not financial desperation.
Posted by Sam Dinkin at 10:58 AMWell, actually, power from the people:
I've always thought it'd be cool if we had giant turbines powered simply by brawn, sort of like that mill-thingy that made Conan so strong in the first Conan movie. I'm not talking slave labor, but if we could work out the technological kinks we could hire people at minimum wage to push a giant wheel around and around generating electricity much the same way dams do. Teenagers who couldn't find other work could do it. They'd get in shape, stay out of trouble, and earn a few bucks. Unemployed people would always have at least one fall back job available to them. It would help with health care costs as it would provide ample exercise. There would be no damage to the environment and pretty much the only foot print would be, well, footprints. People who worked nights or in bad weather would be paid a bit extra. PIRG hippy volunteers could do it too, in their spare time. Every human turbine spin is one less gallon of oil pumped from the ground.
Though, as he notes in the preamble graf, he's not sure about the economics of it. I can assure him that it's nuts.
But it reminds me of an idea I and some colleagues at Rockwell had back in the eighties about how to get the public more involved in space. Since one can view the space program as the modern-day equivalent of a cathedral, or building pyramids, why not get the masses into the act? Instead of using those big diesel engines on the Crawler at the Cape, why not harness human muscle power? We could have hundreds of people--volunteers--pulling on ropes, hauling the giant vehicle down the causeway. I think that it would be quite symbolic of...something.
Maybe.
Housing starts are down, more than expected.
Just anecdotally, we've had several houses on our street for sale for months, and they're not moving. One house down the street was on the market for almost seven hundred thousand last fall. It's now for sale by the owner. He had marked it down to six something. Yesterday I noticed that the sign said "price reduced" and the flyer no long had a price.
I also noted that Zillow has dropped its estimate of our house in east Boca Raton over the past few months, by about ten percent.
Posted by Rand Simberg at 08:36 AMDennis Wingo makes a curious statement in a comment to my April Fools post.
Space tourism is a wealth depleter, not a wealth maker.
Is there something unique about space tourism that makes it a "wealth depleter," or is it true of tourism in general? If so, I suspect that the region around Orlando, Florida would find it a surprising statement. As would Hawaii, or much of the Caribbean. Or France.
I've had this argument before, once on the NASP program, with a second lieutenant who didn't believe that something had value unless you could drop it on your toe (in defiance of the market, in which people part with their money every day for non-material items).
I often complain about politicians who are focused on creating jobs, rather than creating wealth, which is why we have a very expensive, and not very productive space program. But what is wealth? I don't know what Dennis means by his statement, but I'm quite confident that he's very, very wrong. Which society is wealthier--one in which no one travels anywhere, or one in which many do?
There is value in tourism--if there weren't, people wouldn't pay money for it (and travel and tourism are among the top three industries on the planet, measured in the trillions of dollars). A world in which people can afford to go into space, and indulge themselves in their desires to do so, is a world that is wealthier than a world in which they cannot. Moreover, the space passenger market is just the kind of market needed to drive launch costs down, and reliability up, which is a necessary condition for many other space activities that Dennis presumably would consider "creating," rather than "depleting" wealth.
Truly, I find this statement utterly baffling.
Posted by Rand Simberg at 03:30 PMNathan Myhrvold, CEO of Intellectual Ventures, former CTO of Microsoft, is calling for the Supreme Court to hang firm on patent property rights in "Inventors Have Rights, Too!" in the Wall Street Journal.
Goliath is crying "Unfair! Take David's sling away!" Without full rights there is no way for a small inventor to get a big infringer to the table to settle. Instead, they'll stall and drown the little guy with legal fees. The courts would be put in the middle and have to decide all future licensing revenue. Is that the way we want to run an innovative economy?
If we prevented people who owned houses and cars from removing people who were infringing their rights there, it would be pretty clear that the rights would be worth a lot less.
But how should we grant these patents? Is it sufficient to stick a virtual flag in meme space like a 16th century explorer? Should there be a time window when many can make a filing after the initial filing and the patent right auctioned to the highest bidder with all of the filers getting a portion of the royalties?
-----Update 2006-03-30 09:21-----
The Economist weighs in too. They say save injunctions for "irreparable harm" which strikes me as a rotten standard. Either money is good enough and royalties can be decided in the courts or it isn't and patent holders need a stick.
Posted by Sam Dinkin at 05:55 AMI've always doubted it. As many have predicted (and long before it was even implemented), it may be starting to die from its own internal contradictions.
Posted by Rand Simberg at 05:13 AMAl Gore and David Blood write in the Wall Street Journal today:
Our current system for accounting was principally established in the 1930s by Lord Keynes and the creation of "national accounts" (the backbone of today's gross domestic product). While this system was precise in its ability to account for capital goods, it was imprecise in its ability to account for natural and human resources because it assumed them to be limitless.
They go on to advocate environmental accounting which would favor Gore's carbon tax from Earth in the Balance. This is good public policy, but rather than showing we are "operating the Earth like it's a business in liquidation," a sensible green accounting would show laws have curbed the dirtiest polluters, disease has subsided, pesticides and herbicides have fewer side effects, beautification campaigns have made our cities prettier and our parks more accessible, and our toxic sites have been cleaned up. In short, the Earth is now the best place to live it has ever been. Before the industrial revolution there was very dirty heating and lighting fuel, poor water sanitation, air filled with animal and human waste smells, poor food sanitation, poor isolation of pathogens, poor measurement and science of environmental hazards and few resources for transportation to or improvements of parks.
Taxing petroleum and especially coal when energy prices are on an uptick is politically tone deaf. A subsidy for carbon offsets might play OK. These would harvest additional greening without the heavy hand of central planning. But if they are written right, they might cheer the glad capitalists more than the sullen environmentalists.
I do think that it is wise for space enthusiasts to support green accounting--without it, it is unlikely that space solar or He-3 will ever be economically viable (which is not to say that they will be with it).
Posted by Sam Dinkin at 08:00 AMPoliticians fight for jobs and their constituents love it. Governments write reports that laud politicians on their success at achieving jobs often double counting. Who gets the thousands of jobs that are created when a factory or government building opens? The same people on average who lose a job when a factory closes. Who gets the jobs that are created when those primary jobs created demand for additional services? The same people who lose the jobs in other parts of the country where people are leaving. The number of jobs gained nationwide is not positive sum unless people there is immigration or a fall in unemployment. Once you set monetary policy and tax policy and immigration policy, government subsidy for jobs is a zero sum game or a negative sum game.
A typical report on the economic impact of government activity is the Federal Aviation Administration's Office of Commercial Space Transportation report, "The Economic Impact of Commercial Space Transportation on the U.S. Economy: 2004". The report measures three types of impacts on the US economy:
- Direct impacts are the expenditures on inputs and labor involved in the provision of any final good or service relating to the industries analyzed herein.
- Indirect impacts involve the purchases (e.g., silicon, copper wire) made by and labor supplied by the industries that provide inputs to the launch and enabled industries. This impact quantifies the inter-industry trading and production necessary to provide the final goods and services.
- Induced impacts are the successive rounds of increased household spending that result from the direct and indirect impacts (e.g., a launch vehicle engineer’s increased spending on household goods and services).
The direct impact of space spending is $17 billion. The indirect and induced impacts are over $80 billion.
But if there was no commercial launch industry or there was no factory in state X or no government jobs boondoggle in state Y, how would the economy be effected? Every industry generates a penumbra of jobs that it creates in other industries. But if you add up all of the jobs that are created by all the industries in the country, you will be double counting. Each industry creates all the jobs for its own industry. If you look at all the suppliers of an industry, they will all be counted in their own industry too.
Are some jobs different? Primary jobs that are better at creating a cascade? No. The economy is good at balancing what it builds. If there is an economy that only produces hot dogs and buns, if we get twice as good at making hot dogs, some of those people who made hot dogs will go to work making buns.
If there were no space industry, the people who mine the copper would either sell it to someone else or go do something else that people would want to buy. No net decrease in employment.
Building a car factory that has high paying jobs in state X will attract employees from all the other states to fill it with workers. That in turn will attract support workers from all the other states. Or if the workers are already there, the factory will keep them from migrating.
