Heh

Blame America First?

No!

Drain America First! (see the comments)

Road conditions

A recent article on NPR stated that it would take $2 billion over the next decade to repair roads in Maine and "[t]he congressionally appointed National Surface Transportation Policy and Revenue Study Commission estimates that the cost of needed repairs is $220 billion -- at a minimum -- per year" to repair all of the nation's roads. This is seen as a crisis that requires federal subsidization and massive increases in federal and state funding. They are therefore starting to look at increasing gasoline taxes.

The last substantial increase in federal gasoline taxes took place in 1993. Given that we "only" used about 142 billion gallons of gasoline in 2006 (and similarly for 2007; high prices have caused a stagnation of fuel consumption), that means the federal government "only" collected about $26 billion. Given that the aggregate state collection is similar (state fuel taxes vary considerably, but average right around $0.18 as I recall), then "only" about $50 billion or so of the $220 billion is being collected. Your fuel taxes therefore need to climb from a combination of around $0.36 per gallon to something more in the neighborhood of $1.62, an increase of $1.26 per gallon.

May I suggest something else? What about supporting tolls? Though perhaps not very practical for intracity driving, they are eminently practical for freeway and bridge traffic. But first, there is a substantial obstacle to overcome: the belief, widely held in the US, that driving cars is a right and that roads should always be free. Clearly, we understand that roads and bridges are not really free, but the costs are hidden rather than explicit [1]. Tolls are a way of making those costs explicit.

As an exercise in noting how bad the anti-toll and especially anti-private infrastructure bias is, I will cite the Forbes article cited recently in the comments at MR as an example. The Ambassador Bridge is a privately built, privately owned bridge from Canada to the US near Detroit. It is the most popular bridge in the Great Lakes region: 3.3 million cross on the Ambassador vs. 3.6 million on the other four bridges combined. On 9/11, local government officials closed off the nearby car tunnel, and traffic subsequently backed up on the Ambassador. Truck wait times went to 12 hours because of the lack of border Patrol and Customs inspectors.

The tone of the article is as follows: Because some private person had the foresight to build a bridge at that location 75 years ago, and because it is the most popular truck crossing today, and because the state has not built a competing bridge nearby, somehow the owner is a bad guy. And because 9/11 brought about panic and security precautions that caused backups, the owner is a bad guy. And most of all, because he doubled toll rates for trucks and quadrupled them for cars in the past 25 years, he is a bad guy. Bottom line: private infrastructure is bad [2].

The point about toll raises is misleading. If there are four hour weight times at rush hour, this is a sure signal that the tolls are not high enough; perhaps they should consider higher tolls during the rush hour, the same way commuter trains do. If cars are Teh Bad because of pollution and AGW, then tolls should be higher everywhere, not just at the bridge (that's essentially what a carbon tax is). Here's the Environmental Defense Fund on the subject. Furthermore, bridge and road tolls have increased nearly everywhere in the past few years, not just on this private bridge. The tolls on the publicly operated San Francisco Bay Bridge were $1 in 1988, but are currently $4. That's a quadrupling in twenty years, quicker than the cited period of 25 years for the Ambassador. And London has famously begun charging congestion tolls to enter the gridlocked inner zones.

I think we can all agree that we rely on the transportation infrastructure and that we would like for it to be properly maintained. That is essentially a public good (not a pure public good, though). Every unavoidable pot-hole creates potential additional maintenance for the car owner. We would also like to see traffic reduced to the point that we don't experience delays and frustration. But fuel taxes are just one of several responses. Tolls that are reinvested in the roads are a better way of both directing the money to the most used infrastructure and directing the traffic to the best infrastructure. For example, if you had to raise tolls on a freeway to keep up the maintenance due to heavy truck usage to the point that shippers began shifting more of their traffic to more efficient railroads, that would be a good thing, no?

Oh, you did remember that railroads in the US are (for the most part) privately operated and maintained, didn't you?


-----------------------------------
[1] Note the parallel to education: we all know that school buildings, teachers, and books cost money, but the phrase "free education" is used without irony. May I also suggest a small, means-tested toll at public schools? You can call it whatever you want -- "tuition" or "user fee" -- so long as you collect it.

[2] Don't tell the people who believe that private infrastructure is impossible. They prefer the impossibility theorem to the malevolence theorem, but will fall back to the latter when it suits them.

Local, action: Buying Whole Foods' local claims

In Kevin Carson's book chapter, "Decentralized Production Technology", he has this to say about my comment about Viking appliances and planned obsolescence:

Here I take issue, at least in part, with Husman's analysis. First of all, it's hard for me to understand why the average lifetime of an appliance, as determined by the durability of its components, should as a matter of strict definition be excluded as a matter of design choice. After all, Husman himself mentions Viking refrigerators as an example of a product specifically designed for longevity. Second, he seems to be defining "planned obsolescence" far too narrowly. Planned obsolescence refers not just to how soon or how frequently an appliance breaks down as a result of problems with individual parts, but also to how amenable it is to repair. Planned obsolescence, in this latter sense, includes 1) a deliberate choice among design alternatives in favor of a design that makes repair more costly, difficult, or complicated, and 2) the use of such expedients as patents to control the availability and pricing of replacement parts.

First, as I pointed out, the Viking appliances are expensive, on the order of $6,000 for a refrigerator. And the same is going to be true of many such things: a Mercedes or Lexus is going to last longer, all things being equal, than any economy car. So I'm not opposed to including longevity as a design criteria, but rather pointing out that the longest lasting items are going to utilize the latest and most expensive elements and techniques. On the other hand, a Toyota lasts longer than its similarly priced competitors and people desire that feature. Second, I'm going to definitely concede that Kevin has a good point about repair difficulty/ease being part of the equation. The original Model T was made to be easy for farmers to repair, and they loved it. The current generation of cars is ridiculously difficult for the shade-tree mechanic to do anything but change a tire.

But that's beside the point I'm after in this post. What I'm mostly after is the fact that moving to an economy that we might prefer is going to look expensive. I introduced this with the appliance debate, but I'm going to flog the "controversy" between Michael Pollan and John Mackey for the rest of the material.

I first happened to hear about Michael Pollan during this interview on Fresh Air; I have his book Omnivore's Dilemma on my get-around-to-reading list, but this interview will have to suffice for now. It supported most of the things I have come to believe about our diet, corn, and related issues. Note especially his comments after 29:00, in which he says,

To eat in a way that is healthy for you and healthy for the environment and doesn't use a lot of energy is more expensive. That's an issue we have to grapple with. A lot of this food is elitist food, and can be called elitist food, and often is -- usually by proponents of the industrial food system. Any situation where McDonalds is claiming the high moral ground, I'm a little dubious of and this is one of them. But I think we have to confront this.

There's several different ways to look at it. One is cheap food is not as cheap as it looks. The real cost of that $0.99 burger in terms of ... is charged to public health, is charged to the environment, is charged to your health. Even though it's cheap at the register, that is not the real cost of that food. That is an irresponsible price. I don't know that people want to buy irresponsibly.

Now some people don't have a choice. There are a percentage of people in this country who probably can't afford to eat organic or even to eat more sustainably 'cause organic is not the only answer. Let's not oppose organic to everything else; there are many more alternatives out there. Grass fed beef is not organic but it's better, I think, than organic.

