Monday, November 5, 2012

Let us Trade

This article was another reminder of how incompetent legislators and journalists are when it comes to matters economic.

This isn't rocket science. Suppose superstorm Sandy hits New York, where Paul the Policeman works. Living in neighboring Pennsylvania are Sally the Saint, and Jared the Jerk. Sally the Saint, on hearing of the plight of new yorkers, packs a truck full of blankets, food, and gasoline to give to the needy. Jared the Jerk does the same, but only because he thinks he can make a killer profit by selling them to desperate new yorkers. Jared's greed is thwarted by Paul the Policeman, who phones him and informs him that if he tries to carry out his nefarious plan, he will face hefty fines, as well as a likely prison sentence.

The end result: One less truck full of vitally important goods for the hapless and homeless, and one policeman who, rather than spending his time helping these people, is spending his time preventing trucks of goods from coming into New York. Yes, if Jared the Jerk has his way, new yorkers will have less of those pieces of paper that we call money, but clearly, at this point, they would prefer to have food and fuel more than pieces of paper, otherwise they wouldn't voluntarily trade them away.

The essence of capitalism is that it takes something inherently bad, greed, and channels it into productive activities.  In true capitalism, the way you get money is by providing something of value to other people. Non-capitalist ways of getting money, on the other hand, involve stealing, lobbying the president to favor your business with billions of dollars in stimulus money, or doing any number of wasteful things.

Liberals love to accuse conservatives of having Gordon Gekko philosophy and motives. When they use that argument with so-called price gouging, however, they're largely missing the point. Greed is as powerful and as ubiquitous as water. Water can shatter, kill, and corrode. Greed can do the same to societies and individuals. Both are realities that must be dealt with, and it makes as much sense to outlaw capitalistic greed as it is to build New Orleans below sea level and hope that the old levees will hold. Wouldn't it be better to build irrigation, and hydropower plants, and let the water do at least some useful things? This analogy is far from perfect, for obvious reasons, but there's something to be said for recognizing realities. For all of their supposed intellectuality, Democrats often fail to do this when reality contradicts their instinctive sense that if someone is making a large profit, it must have been ill-gained.

"Give us food or let us trade" was the protest of North Korean market women just a few years ago. They may not live in a totalitarian country, but new yorkers could justifiably protest with the same chant. Government and charitable assistance in the wake of any disaster are wonderful things, but when they fall short, it makes no sense to prevent market assistance.

Friday, August 10, 2012

Thoughts on solar subsidies

As per my usual style, I didn’t want to invest the time in posting a blog, but wanted to start a discussion, so I posted an interesting article on my Facebook page, which received comments, to which I started writing a response, which became long enough to justify turning it into a blog post. Hence the new title of my blog, which could still change.

The instigating article is here.

I think the most interesting part of this article is where he says that if the cost of solar cells themselves drops to 0, the cost of the aluminum mountings, etc. is still too high to make solar power an economically viable alternative. That is true not because aluminum is terribly expensive, but because solar power is intermittent, which means that no matter how many solar cells you have, you still have to build the same number of coal, etc. plants as before in order to meet peak demand when it’s cloudy. This means that the aluminum used to build solar cells doesn’t do anything to reduce the cost of the steel and mortar of the building of coal plants. The only thing it reduces is the expenditure on the coal itself.

I can think of two potentially valid counterarguments to this article's question of solar energy’s economic viability, but neither could be argued to be obviously true.

The first is that we could invent an economically viable way of storing solar energy, which would then allow solar cells to actually reduce the number of coal plants. That pesky second law of thermodynamics tells us that any time you convert energy from one form to another (AKA store the energy), you will lose some of that energy in the form of wasted heat. The question an economist should ask, and an engineer should answer, is how much of the energy is wasted? If it’s 1%, you could have economically viable storage, if the storage equipment is inexpensive enough. If it’s 60%, you definitely don’t have economically viable storage. Even though I don’t know the exact percent efficiencies of various methods, or their equipment costs,* the current consensus, I believe, is that it is not economically viable. But then again, we could be only an invention or two away from solving it.

Here’s one person who claims to have invented a solution (liquidmetal batteries). Even though MIT professors are really cool, and even though he deals with many of the problems of economic viability (cheap equipment, low maintenance costs) I have my doubts about his invention, especially at the end when he claims that the molten metal in his batteries are kept hot by the passing electricity. By definition, if the electricity keeps them hot, then it is wasting electric energy to do so.

The second objection to this article is that it assumes that the price of nonrenewables will not increase. Since economic viability is a question of relative and not absolute costs, if electricity generated by nonrenewables quadrupled to 40 cents per kilowatt-hour, then solar could easily become viable. How far away is that future? In my opinion, fairly far. Before solar becomes viable, shale oil likely will, for example. Currently, it’s considered too expensive to extract shale, even though it’s quite abundant in Utah and other places. Even though by definition, the price of nonrenewables will eventually rise, and even though oil already has clearly shown that trend, natural gas seems to be abundant still, and has recently dropped significantly in price.