Subsidies to build a factory are an interstate race that has no net new jobs at the federal level. Once people are only unemployed for a couple of weeks a year on average at most, where do you find the new workers to take the new jobs?
If new tax dollars are used to provide a subsidy, the taxes drive away as much commerce as the subsidies attract with a deadweight social loss versus not doing either. That is, the things that are taxed (like corporate profits) won't happen as much with a tax and the things that are subsidized are overprovided leading to two sources of deadweight social loss.
This is not to say that state and local government development is all bad. Governments have access to cheaper credit that they can deploy for useful purposes. (It would be more efficient to sell it to the high bidder at a direct auction or farm it out to banks who would have to share the risk, than use an all-pay political contributions auction to allocate it though.) Governments have eminent domain to get past collective action problems, but this is out of favor lately. Finally, governments have a role to play in providing public goods, although malls seem to be doing a pretty good job of providing things we used to rely on police, urban planners and taxes to provide (Glenn Reynolds, Army of Davids).
If all the development boards do is give back the taxes that they would collect from the employer they are trying to attract, that actually decreases the distortion of the tax. Better would be just to abolish the tax, the subsidy and the development agency.
If we want more jobs in the economy (a shaky proposition in its own right since some people like leisure or family arrangements that aren't classified as jobs), we should open the borders and put smart people at the Federal Reserve and write good tax law. Attracting major corporations with inducements is worse than giving money back to taxpayers. Using new taxes to attract jobs is worse for the economy than not doing it. The initiatives and laws that the public supports to obtain these jobs really do attract jobs. But they are beggar-thy-neighbor and beggar-thy-self policies that in the end destroy more wealth than they create.
Posted by Sam Dinkin at 07:27 PMI'm surprised it's taken this long.
Posted by Rand Simberg at 01:48 PMIn Offshoring: The Next Industrial Revolution in the current issue of Foreign Affairs, Prof. Alan Blinder, former Federal Reserve Vice Chairman, shows us why the New Economy had good currency at the Fed while he was there. He posits that as manufacturing takes up fewer and fewer jobs, the economy is going to mostly be two types of services: personal services and impersonal services. The former will be what almost everyone does in rich countries while they import impersonal services from poor ones.
This strikes many of the same chords as Glenn Reynolds's new book, Army of Davids (reviewed here and here).
He has a genuine dislike of teleoperation of heavy equipment expecting that, "It is unlikely that taxi drivers or airline pilots will ever be electronically delivered over long distances." Co-pilot seems to be a good job to offshore especially now that we have many trained teleoperator pilots that are already plying the civilian airspace. How often does the pilot become incapacitated, anyway? Taxi, too is a good one for offshoring. Especially if we can get a good liability regime together. DARPA already has the robot taxi contest. Maybe the tele-operator will have less to do so we won't worry so much if they are only a co-pilot for the robot. Most of a taxi driver's time is spent waiting. If that was multi-plexed so that a taxi waiting in line could be left without an operator making those trips cheaper and/or more luxurious depending on the regulations.
He also says that, "Most physicians need not fear their jobs will be moved offshore...." I agree, but mostly because the state is sharply protectionist with goverment purchases even as it promotes a free market for private industry and reaps higher taxes for the efficiency. Other countries have excellent doctors and as we spend more and more on services instead of cars and computers as they get cheaper, those doctors will compete with US doctors via telemedicine, internet drug sales, offshore dial-a-nurse and other cheaper substitutes to 7 minutes of a US physician's time.
He concludes, "Janitors and crane operators are probably immune to foreign competition...." Why? High bandwidth internet video and the crane operator will do fine. A teleoperated robot will certainly become competitive for sweeping floors and emptying trash cans if we ever get serious about blocking illegal immigration and alien workers.
He thinks that the keys to personal services are "face-to-face (child chare), inherently 'high-touch' (nursing), ... involve high levels of personal trust (psychotherapy), and some depend on location-specific attributes (lobbying)."
I think that child care can be delivered on a hybrid model with a tele-operated monitor providing alert service to an on-site home office worker. Much of nursing could be provided remotely: patient history and bedside manner can be provided by video call. Pychotherapy is denied to most of the economy who are uninsured so may be ripe for a cheap off-shore telephone alternative. Lobbying is already done on cell phones sometimes.
So what won't be outsourced? Premium services that we like a person better than we like a robot or a telepresence: waiter, massage therapist, live performer, personal chef, bartender, limo driver, concierge, greeter, agent/broker (but only for the nostalgic), coach/trainer, techster, expensive purchase sales staff, and so on. People we tip, people we seek when we want luxury will be around. People who we don't notice like sanitation workers, truck drivers, and the like are ripe to be teleoperated. Is native language without accent and native facial features important (TV performer)? If so, it will stay on shore. If a teleoperated robot can handle it and people won't freak out, it will be off-shored.
The industrial revolution of off-shoring, teleoperating, robotics and telepresence is now underway. To firms that guess wrong about what jobs to outsource, we will have to bid ta-ta.
Posted by Sam Dinkin at 12:13 PM(like the New York Times asks for) would have to lower wages further to compete with cheaper cars from Toyota North America. (Or would they just fail quicker because their employees would strike due to lower take home pay from higher taxes?)
Posted by Sam Dinkin at 11:15 AMNorthwest is going to start charging extra for some seats:
Northwest Airlines is expected to announce today that it will begin charging customers more for seats with added legroom, including coveted emergency exit row and some aisle seats. The price: an extra $15 for each leg of the flight. Northwest calls them "Coach Choice" seats.Airline experts believe such nickel-and-diming of air travelers is just beginning. By as early as the summer travel season, they say fliers could be paying for nonalcoholic beverages and the privilege of checking luggage.
Bundling all of these services is one of the last holdovers from the old days of the CAB and airline regulation, in which they used amenities to compete, because the ticket prices were regulated. But by doing so, they aren't letting the market work, and they're not getting any signals as to what passengers actually want. When I do carry-on, but pay the same ticket price as someone who is checking two pieces of luggage, I'm subsidizing them. It makes perfect sense to me to have a basic fare for people who just want to get from here to there, and have others who want more to pay for it.
Of course, it works great for me, because I don't like aisle seats, and it may make it easier to get my preferred window (something I'd happily pay fifteen bucks for to be assured of it). Not all seats are created equal, and just as there is a separate first-class section (though those are disappearing from some airlines, like Delta's Song, as well), it makes sense to price them separately rather than this nonsensical egalitarian notion of first-come first-served. I had the Worst.Seat.Ever on my red eye from LA Friday night--a center seat in an exit row that wouldn't recline. I'd have paid quite a bit to swap for at least the window, if not one that would recline (I suppose I could have just asked if anyone wanted to sell me their seat...)
The best thing to me, though, is that if we separate out the services of delivering passengers and luggage, it will make it easier to transition to a regime in which the luggage flies on a separate plane. I don't worry about hijackings since September 11 (not because of the idiotic, expensive and time-wasting security measures, but because the passengers will never allow it to happen again). But I do worry about bombs in luggage, something that we're almost certainly not doing as good a job of screening as we could (again, because of the misallocation of resources attempting to disarm passengers). I'd feel a lot safer if I knew that the luggage was on a different, cargo airplane. And taking down a cargo aircraft with a two-man flight crew wouldn't have anywhere near the emotional impact of killing hundreds of passengers, so the bomb-in-the-luggage would be a much less appealing activity to terrorists.
[Update a few minutes later]
It strikes me that it could also make sense to put in a few "wide load" seats, that they could charge more for. While people who are too large for standard seats would still feel put upon that they have to pay more (an unjustifiable grievance, to me) they wouldn't have to pay twice as much, as they do now when they have to buy a second seat. It would also make happier the people who currently have to get squished sitting next to them. One size does not fit all, even (or especially) in airplane seats.
[Update at 11 AM EST]
Per one of my commenters, maybe I'm weird, but I find the phrase "comfy aisle seat" an oxymoron. I hate aisle seats. I almost prefer a center seat to an aisle.
Why?