If you go to the supermarket, it is true that -- and you're a rational actor, and you don't have a lot of money -- if you're basically buying energy for you're family -- that's to say calories -- the rational thing for you to do under the system we have is to patronize the center of the store, all the processed food. Because a dollar will get you 2500 calories of cookies, of snacks, of potato chips and if you go to the produce aisle, it will only get you 250 calories of carrots

So, y'know, we're programmed by evolution to seek the most energy with the least effort possible and the supermarket has created an environment where that forces people essentially to buy the least healthy calories. But that's not a function of the free market, that's not a function of nature, either. That is a function of policy. There's a reason that the least healthy calories in the supermarket are the cheapest, and that is essentially "policy": we subsidize the cheap calories. We subsidize ... those calories are calories that come from corn and all those calories -- all that high fructose corn syrup -- is subsidized by our taxpayer dollars, the carrots are not.

So it seems to me that for the people who are shopping this way, the challenge is to change the set of incentives and figure out a way to make the healthy food cheaper and to make the unhealthy food a little bit more expensive.

[transcript acquired the with old-fashioned method: listen and type. I hope it's accurate.]

From the interview, Pollan's point seems to be that we should be more careful about what we eat. For example, avoiding anything with HFCS is a good shorthand for not confusing "food products" with "food". He also differentiates between good and bad organic, where bad organic is the type where free range hens never actually get outside (apparently, they haven't checked their contracts). I believe that the use of petroleum as the major input to our food is a problem since one of petroleum's alternative uses is transportation and that means that the cost of food to our poor people is rapidly becoming impacted by the transportation choices of increasingly wealthier people in China and India.

And we thought we freed ourselves of such considerations when we shucked the gold standard.

So Pollan finally ends up endorsing something like the 100 mile diet described by Alisa Smith and J.B. MacKinnon in their book of the same name. He believes that eating local means that farmers will use better inputs (no pesticides or petroleum) and that local farming will inhibit sprawl. And since localism is the point of this post, I swear I will return to it after dealing with two asides.

First, I believe he could have selected better examples. For example, by having all of our farming concentrated in Iowa, they may have eliminated birds there, but we increase the potential for green space around our cities everywhere else. He is basically proposing that we replace the native species of plants around our cities with food stuffs, which only shifts the problems around a little, but does not eliminate them. Indeed, this is the argument of Nobel Peace Prize winner Norman Borlaug, the so-called father of the green revolution. In an article in The Economist, he argues

Thanks to synthetic fertilisers, Mr Borlaug points out, global cereal production tripled between 1950 and 2000, but the amount of land used increased by only 10%. Using traditional techniques such as crop rotation, compost and manure to supply the soil with nitrogen and other minerals would have required a tripling of the area under cultivation. The more intensively you farm, Mr Borlaug contends, the more room you have left for rainforest.

Granted, Borlaug and I are offering a false dilemma here*, but the point is that Pollan doesn't seem to have thought this far through the problem (perhaps he has and it didn't come out in the interview; I haven't read the book).

Second, Tyler Cowen's critique at Slate left me flat. Tyler points out that Pollan's approach neglects to value our time and other market signals. Tyler makes a good point when he says that we may respond to higher fuel prices by driving less or buying smaller cars, but that we probably won't start growing grapes in the back yard. However, I'm surprised that Tyler doesn't more strongly endorse Pollan's descriptions of the problems of subsidization. Neither does Tyler recognize a benefit in which I expect him to be most interested, which is the improvement in food quality that might arise from a more local, fresher supply of ingredients.

While Tyler mentions the problem with the corruption of the term "organic", and agrees with Pollan that shopping at Whole Foods is an insufficient response to the three problems in the industrial food system (our health, our environment, the treatment of animals), Whole Foods founder John Mackey responded much more vigorously in a series of blog posts and public forums. As a result, each has moved a little in the direction of the other, Pollan agreeing that the Whole Foods approach is not as bad as he thought and getting better, while Mackey conceded that some of their practices needed review and changing.**

Mackey's summary of his arguments can be found in this presentation. In slides 39-41, he mentions something that has bothered me for some time now. While writing about the theme of self-sufficiency in Kirkpatrick Sale's Human Scale, I told a story about driving out to a local chile farm to acquire the green ambrosia. Even in my high efficiency automobile (46-50 mpg), it probably required a quart or two of fuel to make the round trip. Most other vehicles would require more, and most of the city lives further away from Lujan Farms than I do. The fuel required per pound of a truckload of chile would probably be much lower when delivering to a market in the center of town, but people still have to get to the market. This is an optimization problem, so the least-energy solution will not necessarily be "don't shop at Wal-Mart". Given existing social circumstances, the optimal solution will probably depend on where you live and what you drive; "shop at Wal-Mart" may actually be the solution for many people.

That is only part of the issue. When you account for all of the inputs (soil, sun, water, etc.), the fact that some geographic regions are blessed with some of these in abundance while others are not, and that economies of scale can be realized when using railroads and ships, local may not be the answer for everything. Mackey's summary of this part was, "If you live in Berkeley, you will use less fossil fuel and produce less carbon dioxide by buying rice from Bangladesh than from California." I'm inclined to think that even if that particular claim is not correct, it will be true that some foods will be less energy intensive when grown and shipped from afar rather than locally.

But is Mackey sincere when he claims that Whole Foods' supply chain is not as bad as Pollan claims and getting better? I was originally going to post about an article in Forbes that I bookmarked some time ago (To Fight Rivals, Whole Foods Buys Local). Unfortunately, Forbes can no longer find the article on their own site. Fortunately, Google can find it elsewhere, so I excerpt it here without linking:

Dairy general manager Matt Lucas began bringing the glass bottles himself from the Morning Fresh farm in Bellevue, Colo., 60 miles north of Denver. Until then, Morning Fresh had long made its name on home deliveries.
Since his Whole Foods deliveries began in 2004, Lucas estimated, his dairy's sales have increased 20 percent. Morning Fresh now sells at least 1,000 gallons a week to supply a Whole Foods distribution center serving 10 stores.
"It's a breath of fresh air to get involved with a group like that. They were so excited to get our product in their stores," Lucas said.
By strengthening -- or, as some farmers say, returning to -- their commitment to local products, Austin, Texas-based Whole Foods and Boulder-based Wild Oats Markets Inc. are fending off big chains like Wal-Mart Stores Inc., Kroger Co. and Safeway Inc., which have expanded their own organic offerings and put pressure on the smaller "natural" grocers. "With Wal-Mart barging into the lower-end organic sales, this is a way these other retailers can differentiate from what Wal-Mart is doing," said Dan Hobbs, a cooperative development specialist with the Rocky Mountain Farmers Union.
...

Small local growers often cannot offer lower prices than large-scale operations that benefit from economies of scale and cheaper labor. But fuel costs for shipping food are less for shorter trips, which in turn often require less packaging to preserve food. Buying local also shortens the time it takes produce to get to market, preserving nutrients and freshness, ....
...
Whole Foods defines a local product as having traveled less than seven hours to get to the store.
It sells more than 200 produce and floral items from more than 60 local growers in the region covering Colorado, New Mexico, Kansas and Missouri. Overall, it does business with more than 2,400 independent farms.