After that, the big question that many readers may ask is, why didn’t you include pollution and global warning in your potential objections? As it turns out, even assuming that global warming has disastrous and imminent consequences, it is still a very bad idea to subsidize solar energy. Here’s why (written by the same author as the first)

To use my own analogy, humor me and suppose that it’s been solidly proven that people who eat twinkies are less likely to become heroin addicts. Clearly, then, if we want to reduce heroin addiction, we must subsidize twinkies! Wrong (much to Hostess’ lobbyists’ chagrin). If you want to discourage heroin use, it is better to tax heroin than to subsidize its alternatives. By doing so, you get the economic incentives right, discouraging the bad thing directly, rather than promoting the "good" thing, which has its own bad consequences, and whose only (apparent) virtue is that it is a substitute for a bad thing.

Carbon emissions aren’t overtly evil, like heroin, but if there are negative externalities you’d like to prevent, then taxes are much more effective than subsidies. A tax on gasoline could incentivize me to get off my rear end and ride my bike instead of taking the car (which has the added benefit of preventing my obesity and subsequent drain on healthcare resources). A tax on nonrenewable sources of electricity would incentivize electricity conservation, and it would incentivize engineers to get rich by inventing more efficient renewable sources, without sucking them into subsidized, resource-wasting, potentially dead-end technologies.

Is it possible that, with the breathtakingly rapid decline in genetic sequencing costs, we could engineer an algae/yeast that cheaply produces fuel? Perhaps. But that will happen much more slowly if government makes breathtakingly inefficient corn-ethanol just as lucrative as brilliant innovation. Perhaps someday engineers will design a tokamak fusion reactor that actually produces more energy than it uses. Perhaps micro-CHP** will help us use the nonrenewable resources we have more effectively. Perhaps there are other solutions that nobody's been creative enough to even imagine yet. Or, perhaps I misjudged, and solar power will overcome its problem of intermittency. 

Even the smartest engineers don’t fully know which of these avenues is the most promising. But government bureaucrats know even less, and legislators are chiefly concerned with which industries lobby them the most, not with which ones actually benefit society.

Ultimately, if we get the incentives right, I believe that we can harness engineers’ innovativeness to invent our way out of the world’s most complicated resource and environmental problems. Given the current inefficient incentives, who knows? I am convinced that the biggest problems we face today are not rooted so much in scarcity as they are in selfishness and economic incompetence.

*But here's an old article, which I have barely skimmed, which has a cost-estimate for various methods of storage.

**I thought of micro-CHP myself, I am proud to say, then discovered on Google that somebody else had already thought of it and was already producing it. I must say, though, currently, micro-CHP’s are at least four times more expensive than a competent business should be able to make/install them, I believe. Or, perhaps reducing noise pollution from such devices is more expensive than I thought.

Monday, June 25, 2012

Why I don't like Taz Murray, and why I will give Keven Stratton the benefit of the doubt

In the months prior to this primary, I discovered that I was on the Republican primary mailing list. It's hard to gain a more favorable impression of candidates from these emails, because they are all almost perfect cookie-cutter imitations of each other - each proclaims the candidate's dedication to shrinking our government to the size of Somalia's, mentions the candidate's strong background, business or otherwise, and includes some endorsement or other.

Although it is hard to find "diamond in the rough" candidates from such emails, Taz Murray, our most voluminous writer, made my job of being an informed voter much easier with these two emails, which I have posted below. For someone like me, who had never heard of either candidate until recently, it was especially helpful, and helped begin forming my opinion before I attended the debate a couple of weeks ago, which I will also write about in the post. For now, here is what I found unimpressive about these two emails:

Unimpressive email #1

No Child Left Behind
I will admit that I know very little about how to improve our education system. My gut feeling is that NCLB punishes schools for failing to achieve unrealistic standards, and that we could do much better than that, but you won't see me unveiling a more efficient educational master plan any time soon. Education reform is a complicated subject that I won't go into deeply until I feel like I actually know something about it.

Still, I am a strong supporter of logic, something that Murray's email is severely lacking. Utah falling from 38th place to 41st place is not credible evidence against NCLB's effectiveness. NCLB, whatever you believe it was, either helped all states or hurt all states, which would not have had any influence on Utah's ranking among those states.

Utah: The best and the worst state?
You could tell me that Utah is the very worst state in terms of educational outcomes, or the very best, and I wouldn't know where to find evidence to prove you wrong either way. I am certain, however, that it is not both. I find it rather peculiar that Murray talks about how Utah is falling behind educationally, and then in the same breath, says that despite lower per-capita spending, it has some of the best educational outcomes. Whatever his plans are for "education reform," I don't think he can implement effective reforms until he has his diagnosis correct, which apparently is unlikely to happen.