Because if I'm in the aisle, I have to let people in and out when they (almost inevitably) decide they want to get in and out. In addition, my arm on the aisle-side armrest is always getting jostled by everyone wandering up and down the aisles, not to mention drink carts.
I just want to get into my window seat, where I can hunker down for the flight, relax, not have to let anyone in or out, and look out the window. I cannot fathom people who prefer aisles, but apparently many do.
Posted by Rand Simberg at 07:00 AMMugabe has a novel solution to Zimbabwe's 600+% inflation--he's going to print more money.
Posted by Rand Simberg at 09:07 AMIn today's Wall Street Journal, the editors note (subscription required) that we care more about individual athletes than the US team:
Today, without a common political foe to concentrate our patriotism, personalities have come to dominate broadcasts. This is an explanation, not a complaint; no one's hankering for those Cold War tensions of yore.
A good way to bleed the power out of nationalism is to attack its very definition as mobile citizenship and superstates like the EU have done.
Posted by Sam Dinkin at 05:07 AMThis article is a few weeks old, but I missed it at the time--Max Borders writes about the Intelligent Design theories of the left.
Posted by Rand Simberg at 05:46 AMIn Shanghai:
Shanghai's housing bust comes after a doubling of prices in the previous three years, a run-up fueled by massive speculation. With China's economy booming and Shanghai at the center of worldwide attention, investors from Hong Kong, Taiwan and elsewhere were buying as fast as buildings were going up. At least 30% to 40% of homes sold were bought by speculators, says Zhang Zhijie, a real estate analyst at Soufun.com Academy, a research group in Shanghai.
This is bad news, because it could be the first stage of a collapse of the Chinese economy, with potentially very dire results for all of us.
Posted by Rand Simberg at 01:17 PMNo, Thomas, your experience is not atypical, at least going by me. I've never, ever received a rebate.
I no longer take them seriously, or even bother to send them in. If it worked once in a while, I might bother, but it's gotten to the point that it's not worth the time and hassle on an expected-value basis, even when it's fifty bucks or so. If the price is worth it without the rebate, I buy it, if not, then I don't. But I never factor in the rebate any more in the purchase decision, unless it's instant in the store. I wish that they'd stop this fraud.
Posted by Rand Simberg at 07:24 PMRon Bailey has an interesting piece at Reason about why the US is wealthy, exploding many leftist myths about exploitation and overconsumption of resources, slavery, etc. One point that I think should be added is that, while rule of law is important, if many of the laws are dumb and economically counterproductive, it's probably better to have less adherence to them than more.
I'd be interested to see a take on this from an Anglosphere perspective.
Posted by Rand Simberg at 07:37 AMAt 2.3% per capita real income growth, real income doubles every thirty years. That is, we can expect our kids to be roughly twice as rich as we are. In particular, we should stop worrying about them supporting twice as many retirees per capita. We should also stop worrying about their environmental legacy. They will have twice as many billions to devote to environmental cleanup and upgrade even if population remains constant.
One thing that would cause the social security crisis to come back in spades would be if, as is proposed in the UK, that social security is indexed to wages instead of prices. If wages are used, social security payments will double when wages double and longevity and early retirement will bear down on workers.
How much do we owe retirees? Is it the same absolute standard of living as they had when they were working? Their same relative position in the economy? These are expensive moral questions. But recognize a promise of a wage indexed gain for what it is: it is a heavy tax on the working to give more real dollars to the retirees than they gave to the retirees while they were working.
I am still in favor of privatizing government pensions, but that would in effect be a huge cut in subsidization of government borrowing. That is, without the whole social security trust fund invested in government bonds, it will be more expensive to finance government borrowing. That will either require higher taxes, increased borrowing or reduced spending to offset.
One thing I can say about that is that my daughter's generation will be twice as able to deal with it as mine per capita.
Posted by Sam Dinkin at 03:50 PMAlan Blinder, former Vice Chairman of the Federal Reserve Board, goes into why no one knows or cares about the person taking on most powerful position in the world, the Federal Reserve Board Chairmanship.
Posted by Sam Dinkin at 07:19 AMListening to the "Beltway Boys" on Brit Hume's show brings to mind an ongoing frustration with the debate.
Look, tax-rate cut fans (both libertarian and conservatives).
Expunge completely from your vocabulary the phrase "tax cuts." There's no sensible way to talk about this concept, because it's an impossible task. The government has no power to reduce taxes, at least when it comes to income. All that it can do is to reduce tax rates. Reducing tax rates doesn't necessarily result in reduced taxes, and increasing tax rates doesn't necessarily result in increased taxes.
It's like the video games that allow you to control velocity, but not position. Actually, it's not even like that, because physics is physics, and you can learn how to get somewhere with a velocity controller, but economics is unpredictable.
Those of us who want to promote economic growth have to change the vocabulary, and get people to stop talking about "tax cuts," because there's no such thing in any predictable way. Doing so may make it easier to persuade people to support lower rates, and an increase in wealth for everyone.
Posted by Rand Simberg at 10:19 PMThe amount of energy used in the economy per real dollar of GDP, "Energy Intensity", has been steadily dropping and is now about half what it was in 1950. So a barrel's worth of oil in 1950 now stretches to two barrels worth of work.
This is before the coming hybrid capital turnover in the transportation sector to double the efficiency there. So I guess prices will have to nearly double again to curb energy use like the 1970s oil shocks.
Roche announced today that it is stopping US wholesale shipments of Tamiflu to prevent "hoarding". Hoarding is exactly what they are doing. The move will shock wholesalers while people buying in advance of avian flu like me are shocking some retailers. Distributers are the last link in the chain. As they process this news, all retailers will begin to restrict access to Tamiflu. Rationing at a below market price results in the drug not going to people who value it most.
Higher prices put Tamiflu out of range of the bulk of the market. The only way they benefit from the higher prices is indirectly through the higher tax revenues from higher profits in the supply chain or increasingly as shareholders. Rationing benefits people who get the ration cards or whatever. There is an ubounded loss in efficiency when some people who want the drug are turned away because they have money, but do not qualify for a ration. An optimal policy might be a tax on emergency use that is distributed to everyone in the country equally. Don't expect politicians to adopt that one.
Doctors, pharmacists and drug companies clearly know best exactly how much to provide becaue they are so good at economics. And they are prescribing, dispensing and producing Tamiflu for the good of the country. Perhaps I know better how many doctors, pharmacists and drug companies the country should have. I think there should be a medallion system like taxis.
Previous posts: Spanish Flu Published, Flu Update
Posted by Sam Dinkin at 06:03 AMApparently, they haven't read my TechCentralStation piece. Here come the dumb stories about "price gouging":
"They are gouging me--$1,600 for a $700 generator," complained Aventura resident Jorge Linkewer, who bought the device despite the price. "My kids have medication that needs to be refrigerated."
Apparently he'd rather have no generator for his kids' medication at $700, than an actual one for $1600. Because that would have been a likely outcome had the price not increased, to discourage someone from buying one who just wanted to run his big-screen television.
Posted by Rand Simberg at 08:13 AMThere were 116 million homes in the US during the 2000 census. Now there are a couple hundred thousand fewer homes in the world and a couple hundred thousand more houses that people have been chased out of. That should fuel the housing price outside of New Orleans in several ways. First, more people will be purchasing homes outside of New Orleans. Second, more people will be renting homes outside of New Orleans driving up the price of substitutes. Third, building materials will be in high demand for a while driving up the cost of building new. Weighing against the bubble is the depression a lot of people face about the future.
High energy prices is kind of mixed for housing prices--it raises prices on close-in houses, lowers it on suburb houses, decreases business confidence, but may increase nominal house prices due to inflation.
In New Orleans, we are likely to see some fire sale prices. It is a good time to start a vulture fund to snap up those houses. New Orleans is likely to have a renaissance the same way that San Francisco, Boston and Chicago did after their big disasters.
Posted by Sam Dinkin at 03:04 PMIain Murray says there's no such thing, joining me and the WSJ in continuing to expose this myth. He also says that the usual economic ignorami are sponsoring a bill for a federal anti-gouging law.
I've got a better idea.