Apparently, Whole Foods is looking at local foods (in the article, consumer interest in local food is credited in part to Pollan's book) as a competitive advantage over purveyors of "bad organic" such as Wal-Mart. If true, it means that Whole Foods' conscience and self-interest are aligned with those of their customers, suppliers, and (if you believe John Mackey's New Agey Manifesto) employees and stock holders. If true, that's pretty cool.

A few things can be pulled out of this.

• I think the struggle between Whole Foods and Wal-Mart leaves us all better off than Pollan does. I can't tell which paradigm will win, but I am certain that having them square off with two different formulas -- and having the local farmers market and small grocery stores as well -- means that my food supply is simultaneously more secure, less expensive, and of higher quality than if someone was to start mandating that their favorite approach should be the victor. Also, Wal-Mart is a big boy, so perhaps the merger of Whole Foods and Wild Oats creates a stronger competition between the two.
• Still, as Pollan points out, it is policy that the corn industry should be as large as it is. Frito-Lay and Coke need to occupy all that premium shelf space because they have products that need to be sold to keep the machine running. In that sense, Wal-Mart is a creation of both Sams: Uncle and Walton.
• Mass producers have genuine advantages over craft production. For one, their cash prices are lower. Amana is cheaper than Viking, Kraft is cheaper than the dairy farm down the road, Wal-Mart is cheaper than Whole Foods. If I'm on a limited budget, that's going to be important.
  
• However, there are hidden costs. Note that above I said, "moving to an economy that we might prefer is going to look expensive", not "be expensive". All things considered, and on average, cheaper appliances and vehicles are typically not as long lasting or efficient, cheaper food products are not as tasty or nutritious as organic and artisan foods, and mass production relies on a massively subsidized infrastructure. We taxpayers pay for agriculture subsidies and transportation subsidies, while we as people pay for the externalities (farm runoff, smog and soot).***
  
• The cost of transportation is a factor in whether local or mass produced is less expensive. The railroad ushered in the first age of mass production and broke down state and regional barriers and built a nation while the container and container ship ushered in the age of globalization. If we are entering an era of permanently higher fuel costs, those trends may reverse. That's not all bad.
  

I am interested in understanding how to reverse some of the policy decisions of the past 150 or so years without reverting socioeconomically to what existed then (grinding poverty, extreme inequality -- contra to what populist demagogues would have you believe about today being the worst of times in those regards). Employing lean production can build a local manufacturing base that produces high quality goods at low costs with little waste, benefiting both workers and consumers. Removing taxpayer supports shifts the advantage from ADM and Cargill toward local farmers. And local governance moves power out of distant capitals and bureaucracies into our hands.

In an upcoming post, I want to say something about local energy production.

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* You could combine localism and organic methods.

** Other takes on the Pollan/Mackey "smackdown turned lovefest":

• An Open Cupboard suggests that Whole Foods should be more diligent about teaching people to shop on a low income. Easy: vegetarian.
• Whole Foods blog: Points out that Whole Foods stock took a $2 billion dive after Pollan's book came out, but also notes that may be attributable to other problems.

*** Yes, it is literally true that the corresponding costs of obesity cost us money through Medicare/Medicaid. However, that also is a matter of policy and I am not going to start using that as a pretext for dictating other people's behavior and food choices.

Energy roundup

1) News from Green Car Congress

• Hybrid sales are continuing to climb. According to the diligent folks at Green Car Congress, hybrids accounted for 3% of cars sold in May. It's weird, almost like there's some kind of incentive, perhaps something to do with the cost of fuel? Yet, the politicians tell us, the market will fail to bring us efficient cars unless we force them to do it via CAFE and hybrid subsidies. Hybrid subsidies might be a factor in their popularity, except that Toyota doesn't seem to be seeing much drop in demand after they hit the magic number that shuts off the subsidy every year.
• In another GCC article, we find that Honda is discontinuing the Accord hybrid. Apparently, "hybrid" does not equal "slam dunk". The Civic Hybrid works, the Accord Hybrid does not. Apparently, consumers haven't gone completely irrational over the "sexiness" of hybrids.
• Honda, Mercedes, and Bosch are exploring diesel-electric hybrids. Apparently they believe there may be a market in 70 mpg vehicles that can run on vegetable oil.
  

2) An NPR article on plug-in hybrids titled, "Corporations push Congress on Climate Policy" makes some fantastic-sounding claims:

A company called A123 Systems invented the battery pack. Les Goldman is the lawyer hired by the company to represent it in Washington. He has been bringing the Prius up to Capitol Hill, singing its praises to senators and staffers. He tells them it gets 100 to 170 miles per gallon — "and that includes charging the battery every 40 miles or so. And one charge, which takes about four hours, will cost you at the electricity rates in the Washington metropolitan area, at night at about 55 or 60 cents."

What A123 Systems wants is a tax break, not for itself, but for consumers. A decade ago, Congress approved tax credits worth up to $2,000, for buyers of new hybrids. It helped dealers sell thousands of the high-mileage cars. Now, Goldman asks the senators, why not do the same thing for these new battery packs?

Now, I assume you caught the fact that they want it for their consumers, not themselves, right? So they selflessly hired a lobbyist to point out that tax breaks helped Toyota sell "thousands of high-mileage cars". At no point does the reporter stop and ask if rising fuel prices were behind that increase rather than the tax breaks, nor does the reporter point out that A123 might perhaps benefit from those increased sales.

But let's go beyond that. Assuming the following:

• Approximately 65% of electricity energy is lost in transmission (see this great graphic). Thus, for each kW-h consumed, 3 must be generated.
• 1 kW-h of electricity is 3,600,000 Joules (3.6 MJ)
• A gallon of gasoline contains 132 MJ of energy
• Electricity costs about $0.10 per kW-h, so $0.55 to $0.60 worth of electricity is about 5.5 to 6.0 kW-h
  

That means that the plug-in hybrid is getting 40 miles per 5.5 kW-h or 40 miles per (5.5*3.6 MJ) = 2.02 miles/MJ. Inverting that, I get .495 MJ/mile, but that is for energy consumed, not energy generated. By multiplying by 3, I find that the vehicle used about 1.485 MJ of energy generated per mile. By inverting that number and multiplying by the 132 MJ/gallon of gas, I can calculate an equivalent mpg. The electricity is giving an equivalent of 267 miles per gallon for energy consumed, but about 89 mpg equivalent of energy generated because of transmission losses. Not bad.

It is also using gasoline at the rate of 170 miles per gallon. Using the higher figure, that's 170 miles per 132 MJ, or about .776 MJ/mile, roughly half the energy required to go one mile with electricity when accounting for transmission loss.

So for every mile it goes, it's consuming about .495 MJ of electricity used or 1.485 MJ of electricity generated and .776 MJ of gasoline. By adding those, I get the total average energy usage per mile. The combined efficiency -- accounting for transmission loss -- is about 58.5 mpg. That's not much more significant that what I can get in my car (50 mpg on the last tank).

Also, gasoline at $3.5/gallon is equal to $0.095 per kW-hr, or slightly cheaper than what I am using for the cost of electricity (diesel currently happens to be a much better deal at $2.70/gal).

So, instead of serving as a panacea, plug-in hybrids shift the fuel from oil to coal, natural gas, or nuclear, and shift the costs from your cheaper gasoline bill to your slightly more expensive electricity bill. Coal is reputed to be dirtier; it also happens to be burned somewhere other than in your own neighborhood. As you might guess, electric companies are behind some of these efforts to promote plug-ins.