Unimpressive email #2
I must commend him for his honesty in this one. He immediately declares his conflict of interest, that he owns a candy business. Still, merely acknowledging that "childhood obesity is a serious issue" is a far cry from solving it. While there are many things the private sector does quite well, there are other things that the government does better. Drawing an appropriate analogy, I believe that in our society, we tend to over-medicate, resulting in worse health and higher costs. Also, I would hope that every physician has an appreciation for all of the marvelous things the human body does on its own if given proper nutrition, rest, and exercise. Still, if I get cancer, and my doctor tells me to eat better, exercise more, and let my body take care of the problem, I'm finding a new doctor.

In the case of rising obesity, I am certain that there is room for debate for what the government should do to efficiently and effectively combat this. Still, whatever the government is currently doing to combat obesity is, I am sure, much better than whatever our candy-business owner would propose.

Besides, a state legislator has no clout in this matter anyway.

This was the only debate I attended. I Wish I had more time to write about this before I go, but I think that the exchange between Murray and the moderator at 53 mins. is telling. In a debate, most of the time candidates can make up whatever statistics they choose, and nobody ever calls them out on it. This debate was particularly vulnerable to such fiction, since there will be no Democratic candidate to face. Utah "Democrats" are very different from national Democrats, and if Republican candidates don't even have to think about Utah "Democrats", then I think that gives all of us very real reason to fear what sort of kooks the primary cooks up.

Anyway, I was very pleased to see the moderator politely interject with actual statistics, refuting Murray's claim that Utah's government was growing too fast. Murray was quick to insist that his fictitious statistics were in fact true. As I watched, I could see the cogs turning in the moderator's head. If he insisted that his statistics were correct, he would look like he was taking sides in the debate, which he isn't supposed to do. On the other hand, could he allow a false statistic to govern the debate?

It appears that Murray has the skill - invaluable to being elected - of insisting that you are right and you know everything. He may not have the skill of listening to others, which is absolutely necessary in governing effectively.

Hasty Conclusion
I wish that I could write more, but I really have to go. I can't say much about Stratton except that he hasn't said or written anything super crazy, and seems like a good guy. 

Unimpressive email #1

This email was sent on May 31, 2012

Recently the Deseret News ran an article, “Can US schools adopt education practices of top-performing nations?”  Some of the highlights include current performance statistics compared to Finland, China, Korea, and Canada where US kids score 23rd in science, 17th in reading and 31st in math.  Saddly, Utah ranks 42nd in the US in terms education outcomes. And what of the last federal solution to our ailing education system, No Child Left Behind? NCLB has amounted to little more than a total failure since we have dropped from 41st a year ago and 38th in 2010.
Our children’s education is extremely important to me.
The answer to our education problems that I hear over and over: spend more money. Utah spends the least per student of any state in the nation on education, yet our statistics show we are doing better than other states.  Perhaps the most shocking statistic from the article: the US spends on average approximately TWICE as much per student on education as do Finland, Canada, China and Korea. Yet we are slipping further behind.
What’s the solution?
Unfortunately, we have not given teachers what they need to perform to their full capability.  If there were a clear correlation with spending more money and improving outcomes in education, I would be leading the band for more money.   Let’s quit wasting money on mindless federal mandates like No Child Left Behind and start spending it in the classroom
We need more good teachers in the classroom who are willing to stand accountable.  We have some great teachers now, but we need more. You can argue all day about class size, curriculum, parental support and etc, but a good teacher in the classroom will do more to educate our kids than any other single thing we can do.  We need to start there, in the classroom and work out to see what is preventing us from retaining more good teachers.  
I’m prepared to be a leader in education. I firmly believe that with better management, cutting wasteful spending, giving teachers the tools they need, and targeting our precious dollars wisely we can solidify something we all hold near and dear to our hearts—our children’s future.
Taz Murray

Unimpressive email #2

This email was sent on May 16, 2012

In an address yesterday on the House Floor, Utah Representative Rob Bishop passionately fought for states rights and railed against Federal intrusion into our local schools.  Two Utah schools have been fined a combined total of $35,000 for simply leaving their vending machines plugged in during lunch time.

I agree with Rob when he said. We should allow local schools and parents to decide what's available for lunch and leave the Feds out of it (see his full statement here).

This issue has a direct impact on my own business.  While I agree childhood obesity is a serious issue, I for one am tired of the Fed. continually impeding on our rights as citizens to make our own decisions.
Additionally, these vending proceeds were being used to fund school music and debate programs.  Those local school officials should be applauded, not punished, for finding creative ways to fund programs that are often first on the chopping blocks.

As your representative in the State House, I will fight federal intrusion into our personal lives whenever I can.  Enough is enough.