Paul Dietz suggested in comments that a federal anti-rent-control law should be constitutional. I would think that a federal anti-anti-gouging law (that is, a federal law that proscribed states from passing anti-gouging laws) would be as well, since the Supreme Court has essentially decided that the Commerce Clause will justify anything, and that federalism is essentially dead. After all, state anti-gouging laws cause people to drive across state borders in order to get gasoline during shortages, or more perversely, to drive to states with the laws to get cheaper gas (until it runs out). It's exactly the same situation as we have with Canada and prescription drugs. So this clearly affects interstate commerce at least as much as a leukemia victim growing pot in their back yard. It might also have the effect of moving modern liberals even further into the previously despised federalist camp, and make them rethink their long-sought desire for Big Brother in Washington.
While I mourn the passage of federalism, we should at least take advantage of it to do some good. I would hope that if we really had a Republican congress, that an anti-anti-gouging law would have better chance of passage than an anti-gouging law. But then, I would have hoped that a supposedly Republican congress wouldn't have exploded the federal budget over the past four years as this one has...
When everyone was talking about avian flu, I got my doctor to write a Tamiflu prescription that I could get filled before the rush. I just sent off my order for a satellite phone ($1000 including 300 prepaid minutes good for one year). I told them not to hurry so the flood victims could get theirs first. That's also going to be my present to my dad come December since he lives in Florida--don't spoil it for him, it's a surprise. By bidding up the price of goods well in advance of disaster, manufacturers will make more of them.
The best shortage prevention technique known to Man (and provably the only one that always works) is raising prices. Rand brought this up. Now WSJ has joined the act with their piece "In praise of 'Gouging'".
Posted by Sam Dinkin at 06:48 AMSpeaking of TechCentralStation, I have a Katrina-related column there (though it's of general applicability), in which I applaud price gougers.
Hey, someone's got to do it.
Posted by Rand Simberg at 01:52 PMIn yet another display of economic ignorance on the part of politicians, Hawai'i has put a cap on wholesale gas prices. I fearlessly predict shortages on the islands, wiki wiki.
Posted by Rand Simberg at 07:01 AMNYT columnist John Tierney has announced he will take on all people willing to bet that commodity prices will rise. He just placed a $2500 bet. He follows Julian Simon's logic (again) that prices have gotten cheaper on everything except human labor since prices started being recorded.
Posted by Sam Dinkin at 09:40 AM"Non Mutual" was the accusation when The Prisoner was pilloried for not having enough community spirit. Mutual funds are being accused of being non-mutual by Ross Miller in his paper that decomposes an actively managed mutual fund into an active market neutral part and a passive part that looks just like an index. What he finds is that expense ratios on the active part look like about 7% if you consider most funds only have about 10% of their portfolio actively managed and that means the 1% vs. the .3% annual fees for managed vs. index fund has to be attributed just to the managed portion. This is great for hedge funds that if their fund is going up 10% a year only charge 2% fees + 20% of the 10% profits or 4% altogether. That's quite a bit less than the comparable active mutual fund.
This is make quite a stir in financial circles.
Posted by Sam Dinkin at 11:40 AMChina is in the news these days for buying up Unocal, Maytag and IBM PC. If you check out the latest CIA world factbook you can see that China's purchasing power is more than half of US with the second largest economy. If you project out the growth rates (9.1% and 4.4%) you can see China catching up to the US in 2015 when we both have $19 trillion economies (maybe $23 trillion adding in inflation).
Year China($B) US($B)
2004 7262 11750
2005 7923 12267
2006 8644 12807
2007 9430 13370
2008 10289 13959
2009 11225 14573
2010 12246 15214
2011 13361 15883
2012 14577 16582
2013 15903 17312
2014 17350 18074
2015 18929 18869
China will continue to grow its economy faster than US because its per capita income is still quite low ($5600 vs $40000 in 2004 est) and will still be less than 1/3 of US per capita income in 2015.
My favorite implication is for space policy. A China committed to space nostalgia (e.g., Moon landings) might get the US to devote thought to rationalizing commercial space policy. Mike Griffin started in this direction.
There is a good, but incomplete proposal for landing slot auctions at Chicago O'Hare at AW&ST, June 6, p.31. (Subscription required)
It includes the following:
One thing that is not decided is "who should get the increased revenues that [the Justice Dept.'s] regime would likely generate or what should be done with them."
My proposal is that the money go to the current rights holder for existing rights and the airport for new rights. That includes the auction winners. I.e., the rights would be resold and the former owner would get the proceeds. This gives the airport the right incentive to make improvements that allow more landings. It also turns the rights into capital assets. We might see better stewardship of them.
We might also see less screaming from existing rights holders because if they get the money, they are no worse off than under the current system. (Unless they were going to go bankrupt and stiff their creditors.)
Posted by Sam Dinkin at 04:20 PMChinese apparel have been slapped with a quota. Quotas are worse than tariffs, but first here's a little background.
The rash of China bashing is well-timed to keep the Chinese buying dollars according to Yuan Answers? (WSJ, 6/10, subscription required). A triangular trade where US sends dollars and st0ck and title deeds overseas to the rich savers of the world and imports lots of stuff in one way shipping containers from China is not a bad thing. In fact, it can be sustained indefinitely with the US capital st0ck continuing to grow. It is a testament to how our laws are not quite as bad as everyone else's.
In economics we talk about how tariffs and quotas both imply a "deadweight social loss". When prices are artificially raised via a tariff, the customer prices rise and the supplier prices fall. The quantity sold also falls. It is this last part that is the first component of deadweight loss. By reducing the quantity sold, profitable trades without the tariff become unprofitable because they are not profitable enough to beat the "spread" between the supplier and customer prices induced by the tariff. All this is Economics 101.
A quota has an additional element beyond this kind of loss. In a quota, the supply price rises too. That means that any supplier who can produce at the new higher price will try to fulfill their quota. Thus suppliers who would have cut back production under a tariff will continue to produce to fulfill their quota. Everyone is cut back pro-rata (or according to some formula, e.g., 7.5% more than last year even if growth would otherwise be 500%) and not according to who is the most efficient. Coase might say that quota shares could be traded, but this entails higher transactions expense than the decentralized trade that occurs with a competitive market price.
The additional inefficiency is happily born by international suppliers who receive a major benefit when a quota is imposed--higher prices. So the quota is a collusive bargain between the Government, the domestic suppliers and the foreign suppliers to raise prices on the consumers at the cost to the economy of two kinds of deadweight social loss. Diffuse harm, concentrated benefit. Can one file a class action law suit against an industry association that lobbies for selfish policy?
Posted by Sam Dinkin at 07:25 AMThe limit for H-1B visas is 65,000 this year and next down from 195,000 in 2001-2003 according to US Citizenship and Immigration Services. Since foreign technical service personnel are literally worth their weight in gold, this is detrimental to the US economy. The London fix on gold (according to WSJ--subscription required) was $418.25 per troy ounce Friday. Each troy ounce is 31.1 grams or so. The average weight of a US adult is 177.3 lbs according to CDC. That much gold can be bought for $1.08 million. A technical services worker costs about $47,000/year according to the Federal Reserve of St. Louis. If the relative prices stay the same, 23 years of work will net $1.08 million. Technical services are likely to become more valuable compared to gold over time.
In the New York Times today, John Tierney talks about Julian Simon's research showing that war has become less lethal over the years as a leading cause of death and the trend has continued. Simon was also a big believer in the value of human capital as am I.
His argument in The Ultimate Resource 2 showed that while more births cost more at first (not counting the joy of parenthood), they resulted in more economic growth when they grew up. There is no delay associated with H-1B visas. The import of human capital will immediately speed US growth. These people were already raised overseas and represent a pure boon to the US economy.
There are individual losers, of course. US technical service workers earn less if people are imported from overseas. But protectionism always results in lower aggregate GDP than free trade. There ought to be a way to compensate US technical service workers for the wage loss they will suffer while still allowing the increase in foreign workers and have a win-win or at least a win/small loss.
My proposal is to have US citizens classify themselves into categories according to proof of training. Then the citizens can get some cash from the proceeds of an H-1 B visa auction if people are being imported in their classification. I also propose that the application process be a short form and that the only reason to reject a form would be the auction price and falsification. That is, any reason to immigrate would be fine as long as the auction price was right. The penalty for falsification would only be to make sure the auction proceeds went to the right people.