Of course, if you were to install a wind or solar generator at the house, the electricity would be "free", but then again the sun and the wind usually aren't very effective at night when the car is parked. And, as I noted near the end of this article, some people are trying to get something for nothing by plugging their electric vehicles in at work. So here are two predictions/suggestions of what we may see in the next few years if fuel prices stay this high:

• Employers providing charging stations at worksite parking areas for charging employees' plug-ins. Install solar panels on the shelters and you increase your "green cred" while simultaneously providing shaded parking and "free" recharging. Sell extra power back to the grid (net metering) and make that unused space pay its own rent.
• Coin-op meters at large parking facilities for car charging. The coin-op serves as both parking fee and recharge fee. It would be nice if they would allow debit/credit/Paypal transactions, too.
  

3) Regarding the previous post on the news that Congress is considering a measure to block states from enacting more stringent measures: this poses a tactical problem for a decentralist. On the one hand, I'm against turning over all decision-making to a large and growing central decision-making bureaucracy and would much rather see local communities working to preserve their environment. On the other hand, opposing the federal/national Leviathan means protecting the paternalist busybody living next door. It puts you in the position of fighting for local decision-making, and then fighting against those decisions. Geez, I guess that's what Jefferson meant by, "The price of freedom is eternal vigilance." But at least I can meet my neighbors and reason through these issues. And when locals make decisions that help some and harm others, they know the score and can compensate them on the next go-round; when large nations make decisions, the far-flung citizens have little idea who is harmed or benefited, so they will remorselessly slam the same scapegoats in every round.

4) Department of Duh: The Worldwatch Institute claims that photovoltaic (PV) costs are set to decline 40% by 2010. Until just recently, as I noted back in July 2006, PV costs were rising. My guess is that consumer demand driven by both high fuel prices and worldwide government subsidization was driving the trend. Since then, the rise seems to have flattened out and even tipped the other way. If the WI predictions are correct, then Julian Simon should be calling WI founder and perpetual Malthusian doomsayer Lester Brown from the grave to say, "See? Told you so."

40% is a substantial reduction. As I noted in this post, PV is only economical under certain circumstances, but a 40% drop in prices certainly opens that up.

So why "duh"?

Well, if you know that the price is set to drop 40% in the next three years, why would you buy now? And if it is set to drop due to market supply and demand factors (which is arguable, see below), then why would you subsidize it? In fact, if many people would defer planned purchases just a little while, the over-production would create an inventory problem and drive prices down even faster.

Note from the WI report that the primary driver behind the supply increase is the money pouring into China from capital markets. Are they investing because they all believe in Peak Oil, in reducing carbon dioxide emissions, or in capturing some rents through programs like California's Million Solar Homes? If the latter, can this really be said to be a drop "due to market supply and demand factors"?

"Well, no matter" say the Big Government Greens, "whatever it takes to get there. As long as we get to screw Big Oil in the process."

How do you suppose Big Oil got that way? Hint: Among the biggest sellers of solar panels are little mom & pop companies like Shell and BP. Baptist, meet thy Bootlegger.

Centralizing to save you from your neighbors

I generally think that the California Air Resources Board (CARB) rules contain some pretty ignorant stuff, but that at least it only effects Californians. Well, and the other 6 or so states that have adopted them. But at least federalism is still gasping for breath. To people who want to be able to show those mean rotten Republican bastards in Washington that something can be done about global warming and air pollution without killing the consumerist economy, the CARB and other state standards are a great way to ... um ...

Hey! What the ... ?

According to the Green Car Congress, it looks like the Democrats running the US House Committee on Energy and Commerce are looking to pass an amendment to the Clean Air Act to "block states from establishing standards to limit the emission of greenhouse gases from automobiles."

But, Democrats don't do this, right?!

Geez, people, wake up. As noted in the comments on GCC's article, opensecrets.org shows that legislation author Rick Boucher (D-VA), Chair of the Subcommittee on Energy and Air Quality Chair, is heavily sponsored by the electric utilities.

Hope you enjoyed the Kool Aid.

Running on glue and tar

My wife and I have been discussing where the world is going to go in the post-Peak Oil era. I for one am optimistic, but concerned about the transitional period. I think that we (humanity) will develop a variety of responses to the problem(s), and that we will be better off in the end, but I am concerned about the rate at which the transition will occur. There may be upheaval and pain in the interim, regardless of who is in the White House or what policies we follow to get there.

In the comments on Matthew Yglesias recent post on gouging, we see a response to higher fuel prices that I think is indicative of lazy, uncreative thinking. Simply keep piling on one supposed remedy after another. This is creative thinking in much the same way that fixing your mistakes after rushing through a job is productive work. (for my previous thoughts on gouging, see here, here, and here).

Some things seem to escape the attention of people who think like this. For example, the crimes committed by a gas station owner can be determined by looking at his prices compared to his competitors' as follows:

• higher: gouging
• lower: predatory intent
• equal: collusion

In this environment, it might be worthwhile to keep a lawyer on staff, nicht war? And since the laws are subject to change, a lobbyist might be useful. If everyone has to have lawyers and lobbyists, that creates a competitive advantage for larger businesses. I think I can assume that people who are against gouging are also against large businesses, so why don't they understand or acknowledge these problems?

---------------------------------

Then, I was reading about heterodoxy, Cowen, and Veblen, looked up Veblen, got side-tracked by Giffen Goods, and finally came across an essay in The Nation by Sasha Abramsky entitled, "Running on Fumes". He raises the idea that gasoline is a Giffen Good, one that poorer people will come to spend more on even as its price rises because they are locked into it.

Sasha says,

Indeed, the very fact that some commentators, such as the Cato Institute's Jerry Taylor, so glibly assume (or, at least, assumed pre-Katrina) that an oil price shock can be painlessly absorbed shows just how invisible the country's poor have become to much of its pundit class.

Since Taylor's offending comments are neither quoted nor referenced, I can only guess that Taylor said something like, "let the price mechanism work" in response to calls for price controls. The month prior to Abramsky's piece, Taylor wrote about fuel prices in NRO. I would recommend reading both before proceeding with the rest of this post.

Back?

It is of course debatable whether the price mechanism will work well with regards to energy. In the comments on James Hamilton's Peak Oil in America post, Stuart Staniford claims that recent empirical research indicates a short-term price elasticity of -0.05. An older survey indicates that the long term price elasticity is around -0.8 and the short term is around -0.2. In any case, this is for a general population, not the poor, so it is only indirectly relevant to the point. If these two articles can be taken as accurate, the indicated decrease in elasticity (magnitude) indicates that it will be harder to curtail gasoline use as price goes up than it was in 1979-1983; I would assume that it would be harder for the driving poor, but perhaps not so much for the urban poor who have access to other options. (I graph oil use vs. oil price here, but have not updated it since October 2005. Note how much reduction was achieved 1979-1983.)

Near his conclusion, Mr. Abramsky claims that the decline of the rural area about which he is writing is preventable, but

prevention involves the sort of innovation the Bush Administration, besotted as it is with laissez-faire triumphalism (not to mention oil-industry campaign cash), has been reluctant to embrace.

Did you just experience a self-administered lacto-nasal enema upon reading -- in a single sentence -- that the Bush Administration favors laissez-faire policies and that laissez-faire and oil-industry campaign cash are not mutually exclusive?

