Monthly Archive for October, 2009

Incentives matter #423: Governed by Callous Children…

Published on 10/30/2009 in Economics . 0 Comments

Glenn Reynolds linked this piece by the ordinarily very average Noonan. Peggy seems to have discovered that incentives matter, or at least stumbled into an actual live specimen businessman who understands that incentives matter.

PEGGY NOONAN: We’re Governed by Callous Children: Americans feel increasingly disheartened, and our leaders don’t even notice. But John Galt is present, in spirit at least:

The biggest long-term threat is that people are becoming and have become disheartened, that this condition is reaching critical mass, and that it afflicts most broadly and deeply those members of the American leadership class who are not in Washington, most especially those in business. . . .

I talked with an executive this week with what we still call “the insurance companies” and will no doubt soon be calling Big Insura. (Take it away, Democratic National Committee.) He was thoughtful, reflective about the big picture. He talked about all the new proposed regulations on the industry. Rep. Barney Frank had just said on some cable show that the Democrats of the White House and Congress “are trying on every front to increase the role of government in the regulatory area.” The executive said of Washington: “They don’t understand that people can just stop, get out. I have friends and colleagues who’ve said to me ‘I’m done.’ ” He spoke of his own increasing tax burden and said, “They don’t understand that if they start to tax me so that I’m paying 60%, 55%, I’ll stop.”

He felt government doesn’t understand that business in America is run by people, by human beings. Mr. Frank must believe America is populated by high-achieving robots who will obey whatever command he and his friends issue. But of course they’re human, and they can become disheartened. They can pack it in, go elsewhere, quit what used to be called the rat race and might as well be called that again since the government seems to think they’re all rats. (That would be you, Chamber of Commerce.) *

And here is the second part of the story. While Americans feel increasingly disheartened, their leaders evince a mindless . . . one almost calls it optimism, but it is not that. . . . We are governed at all levels by America’s luckiest children, sons and daughters of the abundance, and they call themselves optimists but they’re not optimists—they’re unimaginative. They don’t have faith, they’ve just never been foreclosed on. They are stupid and they are callous, and they don’t mind it when people become disheartened. They don’t even notice.

Read the whole thing.

The $10,000 suit

Published on 10/30/2009 in Economics . 1 Comment

This is a brilliant example of where the “buy local” silliness leads:

suit

Here’s a lovely suit of clothes that can be had for, oh, about $10,000. It’s the result of a project conceived by Drexel University instructor Kelly Cobb to make a man’s suit entirely from materials produced within 100 miles of her home. According to an article by Paul Adams in Wired magazine, the suit was produced by a team of 20 artisans, requiring a total of 500 man-hours.

Let’s see, that’s 500 hours of skilled or semi-skilled labor by artisans whose time is probably worth something on the order of $20 an hour. For about $10,000 I can have one made for you.

<snip>

Please read the whole thing.

Hansen to Obama Pt III – Fast nuclear reactors are integral

Published on 10/29/2009 in Nuclear Power . 1 Comment Tags: , , .

Dr. James Hansen, Columbia U. and NASA scientist, wrote this excellent 4-part series of “letters to Obama”. Barry Brook has republished these on Brave New Climate. Hansen’s Pt III on fast nuclear reactors should be compelling to anyone concerned about GHG concentrations. Hansen begins with an overview leading up to a discussion of Gen IV reactors such as the Integral Fast Reactor (IFR) and the Liquid-Fluoride Thorium Reactor (LFTR) :

Nuclear Power. Some discussion about nuclear power is needed. Fourth generation nuclear power has the potential to provide safe base-load electric power with negligible CO2 emissions.

There is about a million times more energy available in the nucleus, compared with the chemical energy of molecules exploited in fossil fuel burning. In today’s nuclear (fission) reactors neutrons cause a nucleus to fission, releasing energy as well as additional neutrons that sustain the reaction. The additional neutrons are ‘born’ with a great deal of energy and are called ‘fast’ neutrons. Further reactions are more likely if these neutrons are slowed by collisions with non-absorbing materials, thus becoming ‘thermal’ or slow neutrons.

All nuclear plants in the United States today are Light Water Reactors (LWRs), using ordinary water (as opposed to ‘heavy water’) to slow the neutrons and cool the reactor. Uranium is the fuel in all of these power plants. One basic problem with this approach is that more than 99% of the uranium fuel ends up ‘unburned’ (not fissioned). In addition to ‘throwing away’ most of the potential energy, the long-lived nuclear wastes (plutonium, americium, curium, etc.) require geologic isolation in repositories such as Yucca Mountain.

There are two compelling alternatives to address these issues, both of which will be needed in the future. The first is to build reactors that keep the neutrons ‘fast’ during the fission reactions. These fast reactors can completely burn the uranium. Moreover, they can burn existing long-lived nuclear waste, producing a small volume of waste with half-life of only sever decades, thus largely solving the nuclear waste problem. The other compelling alternative is to use thorium as the fuel in thermal reactors. Thorium can be used in ways that practically eliminate buildup of long-lived nuclear waste.