I would prefer that they just open the floodgates to a million or more immigrants per year with no evidence of need required. Just set the price so that the benefit of the marginal immigrant exceeds the cost. If Simon did the analysis, we would probably end up subsidizing immigration instead of discouraging it. We should continue to refine our tax code, regulations and improve our environment so the US is the most excellent place to live.
Posted by Sam Dinkin at 05:53 AMI am reading The Ultimate Resource 2 by Julian L. Simon (Princeton, 1996). He makes the point that commodities prices tend to decline over the course of the last couple of hundred years compared to the cost of human labor. The average US wage in 1999 dollars is growing at about 2.1% per year geometric mean from 1900-1999. The real interest rate has been about 1% (in the UK anyway).
This means that if technology were constant and reserves were constant, the real price of a commodity would rise 1%. Otherwise, it would make sense to mine as much oil as possible and put the money in the bank, or leave the oil in the ground and wait for the price to rise.
In fact from 1860-2000 the price of kerosene (see figure 5) has dropped about a factor of 6. If you look at the service kerosene was providing (lighting), it has dropped a factor of 40 from £125 to £3 (in constant 2000 £) per million lumen hours. The lighting was overwhelmingly provided by gas and kerosene in 1900 and electricity in 2000. That technology change was the equivalent of an increase in the availability of light with no new resources being discovered.
As we discover new resources, new extraction technologies emerge, and new cheaper substitutes narrow the uses for the expensive commodity, the price tends to drop. With the price dropping over the long term, that leads us to the corner solution of mine everything you can right away. The race is to extract the resource before its price drops. There are of course temporary shortages that spike the price and help spark technology change.
The good news for the species is that if the past is any guide, we can expect to see energy prices continue to drop in real prices and even more in terms of purchasing power. That is substantially more optimistic than this piece I filed last September. So my daughter in 30 years ought to be able to afford 6 times as much energy service as I can today. As the spaceflight price drops to where the fuel is a significant component of the cost, declining energy costs are good news.
Posted by Sam Dinkin at 07:40 PMThe Senate leadership is pondering repealing the cloture requirement of 60 votes to close debate and stop a filibuster for judicial nominees. Cloture would be repealed not through a formal rule change, but through a clever finesse of the rules. The parliamentarian responsible for interpreting how the rules apply would simply invalidate the cloture rule. This would be challenged and the rule would need 51 votes to keep it at that point assuming Dick Cheney is against.
The Senate Democrats have warned that they will bring all business to a halt in the Senate were this to occur. This is credible, but in turn may be finessed with something even more drastic.
Here is a new option--call it a thermonuclear option--that would allow the Senate to switch to a new majoritarian mode and continue to function. A member would call a point of order saying that none of the rules are in order because they had not been approved by a majority of the current members. The parliamentarian would rule that yes, after over 200 years of precedent, the original Senators clearly made a mistake in assuming that Senate rules bound future Senates. The majority could then go on to adopt any rules they want. This could allow it to continue to function without the participation of any Democrats.
Cloture should be an issue that cuts across party lines. If the Senate repealed cloture on all legislation, the House would have equal say in all matters for a change. This would be a big boon to states like California, New York and Texas that are highly underrepresented in the Senate. Democrat Senators from all States that have nine or more Representatives in the House should be in favor.
The flip side of course is that small state Senators should be opposed. There are many more small state Senators than large state Senators. For this reason, cloture is unlikely to ever be repealed without a massive buyout transferring money from large states to small to compensate them for the lost pork in future years. Even cloture removal just for judicial nominations would be a critical weakening of small state power.
While I like supermajoritarianism in general, I have not been a fan of supermajority requirement in the Senate and a simple majority requirement in the House. This systematically bleeds money from big states to small states. While perhaps a sensible policy during colonization, now it is just a pork fest. Arnold Schwarzenegger made that point after getting elected. My question is, "Why has the House not imposed its own 60% cloture requirement to balance the power in the Senate?"
More on legislative power can be found in "The Senate: An Institution Whose Time Has Gone?" in The Journal of Law and Politics, 1997.
Posted by Sam Dinkin at 09:06 PMHere are some counterintuitive tax loopholes to ponder:
There are some disadvantages to this loophole. Note that there are maximums to 401k contributions so the saver probably needs to start earlier. If the saver's job security is in doubt, it would be wise to start even earlier because some jobs have a waiting period before contributions may start. Finally, the saver may need the help with the will power that contributing every month brings.
(Note: for matched deposits, the doubling of the principle earning income offsets any savings in taxation so those contributions are not subject to this loophole.)
To mix another metaphor from physics, the custodian of the accounts can behave like Maxwell's Demon who lets energetic particles through a door and sends slow particles back the other way. Dinkin's Demon is going to close both positions after one year if the price of the risky security falls and keep positions where the risky security rises. There entropy in thermodynamics that makes Maxwell's Demon expensive. Dinkin's Demon only costs commissions. The risky security is held both long and short so all the security has to do is oscillate to generate the opportunity for money to flow from the pre-tax account to the post tax account.
For example, suppose a firm is worth $100 million and stays exactly the same total value. Suppose there are 100 million shares outstanding at $1.00 each. Suppose the firm pays $100 million/year in compensation. If employees and management agreed, 25 million options could be issued, cash compensation reduced, and $50 million (and a $49 million loan) could be used to buy up 99% of the outstanding stock at $1.01, then 8.33 million shares resold. (A synthetic 1 for 3 reverse split). The price per share after the buyback would be $3. The employees would have $50 million in capital gains that they would pay $10 million in taxes on if they exercise the options and hold them for a year so they have $40 million in gains post tax. Compare that to the $50 million they receive in cash. The $50 million would be taxed at ordinary income tax rates so the employees would have only $32.5 million if they are in the 35% bracket. If they are in the 25% bracket, they and their employers have to pay social security so take home pay is roughly the same with cash, but lower brackets do even better with capital gains.
It's not a new story, but Steven Moore has a good roundup of the current state of the societal parasites and despoilers of the environment that comprise the American sugar industry.
Posted by Rand Simberg at 06:52 AMBorrowing to build physical and human capital is a way to finance growth. Can you imagine the quality of education and the number of college educated people if there were no student loans? Can you imagine the house you could get without a mortgage? They would not be nearly so nice as if you get a generous loan at a low interest rate. The same is true of our nation's capital investments. Can someone tell me if we are carrying on our books assets such as the following: the nation’s bridges, parks, federal buildings, military bases, roads and internet?
We certainly are not accounting for our children’s education via a standard statistical model that predicts the likelihood that they will stay in the US and booking their future increased tax revenues on their human capital as an asset.
Strategy
The goal for our national debt should be around 80-90% “loan to value” to borrow a phrase from the housing sector. We should finance 10-20% of spending out of current consumption as a down payment and finance the rest out of borrowing.
If we open the money spigot from borrowing, we can reduce taxes and still be able to afford some wondrous projects. Here are a few grand challenges for the US government to undertake:
Buy out existing terrestrial TV spectrum users, pay for “Rural Cable-fication” or subsidize rural satellite service and use the spectrum for power broadcast or mobile data.
We should undertake grand foresighted projects like colonizing the Moon, Mars, LEO, the Lagrange Points and NEO. We should some big prizes for major longevity challenges like drugs that increase working life for folks with heart disease or cancer. More money should be allocated for local environmental improvements such as pollution permit retirement that make the US a nicer place to move to.
We are a rich nation with good credit. We should be utilizing that credit to increase our productivity, education, health, environment and all the other things that make our economy more valuable. By making the US a better place to live we will continue to attract the world’s richest and smartest people to pay our taxes and grow our economy.
Borrowing is not a zero sum game. Our children may pay $2 in taxes for every dollar we borrow now to invest, but with a reasonable return, they will be making $3 or $4 more for every dollar we invest. Another commonly misunderstood assumption is that federal investment crowds out personal investment. While somewhat true, the federal investment costs are lower due to a cheaper interest rate because as a sovereign, the government can borrow for less than a private individual or corporation can. Thus the federal government can invest more than what it crowds out. Thus, the private investor can either get an adequate savings rate by investing in government bonds that are now at a higher interest rate, or by investing in something else that becomes viable due to the flood of federal investment including subsidized private investment corporations.