Indeed, this seems to be common in discussions of gouging, Peak Oil, current pricing, and related issues. Are Mr. Abramsky and the commenters on Matthew Yglesias' blog really claiming that the oil industry enjoys laissez-faire trade policy? That seems so absurd on its face that I cannot believe it needs rebuttal.

The oil industry came of age in the Progressive Era. Oil production had steadily increased and prices decreased for the entire history of the industry through the antitrust prosecution of Standard Oil. As the automobile caught on and demand heated up, Progressives were excited to be able to subsidize a competitor to railroads. Then, as the US got involved in World War I, businessmen eager to be freed from antitrust regulation jumped at the invitation to participate in the Commodities Section of the Petroleum War Services Committee and the Oil Division of the United States Fuel Administration. Dominick Armentano points out in Antitrust and Monopoly, that A. C. Bedford, president of Standard Oil of New Jersey, was appointed as chairman of the War Services Committee. Their experience of cooperation and "supervised competition", and the concurrent worldwide embrace of central planning (think about what was happening in Russia, Germany, Italy, and even England in the period between wars), paved the way to the corporative-creating National Industrial Recovery Act. When that was struck down, the Connally Hot Oil Act of 1935 was passed without hearings to maintain stability in the oil industry. It allocated state production quotas and provided a means to enforce restrictions on interstate transshipment in excess of those quotas.

The military has been tied in to oil production or at least the Middle East arguably since Eisenhower placed troops in Lebanon in 1958 and Kennedy defended Saudi interests in 1963. More recently, in 1980 Jimmy Carter announced the Carter Doctrine, stating that the US would defend its oil interests there. You have the obvious Bush wars since then, with Clinton lobbing a few bombs and establishing bases in Saudi Arabia in between.

In addition to regulatory and military support, we also have regulatory intervention and distortion. As James Hamilton has pointed out, one reason for the increase in gas prices during the tight markets in 2005 was the fact that the national market is segmented by EPA requirements and refineries cannot easily switch between the various boutique fuels favored by - you guessed it - Mr. Abramsky's fellow travelers. Finally, we have people who insist that we need to increase gas taxes so that we, like Eurotopia, will have gasoline prices near $10 per gallon.

Any guesses as to whether The Nation favors those higher fuel prices? I searched for "carbon tax" on their site and got 78 hits; the first one says, "A carbon tax would be simple --" The author goes on to add that

And as Charles Komanoff of the Carbon Tax Center argues, at least part of the proceeds of the tax could be rebated to poor and middle-income households through the income tax system, neutralizing any inequities. The unrebated balance could be used to subsidize alternative energy research and production. Given the historical successes of government funding of basic research in computing and medicine, there's every reason to believe the products of this work would be very promising.

Another two-fer: not only do we learn that the simple tax now has lots of other little simple ancillaries, like using the simple income tax system to rebate for gas, but we also discover that the government's funding of basic research has a proven track record. They don't explain exactly how we figure out the difference in rebates between subway-riding New Yorkers and rural Californians, so perhaps it is not as simple as they first insist. Nor do they actually compare the government's track record in conducting research to anything else, like privately funded applied research. Now, I think it's possible that government gives the private sector a good run in basic research, but recall that the human genome was first decoded by a private company in 1/10 the time and budget as that proposed by a government agency. But the private sector is much better at applied research, which is what was meant by "subsidize alternative energy research and production." So they call for applied research based on the government's track record in basic research? Nice sleight of hand.

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A greater protest must be registered over Mr. Abramsky's nearly complete silence on the century of other Progressive policies that have pushed the poor out of town and into the oil-based lifestyle. Once again, we can refer to Gabriel Kolko's Railroads and Regulation and The Triumph of Conservatism for an understanding of the politics underlying regulation in the Progressive Era. The tongue-in-cheek, short version is that competition was largely working for everyone except the capitalists themselves. Competition was forcing costs down so far that they were all headed for bankruptcy, so they tried cooperative arrangements. When those failed, they turned to the federal government to act as the cartelizing agent. Though Kolko doesn't specifically address it, it is easy to see that the electric power industry faced the same logic of high capital costs, low marginal production costs, and the resulting expansion, competition, system building, bankruptcy, and "need" for regulatory intervention. This eliminated the "destructive competition" in rails & utilities by constraining competition and innovation. The whole point of regulatory oversight was not consumer protection, as the unsophisticated, narcissistic state-worshipper would have you think, but rather stabilization for the industries so they could go back to peace, quiet, and regular dividends. That is why deregulation and people like Craig McCaw and Michael Milken were so upsetting to AT&T in the 1970s and 1980s, and why electric utilities are so resistant to deregulation today.

The same public who first wanted to give land grants and rights of way to railroads and canals in order to get rid of private turnpikes, and then wanted to constrain railroads because the average voter didn't understand the logic of the capital-intensive industry they had spawned, and now didn't like the fact that their regulations created a de jure cartel, wanted roads. They joined the Good Roads movement and fought for public subsidies for bicycles and then cars. When Louis Brandeis brought Harrington Emerson to the stand in the 1910 Eastern Freight Rate Cases to argue that every industry could be rationalized with and every consumer benefited by Taylor's Scientific Management, the public caught the bug for the Efficiency Movement and Technocracy Movement. They wanted to centrally manage everything. The goal was, as Herbert Croly put it, to produce "Jeffersonian ends with Hamiltonian means".

As outlined above, the Progressives in WWI and FDR's cabinet in the Depression and WWII supported a state-industrial oil policy to further rationalize oil production and distribution. In conjunction with the Good Roads and subsidization of the automobile (which gave rise to the Golden Age of manufacture and its corresponding anomie and unionism which many Progressives yearn for), the stage was set for moving out of high density urban areas and to the suburbs.

The push to suburbia has also been helped over the years with some uniquely Progressive policies. Rent control in New York City, for example (I once read that poverty-stricken Walter Cronkite lives in a rent-controlled building). The aforementioned utility subsidization, including the TVA and REA, which replaced farmer-owned windmills with investor-owner utilities. More recently, to "preserve their character" (a euphemism for "preserve their property values"), many cities (bastions of Right Wingerdom, like San Francisco) have banned urban development, forcing people out of town to find affordable housing. To pay for a wide variety of programs, some of which used to be privately provided by the working classes for themselves, cities have raised property and sales taxes (Santa Fe, for example: there's a reason you need to make $10/hour to live there, and it mostly has to do with California millionaires moving into the City Different; most of them are not exactly Goldwater Republicans). While the upper and middle classes were leaving the city to live in clean, quiet neighborhoods, these policies were all pushing the poor even further out of town.

In the specific case Mr. Abramsky addresses in his essay, the size of those towns probably needs to be smaller. They were dependent on mineral extraction and timber, both repeatedly attacked by people like Mr. Abramsky, but probably not by Jerry Taylor. Indeed, it's probably a safe bet that when people like Jerry Taylor raised the issue about the impact of stopping resource extraction on the workers, people like Mr. Abramsky glibly dismissed it, saying that the economy could easily absorb the jobs lost. But I will go further than either of them and point out something both should agree to (if they want to be logically consistent with their probable core values): continuing to live in a non-agricultural rural area is inherently energy intensive, and we should not continue to subsidize it if we really think Peak Oil is a concern.