The United States chose the LWR development path in the 1950s for civilian nuclear power because research and development had already been done by the Navy, and it thus presented the shortest time-to-market of reactor concepts then under consideration. Little emphasis was given to the issues of nuclear waste. The situation today is very different. If nuclear energy is to be used widely to replace coal, in the United States and/or the developing world, issues of waste, safety, and proliferation become paramount.

Nuclear power plants being built today, or in advanced stages of planning, in the United States, Europe, China and other places, are just improved LWRs. They have simplified operations and added safety features, but they are still fundamentally the same type, produce copious nuclear waste, and continue to be costly. It seems likely that they will only permit nuclear power to continue to play a role comparable to that which it plays now.

Both fast and thorium reactors were discussed at our 3 November workshop. The Integral Fast Reactor (IFR) concept was developed at the Argonne National Laboratory and it has been built and tested at the Idaho National Laboratory. IFR keeps neutrons “fast” by using liquid sodium metal as a coolant instead of water. It also makes fuel processing easier by using a metallic solid fuel form. IFR can burn existing nuclear waste, making electrical power in the process. All fuel reprocessing is done within the reactor facility (hence the name “integral”) and many enhanced safety features are included and have been tested, such as the ability to shutdown safely under even severe accident scenarios.

The Liquid-Fluoride Thorium Reactor (LFTR) is a thorium reactor concept that uses a chemically-stable fluoride salt for the medium in which nuclear reactions take place. This fuel form yields flexibility of operation and eliminates the need to fabricate fuel elements. This feature solves most concerns that have prevented thorium from being used in solid fueled reactors. The fluid fuel in LFTR is also easy to process and to separate useful fission products, both stable and radioactive. LFTR also has the potential to destroy existing nuclear waste, albeit with less efficiency than in a fast reactor such as IFR.

Please continue reading…

Despite claims, data continue to show small impact of stimulus

Published on 10/28/2009 in Economics and Financial Crisis . 0 Comments

More from prof. John Taylor, who has an irritating (for some) tendency to keep looking at the data:

Debate about the impact of the $787 billion stimulus continued this week. “Thanks largely to the Recovery Act,” Larry Summers argued, “we have walked a substantial distance back from the economic abyss and are on the path toward economic recovery.” Yet the latest data from the Department of Commerce continue to show that only an insubstantial part of this distance was due to the stimulus. The table shows the latest Department of Commerce estimates of the contributions of consumption, investment, net exports, and government spending to the improvement in GDP growth from the first to second quarter. Growth improved by 5.7 percent (from -6.4 percent to -0.7 percent). Private investment was by far the major source. Government spending contributed 1.9 percentage points, but more than half of that was defense spending which was not part of the stimulus. The table is an update of information reported in my Wall Street Journal article of last month with John Cogan and Volker Wieland. This one-page brief provides more details and also shows that direct spending from the stimulus contributed only 0.3 percent of 5.7 percent. We will learn more when the Department of Commerce releases data from the third quarter next week, but so far their data are very clear that the stimulus is having a negligible impact.
[From Despite claims, data continue to show small impact of stimulus]

I find it interesting that the majority of the Wall Street economists that I listen to seem to believe that the “stimulus” is a major factor in the economic turnaround.

And the Answer Is…Productivity

Published on 10/28/2009 in Economics . 0 Comments

This is a useful example of the severe weakness in secondary school economics. This is from Stanford professor John Taylor’s blog (yes he of the famous Taylor Rule). The student response system Taylor uses is very interesting – perhaps common now, but the first time I have personally read about it.

I teach Economics 1 with an “audience response system” similar to the ones you see on TV game shows. Think of the “Lifeline” on “Who Wants to be a Millionaire?” Each student in the lecture has a little hand-held transmitter. They press the keys on the transmitter to give their opinions on issues or answers to questions. Their answers come directly into my laptop computer and are immediately projected in a bar chart on the screen, creating an opportunity for discussion.

The question on the right generated a good discussion this week. I asked students to respond A through E at the start of the lecture, which was about labor productivity and wages. Later in the lecture I then presented and explained the chart below which shows that the best answer is B. Productivity growth is highly correlated with compensation growth over time as predicted by basic economic theory and leaves relatively little for A, C, D, or E to explain. But before seeing the graph many guess another answer, and I suspect most people are surprised that there is so little to explain after you take productivity into account.

<snip>
Please, read the whole thing: And the Answer Is…Productivity.

IAEA study on life cycle GHG emissions for electricity generation chains

Published on 10/28/2009 in Energy Policy and Nuclear Power . 0 Comments Tags: , , .

LCA GHG emissions.jpg

Stewart Brand linked this IAEA 2000 study (PDF) in his new book Whole Earth Discipline: An Ecopragmatist Manifesto. Extensive online footnotes for the book are available (free).

The IAEA study is one of the more credible analyses comparing coal, nuclear, solar and wind.

Click the thumbnail at left for the summary comparision figure, which shows nuclear is by far the lowest source of emissions per kWh of electricity produced. Hydropower can be similar, but viable sites have pretty much all been exploited.