I am not sure whether subsidizing all investments equally across the board is best course. This course would distort the economy least, but perhaps the benefits would not accrue to taxpayers since some of the activities subsidized would be hard to tax or would be too specialized to use if a firm goes broke. A reasonable policy alternative is differentially subsidizing investments that are easy to tax or are common and durable enough to be used by more than one owner. For example, subsidizing real estate improvements would distort the economy, but perhaps in a favorable direction.
Tactics
We should grant H-1B entry visas to everyone willing to pay an entry fee in addition to our patchwork system of “need”. Replacing our H-1B visa patchwork system would be better.
We should invest in our children’s education by Federal borrowing. We should invest in the housing st0ck with Federal borrowing. Fannie Mae and Sallie Mae type of debt should be subsidized even further. Houses, buildings, bridges and roads are good because they can be reused by lots of folks. SBA loans are good, but the government should shoot for sufficiently high returns to pay back the money.
Government management of these loans is of course a negative. I would recommend having a general subsidy that thousands of competing businesses could take on their tax filings.
My vote for subsidizing roads would be to subsidize deployment of electronic toll tags. Perhaps build them into license plates. Spending 10 minutes in a toll line wasting $2.50 worth of time at the average wage to pay a toll is inefficient. There are plenty of other opportunities for electronic and money queues to replace physical queues.
Keeping property taxes deductible would be another good choice. Allowing the deduction of the purchase of local services that the property taxes typically pay for would be a good follow up that would reduce pressure to have local and state governments provide services at all. That is, the following services would become deductible: private security, private fire protection, private schools, private hospitals, private roads, and private utilities. The net effect of this tactic would be to keep home building going strong. Expanding the capital gains tax exemption on real property would be good. The only beneficiaries of encouraging people to move whenever their house appreciates $250,000 per person is the realtors. A compromise would be to have the excess over the $500,000 real estate gain exemption be carried forward to subsequent years.
State taxes and bonds are another area to allow deduction and further subsidize. By having a federal service that buys state bonds and repackages them with a federal guarantee, the federal government can reduce the cost of state borrowing by more than the additional risk that they incur. In essence, it would be a FDIC for state bonds. Municipal bonds could be covered in the same way. Completely nationalizing bond insurance, though, would be a bad idea, but offering a federal backstop to a portion of the bond issue to all underwriters would allow them to not let borrowing get out of hand, but limit their downside risk so they can encourage state and local investment.
Another area to subsidize is education. Student loans are pretty generous already, but there are several ideas that would not distort the economy too much and would encourage human capital investment across the board. For example, making books, tuition and school supplies tax deductible (and those deferrable since students typically do not pay a lot of taxes to deduct). Giving too much money and freedom to students would potentially unduly concentrate the efficiency as the student declares bankruptcy to avoid paying. Making the debts not dischargeable is not a good solution because it hurts the economy by creating a class of people with no incentive to work. Perhaps a better way is to create an affinity program where the government would pay a portion of the tax receipts of the graduates to the universities that educated them.
Posted by Sam Dinkin at 07:58 PMHand wringing: An excessive expression of distress: handwringing by some experts over the state of the economy.
There is a lot of hand wringing about the trade deficit. We are shipping people slips of paper and they are shipping us cool stuff to use. Sounds like a decent trade to me.
But even if we are worried that the celebration will end some day, here are some good reasons not to worry about the flip side of the trade deficit, the capital surplus.
We have an economy in the United States that is well capitalized. We also attract skilled workers from around the world. One estimate of world capital concludes that the human capital stock exceeds the physical capital stock.
If you take the 60% more that college educated people earn at midlife and multiply it by the number of college educated people, the 40 million college educated people in the United States are worth $1T a year to the US economy. They would cost us a lot more if we could not import them from overseas because they very much increase the returns from other assets in our economy. They are so cheap to rent because they are so common.
This puts the value of the college education portion of the human capital stock at about $20T or about twice annual GDP. This fraction of GDP is similar to the number another researcher gets for the total human capital stock in Chile.
Of the 160 million people 25 and over, about 25% have a college education up from 5% in the mid 1950s. If we continue at that 0.4% increase per year, that gives us an extra $300B/year in extra human capital stock.
If you look at another component of capital, the housing stock, there are about 72,000,000 homes in the US worth an average of $290,000 including the land or another $20T in capital stock. That average price appears to be growing at about $8,000/quarter or about $2T/year. That is just the single family housing stock, not commercial and industrial real estate, not multi-family, not equipment and not environment and infrastructure.
If you add all the human capital growth to the growth and appreciation of physical stock in the United States, you can quickly see that we can sell capital stock forever at a $666B/year rate and still continue to grow our capital stock by trillions per year. If we have $200 trillion in human and physical capital (using the envelope theorem to invert our domestic product by one over the interest rate) in the US almost all held by US citizens, selling 0.33% of it every year even as we grow it by many times more than that is no big whoop.
Whoop: Equal to the word ‘deal’. Usually used in a frustrated sort of manner, but trying to get across a point. Example: When her friend wouldn't try something new, she said, Come on, what's the big whoop, anyway?Posted by Sam Dinkin at 08:18 AM
Henry Hazlitt's classic "Economics in One Lesson" is now available on line.
If everyone read (and absorbed) this, the world would be a much smarter place.
[via Lynne Kiesling, who's apparently (and apparently happily) in Paris for a few weeks]
Posted by Rand Simberg at 05:59 AMDavid Levey and Stuart Brown have an antidote for global gloomsaying about the US economy in the latest issue of Foreign Affairs.
The U.S. dollar will remain dominant in global trade, payments, and capital flows, based as it is in a country with safe, well-regulated financial markets. Provided U.S. firms maintain their entrepreneurial edge -- and despite much anxiety, there is little reason to expect otherwise -- global asset managers will continue to want to hold portfolios rich in U.S. corporate stocks and bonds. Although foreign private demand for U.S. assets will fluctuate -- witness the slowdown in purchases that precipitated the decline in the U.S. dollar in 2002 and 2003 -- rapid growth of world financial wealth will allow the proportion of U.S. assets held by foreigners to increase....Posted by Rand Simberg at 09:07 AM...Only one development could upset this optimistic prognosis: an end to the technological dynamism, openness to trade, and flexibility that have powered the U.S. economy. The biggest threat to U.S. hegemony, accordingly, stems not from the sentiments of foreign investors, but from protectionism and isolationism at home.
Dennis Wingo asks a question that I often pose:
...we need to focus on what our “sense of purpose” is in this exploration program. What is our purpose in doing this? Is it science? International prestige? Educational inspiration? All these reasons are bandied about, but history shows that none really capture the public’s broad support.
He thinks that the answer is to open up the resources of the solar system to humanity.
Looks like a space post, right? So why have I categorized it under "Economics"?
It is said by many in the environmental movement that the U.S. consumes far more than its share of resources.
Yes, it is said by many in the environmental movement. Of course, it's also said by many that man never walked on the moon. "Many" saying something doesn't make it so.
What does this mean? What is "our share of resources"?
People who make this claim generally mean that we consume a greater proportion of the world's "resources" than would be justified by our proportion of the global population. We are less than ten percent of the world population, yet we consume (make up whatever number) percent of the world's "resources."
There are two fallacies here. The first is that the word "resources" is ill defined for the purpose of the discussion. Most of the proponents of this point of view tend to have a dim understanding of capitalism, and the mechanisms of wealth creation. In fact, they often think, or at least act and argue as though they think, that the wealth of the world, or the country, is a fixed quantity, to simply be divvied up according to some nebulous scheme of "social justice." But (to get to the second fallacy), wealth and "resources" themselves are not fixed quantities--they are created by activities both natural and artificial.
If "resources" are simply a static quantity of stuff, lying around waiting for someone to pick them up, then it might make sense to allocate them by percentage of the population (e.g., ten percent of the population should get ten percent of the "resources"). Even then, it doesn't make a lot of sense--for example, I would think that these types would argue that single mothers should get more?