I recently came across a site (probably something on Gristmill dealing with global warming) that claimed all of the skeptics of (Kyoto?) never provide any suggested solutions of their own. Does Mr. Abramsky offer a suggested solution for the poor people he exploits for his article? He offers a vague mention of mass transit, a system that works well in high density areas like Europe and the Northeast Corridor, but probably not in Northern California. He seems to imply that George Bush is personally responsible for the lack of mass transit despite the fact that ridership is higher than it was under Clinton.

Abramsky makes a quick offer to help them pay for oil, thus furthering the addiction that has them in this situation in the first place, and contributing to a 150 year legacy of trapping people in a state-underwritten prison. The latest insult in that legacy has been the ethanol subsidy, a Carter-era program with bipartisan support for all the wrong reasons: it reduces imports, it supports "family farmers", and it is "renewable". First used to replace lead (Pb) and reduce pollution, it actually increases certain types of pollution. The subsidies for "family" corn farmers mostly end up in the pockets of ADM. And the renewability, touted by Progressives, is having growing implications for poor people. As I noted in my review of Joshua Tickell's From the Fryer to the Fuel Tank, "Some bio-cheerleaders ... claim that a large scale shift to biofuels won't affect food prices, but that is almost certainly wrong. The amount of land required to make a dent into our petro-fuel usage would easily require both the fallow fields and some land currently used for food production. Demand up, price up, QED." Given recent headlines, I'm going to claim prescience, but I think every clear-headed person could figure this out on their own. Even Noam Chomsky figured it out in hindsight.

Finally, Abramsky also mentions the possibility of subsidizing efficient vehicles, something that has been going on for several years with mixed results*. In other words, we get some paeans to Progressive programs and a demonstration of how much good Mr. Abramsky can do with other people's money to prove that he cares. Some of his explanations are wrong, some suggested solutions are demonstrable failures, and one at least will probably make things worse (subsidizing oil? Really?!). At no time does Abramsky recognize or even seem to be aware of the contribution of his intellectual predecessors to the creation of the problems of today's poor. Instead, he turns the tables, claiming that those problems were caused by people like Jerry Taylor and policies like laissez faire and implying that anyone who doesn't accept his vaguely defined solutions is responsible for the misery and possibly death of the poor. "Laissez faire means you don't care."

Now, Mr. Abramsky is correct to question the effect on the poor, but he has come to exactly the wrong conclusion. His essay is nothing but rhetorical sleight of hand intended to impugn Jerry Taylor and anyone who dares suggest that the price mechanism is a better mechanism than any other so far identified to coordinate oil supply with oil demand. Mr. Abramsky is like George Washington's doctors who kept letting his blood, and upon remarking how sick he appeared -- probably the result of too much blood letting -- tried more blood letting.

Note that I did not say the price mechanism is the best means. Again, thinking negatively (what is that? perhaps not what you think), there may be a solution of which I have not heard yet, but until then the price mechanism is the least worst solution. Price controls are predicted by theory to create shortages, and the theory is confirmed by empirical data. A shorthand way of explaining this is the gas lines in the 70s and in Baghdad today. Surely, if the poor need gasoline, then some at high prices is better than none at any price? Ridiculing the least worst answer, or insulting the person who acknowledges it, is like accusing your doctor of murder for informing you that you will inevitably die.

Furthermore, Mr. Abramsky never seriously looks at the total effect of the price mechanism. It not only curtails demand, but it stimulates supply. Note the implications of this chart in The Economist, from the article "Venture Capitals". Furthermore, note an idea from this episode of Nova: "If you look at companies, like SunEdison, who are helping retailers put up solar panels on their roofs, you're suddenly seeing a linkage of the capital markets -- which have traditionally been very reluctant to get into solar energy -- with the retail sector. That's how you do things in America. You link the technology to the capital, and that's where the rubber hits the road." In America, the capital markets respond to a problem, while in other countries, the politicians respond. The former have to spend their own or their clients' money and are held accountable, the latter not so much.

"So what", you might say, "I don't care who produces the solution, so long as there is one. And so long as it benefits the least well off."

Well, here's so what. I'm vaguely familiar with the theory of functionalism. It says that institutions exist because a society needs them; institutions serve a purpose, a function. When I first heard of it, I immediately thought that it seems circular and lacks a mechanism to describe change; this appears to be an ongoing criticism of the theory. In any case, proponents of this theory use it to justify the existence of government agencies: obviously we must need them if they exist. If you evil bastard libertarians abolish some of those agencies, people will suffer.

That is true as far as it goes. It doesn't go far enough, though. There are two problems with it.

First, I have always believed that there are two problems faced by people who desire change: one is describing a desirable and reasonably realistic future. That is what I like about Kirkpatrick Sale. The second is to describe the path, how to get from here to there. The problem with simply saying "abolish such-and-such program" is that it doesn't describe what we reasonably expect to replace the functionality of that program or how the private institution that replaces the program will spontaneously evolve. For one thing, we don't know what it will look like or how it will evolve: if we did, we'd be in favor of planning. For another, "spontaneous" does not mean "instantaneous", and "evolve" does not mean "appear out of thin air".** So they are right to think that people would suffer if all we were saying is "abolish such-and-such", but we aren't: we are saying, "abolish such-and-such and allow some time for a better solution to evolve." Clearly, though, we need to do a better job of understanding and then explaining how institutions evolve.

The second problem with the functionalist-statist analysis is that it is usually based on an ignorance of history. Remember, if the existence of an institution implies a need for it, what answered that need before the government agency? This is a problem with the change mechanism in functionalism - if the agency sprung from nothingness, either the need must not have existed before, or the agency didn't spring from nothingness. So how does functionalism account for how or why would such a change occur? No answer seems to be forthcoming (but I admittedly have only a kindergartener's view of functionalism). In many cases, though, the solution to the riddle is that a private institution answered the need until it was co-opted by the government. As David Beito has documented, that was the case with much social insurance. The victor (the government) also gets to write the history and teach it in the schools it owns, so few people know about institutional arrangements that probably haven't existed for generations.

Let me bring this full circle.

Sasha Abramsky and others are claiming that laissez faire is not the answer to the problems posed by high gasoline prices for poor people, they are claiming it is the problem. I'm going to consider this patently false until someone can successfully convince me that oil policy is and has been laissez faire. Even stipulating to that claim, though, their recommended solutions of subsidizing the addiction would only prolong the problem and -- given that agencies rarely die once created -- would make the problem worse if oil prices should fall. They are refusing to face the possible fact that this area of California, like the Corps of Engineers' New Orleans, should not be as heavily populated as they were in the cheap-energy past. However, had laissez faire actually been practiced instead of the heady policy brew we have endured for the past 100+ years - regulating railroads and utilities, protecting them against innovators, encouraging suburban expansion, promoting efficiency in energy production at the expense of efficiency in distribution, reliability, and end use, then perhaps the poor people described in Mr. Abramsky's story wouldn't be locked into the lifestyle they are. People like Mr. Abramsky spent taxpayer money on the system that got them into this mess, now he has 100 ideas on how to spend more to keep them in the manner they have come to expect: poor, dependent, and hopeless. Ecologists refer to this approach of endlessly proposing the same solutions to the unintended consequences caused by an earlier round of similar interventions as "parachuting cats."