The article summarizes the sources of GHG for each electrical option, and the key factors that influence the life cycle valuation — such as capacity factor, which is very low for solar and wind power.

The Salter Sink

Published on 10/27/2009 in Energy Policy . 0 Comments

Intellectual Ventures Lab has an intriguing new idea for cooling hot ocean waters – where hurricanes/typhoons originate. The concept is elegant just mix the hot surface water with cooler subsurface water at 200 meters and below.

Energy from the sun heats up the surface of the ocean. As that heat irradiates up and fuels storms, they can become ever more dangerous hurricanes. Reducing their destructive potential is possible if we can just cool off the surface of the ocean. Even just one degree centigrade might be the difference between a category 4 or category 5 hurricane. This is a nearly ridiculous notion because of the scale involved. Thousands of square miles of ocean surface might need to be cooled off.

The Salter Sink is a simple idea, with massive potential. Two insights make it very compelling:

Everywhere there is hot water on the surface of the ocean, there is cold water down below.

Please continue reading…

Bill Gross: “there could be payback ahead…”

Published on 10/27/2009 in Financial Crisis . 0 Comments
That’s another way of saying you would have been far better off investing in paper than factories or machinery or the requisite components of an educated workforce. We, in effect, were hollowing out our productive future at the expense of worthless paper such as subprimes, dotcoms, or in part, blue chip stocks and investment grade/government bonds.

Bill Gross, Chairman of PIMCO, examines the “paper economy” based upon leverage and asset price growth (vs. the production economy of making things).
Putting a compounding computer to this 1.3% annual outperformance for 50 years, produces a double, and leads to the conclusion that the return from all assets was 100% (or 15 trillion – one year’s GDP) higher than what it theoretically should have been. Financial leverage, in other words, drove the prices of stocks, bonds, homes, and shopping malls to extraordinary valuation levels – at least compared to 1956 – and there could be payback ahead as the leveraging turns into delevering and nominal GDP growth regains the winner’s platform.
Please continue reading…

Charter Cities: North vs. South Korea

Published on 10/26/2009 in China and Economics . 0 Comments Tags: .

Paul Romer on the impact of the institutional differences which have been tested for half a century on the Korean peninsula. NOKO is an excellent refutation of the argument that culture dominates rules “it won’t work to reform their government because their culture is so different”.

(…) There are many statistical measures of the large difference in the quality of life between the North and the South. One gripping visual indication comes from a satellite picture of the Korean peninsula at night. Compared to its neighbors, North Korea (outlined for clarity) seems like a black hole. South Korea, which looked like the North within living memory, is now a sea of lights.

Until the end of World War II, the North and South shared a common set of formal and informal rules, first as an independent nation, then under occupation by the Japanese. When the allies disarmed the occupying Japanese forces, Russia set up one system of government above the 38th parallel. The U.S. set up a different one below this arbitrary line on a map.

(…)

In today’s world, charter cities offer the best strategy—perhaps the only feasible strategy—for giving people the option to move to a place with a new system of government. Charter cities can also give the leaders of founding nations the chance to set up new systems of government that can, in the best case, do what better government did for South Korea, unleash the potential of the people who use its rules to connect with each other.

I’m wondering if a charter city on the Chinese border might offer a way forward for the North Korean peasants – if NOKO did not gun them down when attempting to cross over. As it stands China tolerates NOKO criminality in nukes and drugs because they fear a collapse which would lead to millions of starving immigrants.

Why are these students studying under streetlights?

Published on 10/26/2009 in Economics and Education . 0 Comments


Probably because power is supplied by the government. From the FAQ at Charter Cities:

Q: Why are these students studying under streetlights?

A: They don’t have electricity at home, so they go to the airport to study for exams. See the news report describing their situation.

Q: Why do you display this picture on your home page?

A: All too often, the picture associated with the challenge of development is one of a starving child. This kind of picture may be helpful in motivating giving, but it does not necessarily lead to careful thinking about the forces that hold so many people back. There are, to be sure, desperate cases of people who are truly helpless. But images of extreme deprivation often obscure the fact that many of the world’s poorest residents attempt to help themselves, only to be stymied by bad rules.

Q: What kinds of rules keep people from having light in their homes?

A: Here are some simple examples of rules that can keep people in the dark:

  • Electricity is provided only by a government-owned firm.
  • Government employees can’t be fired, regardless of how poorly they do their jobs.
  • The low subsidized price of electricity for the lucky consumers who have access is determined by political considerations.

Under good governance, the people who want electricity in their homes can easily match up with the utilities that want to provide it to them.

Here is the BBC article on Guinea – the source of the photo above.

Education is supposed to light up a child’s life – but resource-rich Guinea is stumbling at the hurdles of bad governance, corruption and misrule, with a knock-on effect for her children in their academic pursuits.

(…)

Between 1999 and 2002, schools in Guinea had a modest pass rate of 30-35%. Since 2003, that has dropped to between 20 and 25%.

The absence of electricity was one key element that led to nationwide violent protests against the government of President Lansana Conte across the country in January and February this year.


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