But since they're not a fixed quantity, it's actually perfectly reasonable for a small proportion of the world's population to consume a larger proportion of those "resources," since they are making a major contribution--in capital and knowledge--to creating them.
Is undiscovered oil a "resource"?
No. For practical purposes, it doesn't even exist. It only comes into existence in any useful way after modern technology finds it, and then drills for it and pumps it. How much of it should the country under which it sits, or its population get? Well, that should be a matter of negotiations, but most oil-producing countries realize that they would produce no oil without western capital and technology, so they do deals which are both moral (assuming that the government is the owner of the "resources"--a dubious ethical assumption, but one for another day) and legal. So if Americans consume more oil, it's because they're willing to pay enough for it, either directly by purchasing it, or indirectly through taxes that subsidize research and provide the military means to keep shipping lanes open.
I'm all in favor of extending space technology to utilize and create new resources off the planet, but I don't feel morally obligated to do so because I "consume more than my share."
Posted by Rand Simberg at 06:28 AMI'd love to see what Mindles and Jane, and Tyler Cowen, think about this:
A model that assumes stock market traders have zero intelligence has been found to mimic the behaviour of the London Stock Exchange very closely.Posted by Rand Simberg at 05:11 AMHowever, the surprising result does not mean traders are actually just buying and selling at random, say researchers. Instead, it suggests that the movement of markets depend less on the strategic behaviour of traders and more on the structure and constraints of the trading system itself.
Oil prices are below forty bucks a barrel.
I continue to blame George Bush.
Posted by Rand Simberg at 06:29 AM...had their single biggest one-day drop in three years today. And the Dow was up a hundred and fifty points.
I blame George W. Bush.
Posted by Rand Simberg at 12:57 PMHe says they're way too small.
Posted by Rand Simberg at 10:04 AM...on "price gouging" (otherwise known as the law of supply and demand) in the wake of Hurricane Charley. The Mises Institute preemptively responded to this, but it never slows down the economic ignoramuses at the New York Times:
Janet Snyder, a pharmacy technician in Cape Coral, said several men in two pickup trucks spotted her roof damage and offered to lay down a temporary covering of plastic sheeting. They wanted $600, about four times what she figured was the right price, based on 15 rolls of plastic that usually sell for $10 each.
OK, so Janet is clearly no business major, but how dumb is the reporter to pass this on without comment? She seems to think that the men's labor should be free, and that she should only have to pay for materials. In the real world, even with no hurricane, she wouldn't get free labor. She certainly can't expect it when there is so much to be done.
Posted by Rand Simberg at 12:48 PMSo says David Brown.
He's right.
Posted by Rand Simberg at 05:55 PMStories like this, about how much owners of intellectual property are losing to piracy, always bug me, because the industry press just accepts the figure without criticism or comment.
They claim that they lost almost thirty billion dollars last year to pirated software. They derive this number by estimating the number of pirated software installations, and multiplying by the price of the product. But it's almost certain that their losses aren't that high. The only amount of money that they're out is the amount that the people using the software would have been willing to pay if they hadn't been able to get it for free.
This kind of disingenuous story occurs because people don't understand the difference between price, cost, and value. For software, the marginal cost (resources required of the seller to produce it) for the software is almost zero, while the price (the amount asked by the seller) may be very high relative to its actual value, which varies from individual to individual. No rational person will pay more for a product than they value it, so if they can't get it for free, the only amount of money that the vendor is out is the sum of the value of it for all potential buyers. Clearly, it wasn't worth the full price to many of those individuals, or they would have paid it, and I think that the amount of loss is vastly overstated--many of them would have simply gone without, rather than pay full price, so the revenue in that case would still be zero.
Posted by Rand Simberg at 11:36 AMMakes Hans a poor boy.
Germans are starting to think that maybe, just maybe, their economy might do better if they didn't take so much time off.
...some economists and politicians say that if Germans want to fix the country's fiscal problems, they have to start showing up for work.
Duh...
Posted by Rand Simberg at 02:34 PMThere are many infuriating things about the current federal tax rules, but the one that I find the most egregiously unfair and potentially damaging to the economy is the situation with deductability of interest.
In 1986, individuals were no longer allowed to deduct loan interest, except in special cases, and for their home mortgages. The arguments for this change were simplification, discouraging installment borrowing and more revenue for the government. The only valid argument is the first one, since it's not clear that discouraging installment borrowing is a good thing for either the economy or the individual.
But it did indeed simplify taxes--there's no longer any need to find all of your interest deductions, and add them up, since they're no longer relevant to your return. Of course, in exchange for this "simplification," most people pay much more in taxes than they did prior to the change. This has resulted in the growth of "mortgage lines of credit" since now the only way to make the interest deductable is to borrow money against your house.
This change was outrageously unfair, because they now get you coming and going. You still have to pay tax on interest earned, but you're not allowed to deduct interest paid. So interest counts only when it's incoming--not when it's an outgoing expense, unless it's going into some other investment (not consumption). (Thanks to Carey Gage for pointing out my previous erroneous statement, now down the memory hole).
But the situation has a more problematic effect (speaking personally)--it discourages small business formation. Suppose someone has an idea for a business startup, but limited access to capital. Well, one way to do it, if one has a good credit rating, is to do "venture capital by Visa." Borrow the money from your credit card, and pay it and the interest back from the proceeds of the venture.
Now most financial advisors would say that this is insane. Of course, those same financial advisors would probably also say that starting your own business is insane as well, given the rate of failure of startups. So given that you're going to be an entrepreneur anyway, it's not that much nuttier to borrow the money to do it from Mastercard, instead of Aunt Nellie.
And therein lies the problem. Clearly, the interest that you're paying on the loan is a business expense. But if the main thing that you need the money for is to cover your personal bills (rent or mortgage, groceries, gas, etc.) while you're getting the business going, there's no way to deduct it under the current rules.
Well, wait--there is one way. You can borrow the money, then relend it to the business startup, and then pay yourself a salary from the loan. This allows you to deduct the interest for the loan to your business. But there's a big problem--it also means that you have to pay federal income taxes on it, including FICA, and possibly even things like unemployment insurance, because it's now taxable income to you.
So that's the choice you have. You can simply borrow money to support yourself, but you can't deduct the interest because it's not considered an allowable business expense, though clearly it should be. Or you can borrow the money and lend it, in which case Sam takes a huge percentage off the top before you can get it to pay your bills.
Either way, I suspect that there are a lot of businesses (including space businesses) that don't get started because of this financial catch-22, which could be eliminated by simply returning fairness to the tax system, by either excluding interest income from taxes, or restoring the interest deduction.
Posted by Rand Simberg at 11:09 AMPerhaps this is so obvious that someone else has already mentioned it, but it seems to me, upon further reflection, that there is an answer to Megan's question about why Enron (or any B2B) was advertising to a market that was in a position neither to purchase, or influence the purchase of, its products.
Was it trying to boost market? Obviously not. Was it trying to boost profits? How would that be accomplished with expensive and opaque ads? Was it trying to hype stock price?
Bingo.
Posted by Rand Simberg at 02:28 PMSenate Majority "Leader" Daschle is having trouble getting his followers in line. No other Democrats want to sign on to his latest demogogic campaign to convince people that tax cuts cause recessions. Sounds like they're running a little scared.
[Update at 10:36 AM PST]
Tony has a couple comments on this and the previous related post from last night.
My response to his comment on this post is in the comments section for it. As to the previous one, I'll move it "above the fold."
I don't think that you fairly represented what I argued - again, nobody is claiming that "tax cuts cause recession". The assertion was that "lack of confidence" in the fiscal policy "probably"(D's word), or "mau have"(my words, had an adverse impact - neither of us say "definitley did have". That's precisely Daschle's stated argument, though few people - except myself E.J. Dionne (in todays WP)- choose to read it that way.
Well, "choose to read it that way" is exactly the right phraseology. Very few others conversant with the English language would "choose" to do so. As I said in my comment in this post, I "choose" to read it the way it was obviously intended--to blame the tax cut for the recession, or at least the depth of it. As I said, if there's a "lack of confidence" in the Administration's fiscal policies, it's not because of the policies themselves--it's because of their mischaracterization by the Democrats and their willing accomplices in the press.