Given the power to enact their vision, they would systematically destroy every last vestige of spontaneous, private order in an effort to build community values. But such governments have a tendency to collapse of their own weight. When they do, the survivors look around and note that the community was kept together only by the fear of the increasingly necessary police state. There is no community spirit in such a place. Look at what the inhabitants of Russia have been enduring after the collapse of their system. Listen to this article on NPR about the lack of community values in Albania. No, really, listen to it. Generations of socialist theory have wiped out everything they knew about civil society. In America, de Tocqueville marveled at the Association phenomena; in Russia, people wished for their neighbors' barns to burn down.

That is why I prefer private to public institutions. I don't believe in market "magic"; too often have I been a disappointed consumer. Private solutions may not be perfect, but neither are state institutions. Too often have I also stood in DMV lines.

Cooperatives and associations are more democratic than an agency run by career bureaucrats. Furthermore, even Hirschman now acknowledges that Voice works only when Exit is a viable option. As a result, on average, private institutions are flexible and responsive and will evolve; public agencies are rigid and arrogant and will stagnate.***

Nobody resents an association they neither belong to nor pay for, even when that institution stands for something they loathe, but everyone hates paying for those parts of the government they oppose (agriculture? military?). Those who oppose democracy distrust private organizations and vote to suppress them (think Red Scare, Alien and Sedition, Palmer Raids, Radio Caracas Television). Those who genuflect to democracy cannot understand why people would vote for what they would call "undemocratic" programs and politicians. To comfort themselves, they develop theories of conspiracy, brainwashing & propaganda, or false class consciousness. They then begin to support politicians who promise to thwart those poor demented creatures, the opposition; in the end, the democrats line up to vote for the fascists, who proceed to replace private institutions with state institutions. The democrats are surprised when the anti-democrats take control of the machine and use it in surprising ways, perhaps even contrary to its original intent.

A public policy and agency require no imagination or creativity; simply - and I mean simply - propose a blunt mechanism for addressing whatever problem vexes you, then either declare victory or ask for more money and authority. The clever politician does both at once. Opponents can always be demonized as unpatriotic, asocial, and dangerous. A private institution requires work, creativity, conviction, persuasion, and innovation. It promotes civic values. Think Wikipedia, an institution created by libertarians (yes, Virginia, Jimbo Wales is one of those people). That is why I think that government is the intellectually lazy man's solution, and why it endangers the poor man whom he seeks to save.



* Yes, the Prius is great, but I get 46+ mpg with my non-hybrid. Somehow, the powers that be decided that hybrid was better than diesel, even though diesel fuel can be made easily from waste oil and renewable oil. I would argue that this is rather short-sighted, but not atypical. Also, several years ago I remember reading about the skyrocketing price of Suburbans in Arizona due to a shortage of them; apparently, the state was subsidizing a version with an alternative fuel modification (LNG or propane), but you could still run it on gasoline, so people were driving in from out of state and taking ownership of a friggin' Suburban at taxpayer expense for the purpose of saving gas. Personally, I think that if there is a role for the government here, it is to fund an E-prize as Lovins et al describe in The Oil Endgame. Remember, however, that the E-prize is named after the Ansari X-prize, a privately funded prize that has been moderately successful.

** In case you think I'm exaggerating about the strawmen used by anti-libertarians, look at what this says about libertarianism: "Libertarians believe (like Marxists believed back when there actually were Marxists) that if the government just shriveled away, a paradise would naturally spring into existence." Spring? It took hundreds of years to kill some institutions that themselves had to evolve over hundreds of years; only a fool would think they could be replaced overnight. Similarly, only a fool would think that "stroke of the pen, law of the land" equates to "problem solved". They are generally surprised to find out about "unintended consequences". Other than that, Midas' claim that things claimed by libertarians have never existed exposes the breathtaking ignorance of actual history usually found in people who read only popular history books. He could try starting with Homage to Catalonia or The Machinery of Freedom and work his way up from there.

*** Size is also important: I will take a small, decentralized public institution to a large corporation. Centralization and the distance between the top of the hierarchy and the end users or customers are also factors.

Really? That's all you can come up with?!

James Kunstler has this to say about flying to Maui (which he apparently did before his latest jaunt to Chicago):

For all of you out there disposed to twang on me for riding a jet airplane all the way to Maui, please consider that United flight 35 would have flown from San Francisco to Maui with or without me on it. Here's the deal: I had to go to San Fran to give a talk at the Commonwealth Club. From there, I had a lecture gig on Maui. I stayed three extra days and nights -- since I'd come all that way.

Where have I heard that argument before? Wasn't it Arianna Huffington justifying the use of a private jet because it happened to be going where she was going? All during that period of time that she was lecturing us on the evils of SUVs? Or was it Al Gore, whose prolific use of energy at his house and in his travels is justified by the fact that he has important stuff to do and lots of people to entertain (as opposed to you and I, whose lives are so much less significant)?

It's not that I really care if they do those things. I object to their telling me how to live my life while and insisting that I shouldn't do what they do. And this is such a lame rationale: every passenger just happens to be going to the same place the planes are going. Sometimes they have things slightly more important to do than "give a talk" ... which could have been done on videotape, via satellite, or over this newfangled internet thingy.

Sustainability Conference II

Sustainability Conference I

The attention given to solar was completely unrealistic. I happened upon Kunstler's blog; he accused Democrats of as much "magical thinking" as Republicans in this post. WRT solar power, he's right. There was no realistic discussion of this: a few people were obviously interested in it, and a few had done enough research to know the reality, but did not seem to have been dissuaded.

1) The keynote speaker said the cost of solar is going down. Bzzt. As I noted earlier, it has been going up in lockstep with oil prices, though it seems to be plateauing. If each dollar buys less solar panel, given a fixed or declining amount of money left over after other purchases (which is what the End of Suburbia was preaching), you aren't going to be able to buy as much solar in the future. My suspicion is that there are two causes for the rise in price: increasing demand with flat or slowly increasing supply, and subsidies. The former was driven by the increase in fossil fuels in 2003-2006, and may eventually correct itself. The latter is self-fueling (see below).

2) How much power does the average user use? The US national average in 2001 was 888 kW-h/month. Mine is something like 600 kW-h per month. If I had a 1 kW solar array and got 6 hours insolation (direct solar exposure) per day for 30 days, I could generate 180 kW-h per month. That's 1/3 of what I need, 2/3 if I double the size of the system. And I live in New Mexico where we get 6-7 hours of insolation a day (and we have something like 260 cloud-free days per year); the calculus is much tougher if I live in NYC or Seattle where they get far less insolation.

3) Two costs were given at the conference. One was $16,000 for a 1.5 kW system (roughly $10/W). Another was that the typical system costs $0.25 - $0.40 / kW-h to operate. Someone asked if that included sell-back (net-metering). The answer was obscure (I don't think the speaker heard it correctly), but the proper answer should have been: no, but it doesn't matter much. You can only sell back at the rates you pay for electricity, which is about $0.10/kW-h, so it's still 2.5-4 times the cost of commercial supply, i.e. it's no free lunch. Also, you can only sell back to the electric company up to the amount you use. Look at it this way: if you are currently paying $60/month for electricity, you will be paying $90/month for the loan for the system after accounting for rebates and sell-backs. You will also still have that monthly bill from the electricity company, but it will only consist of the subscriber fee plus tax.