You refer to "talking down the economy" - when I threw that back at Bill Quick in re Mr. Bush doing the same to sell the 2001 Act, Bill argued that "mau-mauing" the economy wouldn't have an effect, either.
There's a more fundamental difference. When Bush was "talking down the economy," he was simply describing objective reality--all the economic indicators had been heading down even before the election. Of course he was making the case for a tax cut. When the economy is heading into a recession, as it obviously was, it makes sense to cut taxes, and to develop a public consensus for that.
Mr. Daschle, on the other hand, is not so much "talking down the economy" directly, as attempting to talk down the people's confidence in the Administration policy with errant nonsense (which he perhaps hopes will have the desired effect of prolonging the recession until after the election). Fortunately, it doesn't seem to be working.
So - which is it?
As I said, you're comparing simply describing economic reality on the one hand, with raw unfounded propaganda on the other.
In re Hoover - read over the history again: Hoover's initial reaction was DO NOTHING, everything will be OK, the economy is FUNDAMENTALLY SOUND.
As indeed might have been the case, had he not panicked with Smoot-Hawley, and had money been looser (something over which he had no direct control, though a little jawboning might have helped).
Hoover didn't act until after it was too late to turn things around.
As I said, it was not the timing of his actions that was the problem--it was the stupidity of them.
Finally, the argument that tax cuts spur investment is good theory, but companies are telling us what they would do with a tax cut that comes NOW - they wouldn't use it to "invest", they would use it to "recoup".
What does that mean, exactly--"recoup"?
Does it mean that the money will not get spent, or invested, in something? How can that be?
Do you think that it will just sit in a vault somewhere, so that the greedy corporate executives can swim around in it a la Scrooge McDuck? I don't really understand this comment.
As far as the causes of the depression - ask yourself why monetary policy was tightened.
Because the people running the equivalent of the Fed at that time were economic ignoramuses, and didn't understand the problem.
Could it possibly be that when everybody tried to "cash out" it was discovered that nobody could cover the debt, and pumping the requisite number of dollars into the economy would have resulted maybe in hyper-inflation?
Nope, though it's possible that they thought that.
[End Update]
Posted by Rand Simberg at 09:39 AMWell, I've finally found a (sort of) explanation for Tom Daschle's rants. Tony Andragna has been defending his nonsensical assertion that the Bush tax cuts have exacerbated the recession over at Quasipundit. He says:
Neither Tommy D' nor myself argues that the tax cut per se deepened the recession, but the lack of confidence in this administration's fiscal policy, especially as regards the return to deficit spending, definitely could have had some impact.
Well, I don't think that's what Tommy D' is arguing, though I suppose it's possible that you're channeling him. In fact, I haven't heard Tommy D' make an argument at all--just issue fatuous nonsense. But if that's what you're arguing, then you don't really have a case, unless you're saying that in order to instill "confidence," we have to cater to the economically ignorant.
Deficit spending doesn't cause recessions. And concern about deficit spending doesn't cause recessions, unless the public has been propagandized by the likes of Tommy D' to believe that they do (i.e., "talking down the economy"). Would it sound a little too cynical if I point out that it's not in the Democrats' political interest to see an economic recovery prior to November?
This argument is pointed up by what actually happened in the instance that Bill cites - the Depression wasn't the effect of a single event, but a chain reaction flowing from lack of confidence in the government's ability to deal with the problem.
No, the Depression was caused by too-tight money after the crash, and then compounded by the Smoot-Hawley tariff bill, which, with its retaliatory companion bills overseas, signicantly reduced trade and made the situation global.
If Hoover had done something - anything - instead of nothing, the the Depression may well have been avoided.
He didn't do "nothing." He did things to make it worse. Like encouraging and signing Smoot-Hawley. He even did things that modern-day liberals would have him do, like creating the RFC.
Sure, "deficit spending" is one of the tools that a government ought have the ability to use in fighting downturns - nobody argues to the contrary. Daschle's complaint over handling of the downturn is that the GOP "made a huge tax cut their number one priority -- ahead of everything else -- and discarded the framework of fiscal responsibility"(italics mine).
Those two things (tax cuts and fiscal responsibility) are not in any way inconsistent, if you believe that cutting tax rates grows the economy (which leads to tax revenue increases, even as rates are reduced). Apparently, you don't believe that, despite all the historical evidence for it.
IOW, there is an argument that the GOP made our long-term situation less secure with their use of fiscal policy in trying to fix a short term problem, and this insecurity might have had an adverse impact on the recovery.
I find it amusing that Democrats are now concerned about "fiscal responsibility." They never used to care, as long as they could get all the revenue they needed for their programs.
More to the point, the projected deficits are less a of function of spending than they are of a failure to collect enough revenue to cover all of the things that the government - yes, even under Mr. Bush's plan - wants to do (some of us argue that sans the recession Mr. Bush's numbers still never got there). That might seem an inane distinction, but the point is that spending is the cure to downturns, not tax cuts.
No, the point is that recessions are solved by spending and investment. Tax cuts accomplish both (since the money that the people don't have to pay in taxes will be either spent or invested). Government spending can accomplish both, but it's usually much less effective at either than letting individuals make the choices.
Posted by Rand Simberg at 01:22 PMSince War Correspondent Geraldo is having trouble finding his way to the front, he's decided to (at least temporarily) revert to his leftist roots and whine about the free market in Afghanistan.
He did a little segment on FNC tonite, in which he wandered around a bazaar in Kabul with his cameraman, showing off American aid goods for sale. Can of cooking oil, five bucks, sack of wheat, ten bucks, etc. Then he complained that it wasn't reaching the people, but the benefits were accruing to some evil "middle men."
Now there are circumstances in which middle men are indeed superfluous (usually only with government connivance via various trade rules and laws), but the reality is that commerce and distribution of goods would not occur without them.
I had an artichoke for dinner tonight. I'm damned glad that I didn't have to drive all the way from LA to Castroville (a 350-mile trip one way) to buy it from the farmer. It was more convenient to go to the local grocery and buy it, and I thought it a bargain, even at $1.69. Unfortunately, in order for me to be able to do this, it had to go through not one, not two, but probably at least three of those evil "middle men."
They had to expend energy and resources in order to find the artichoke, negotiate its purchase from the farmer, transport it (while keeping it cool and refrigerated), negotiate its sale to the grocery, get it into the store, have a place in the produce section for it (with continued cooling and occasional watering), enter it into a computer system so that I could purchase it without a lot of inconvenience to either myself or the sales clerk, etc. They (or any sane person) wouldn't do all of this without being compensated.
That this is occurring in Afghanistan, considering the ghastly times that they've gone through, is not something to be lamented, but rather to be positively rejoiced. The market is still (or newly) functional there, and if we can get enough food and other supplies in there quickly, the same market that is delivering these goods to the wealthy will ensure that the price will drop (law of supply and demand, doncha know) and the goods will become available to all.
But of course, rather than using it as a lesson for how markets work in the real world, Jerry Rivers chose to make some mindless point about "exploitation."
Posted by Rand Simberg at 08:56 PMAccording to this story from the Gulf News in Dubai, the bombing of Kandahar has invigorated the local economy. The scrap from US bombs is apparently of a superior quality relative to that which was available antebellum. It is so valuable, in fact, that some Kandaharians have made the investment in decoy bunker lights to attract US bombers, the results of which are then collected and sold on the local scrap metal market. They've even (apparently successfully) taken to tying unfortunate dogs to positions near the lights to provide an IR signature.
It brings to mind the coastal inhabitants who would put out false lights to lure wayward ships onto the rocks so that they could be plundered. I wonder if the Pentagon's damage assessment team is compensating for these spurious targets?
[crackle...ROGER, TANGO BASE--WE HAVE A CONFIRMED KILL ON TWO FLASHLIGHTS, ONE EXTRA DRY-CELL BATTERY PACK, AND A MALAMUTE, OVER...]
Posted by Rand Simberg at 08:46 PM