Note that these were for grid-tie systems. An off-the-grid system will run at least twice as much, and the batteries require extra care (a well-ventilated area to dissipate the hydrogen generated during storage) and replacement on a regular basis (10-20 years). Incidentally, "grid-tie" and "net-metering" means that the PV system produces more than you use through most of the day, produces just about what you need in the afternoon/evening, and you rely on the grid at night and in the morning; which means someone still has to run a power plant.

3a) Let's look at this. The 1500 W system will be operational in a location that gets about 6 hours of insolation per day. That comes to 65700 kW-hours in the 20 year lifetime of the system. That means the cost of electricity is about $0.24/kW-h, rather toward the low end of the other prediction. This doesn't take into account system degradation, line losses, and so on, which would all drive the cost per kW-h higher. Take the $6,000 tax rebate back and it still comes to $0.15/kW-h. This system was enough to cover the speaker's own daily use.

3b) One thing that occurred to me during the movie I discussed in the previous article (link at top) -- and was later pointed out by one of the builders in the panel session -- was that in the coming era of higher energy costs (remember, this is their basic assumption), the system would be more and more valuable. In other words, if electricity costs increased to something on the order of $0.20/kW-h, the system would be viable at the low end of the calculations above. It would definitely pay for itself quicker if energy costs rose above $0.25/kW-h. That's an interesting bet, especially if you switch to a plug-in hybrid.

4) One of the builders, a self-described long-time left-wing activist, made a point of saying how the Bush Administration had "hammered down" any subsidies for solar power.

4a) Let's review the Clinton Administration environmental initiatives:

• Signatory to Kyoto, never submitted to the Senate for ratification, never did anything about it.
• Some 11th hour rules made in 2000 (first directed in 1996) on arsenic in drinking water changing the maximum exposure level.
• Propose a “Million Solar Rooftop” program, but never pressed it. That's about it.
  

This chart from here shows that Clinton Administration funding for Climate Change programs basically increased from 603 million to 1.1 billion. Not impressive.

Funding for Technology Programs to Combat Climate Change (in millions of dollars)
1993	1994	1995	1996	1997	1998	1999	2000 Estimated	2001 Proposed
603	796	960	788	764	825	1,009	1,095	1,432

This isn't to say that the Bush Administration is exactly the Teddy Roosevelt Administration (or even the Nixon Administration) in terms of its environmental activity, but Clinton only topped him in rhetoric. However, from what I can find, current Climate Change spending is somewhere in the $3-4 billion dollar range. Clinton: 40% increase in 8 years, Bush 400% in 6 years. Of course, since you can't actually pin those numbers down to find out exactly what we're getting for the "investment", I'd guess we had a case of Clinton = Bush = 99% BS. I say that because I suspect that both administrations counted obvious boondoggles (such as ethanol from corn programs) as Climate Change remediation.

I also found that the Bush rhetoric has been a regular but undiscovered drumbeat. This article's author thinks the rhetoric is new, despite earlier press releases like this, this, and this. I think Kunstler is right to be cynical.

4b) Let's review the politics and economics of subsidies. Subsidies are sometimes known as "corporate welfare", which, as we all know, both Republicans and Democrats are against. It is a mystery how they keep getting passed, init? In the solar industry, the subsidies happen to help out little Mom & Pop companies like British Petroleum, Canon, Kyocera, Mitsubishi, Sharp, and GE Energy. Also keep in mind that the subsidies are not secret: the suppliers know about them, too. They know that the bargaining limit for prices will go up by the amount of the subsidy, so they can basically leave production levels where they were before the subsidy even as they raise prices by the amount of the subsidy. The subsidy is no benefit to the consumer when it all goes to the manufacturer, so this merely becomes transfer from taxpayers to PV manufacturers. This is probably one reason for the rise in PV prices, especially in Europe. Still in favor of them?

Conclusion:

I believe we would be much better off with fossil fuel energy prices that more closely reflected the social costs. That's what Mankiw's Pigou Club promises, but it's also what a cap & trade program would bring. Both Kyoto and the 1990 Clean Air Act contain forms of cap & trade programs; the SO2 program in the 1990 Clean Air Act is thought to be very successful (which Administration signed that?) at reducing Acid Rain (resulting in things like this). Raising the cost of production of coal-fired or natural-gas-fired electricity by requiring providers to buy CO2 permits does a much better job of encouraging alternative solutions for two reasons:

First, people might not choose solar. They might choose to cut down on energy consumption with, for example, more insulation, better house design, more efficient vehicles, and/or better urban design. This would be a much better way of balancing our needs with the supplies and AGW forecasts because it would stretch existing supplies. This is the soft energy path favored by Amory Lovins. It is also an example of the principle of substitution noted by Julian Simon, and an example of adaptation recently suggested by Roger Pielke in Nature. Cutting energy use could also be combined with the adoption of alternative energies, enabling us to get there easier. In other words, rather than replacing my entire 600 kW-h usage with solar, I could perhaps cut my energy usage by half and then buy a 1500 W system that meets all of my needs.

Second, making fossil fuels more expensive would not subsidize and therefore support the least efficient providers of solar energy. If there are, say, three providers, the most efficient (least cost) provider would sell all he could make at a price that the competitors could not match up to the point at which consumers would turn to the next least cost provider. Once demand rises that high, the least cost provider would raise his prices to those of the competitor and pocket the extra income because the only alternative consumers have is not the least cost provider. If demand is high enough that the two most efficient providers cannot meet it all, they will raise their prices to meet those of the highest cost provider. As demand continues to increase, the least cost provider will see higher returns, and can therefore command more investment to expand his facility to the point that he might put the least efficient (highest cost) provider out of business. In such an environment, the highest cost provider has an incentive to try to improve his processes to match those of the least cost supplier; either that or risk going out of business altogether (which is fine, since it leaves the two lower cost providers in business at the prices commanded by the second lowest-cost provider). The subsidy thwarts the entire scheme by allowing even the highest cost provider to raise prices in order to capture some of the subsidy from the consumer. It is thus an incentive to capture market share and a disincentive to do it by increased efficiency at using inputs. More investment will go toward marketing than engineering and production management.

Unfortunately, the default setting of people at these conferences is

Democrats good, Republicans bad (and libertarians evil embodied)

Or, alternatively

Command and Control, Tax and Spend, Policymaking Government Good, Market-based Reform Bad

If they could perhaps be bumped off their default settings, I think I could stand listening to the rest of what they had to say. Unfortunately, they wanted to start the second half of the conference worshipping Cuba as the example of the path we should take with another film called The Power of Community. Sorry, I am actually offended by cults of tyrannical, murderous, autocratic personalities.

NOTE: Now that I'm looking up the Cuba film, I'm sorry I missed it. Apparently, one of the responses to the loss of their patron, the Soviet Union, and the subsequent collapse of their system was to establish farms with property rights (property rights in a broad sense - it is owned by a local community) and private markets (at which said community trades). The same thing that brought China out of the Cultural Revolution. Private property saves the day again?

Still, it's limited freedom within an overall oppressive atmosphere. One rooftop farm has this description: "Running free on the floor are gerbils, which eat the waste from the rabbits, and become an important protein source themselves." Yummy, can't wait. Most reviews of the film are the same fawning fluff, but only in a picture caption on this did I find a reference to the private markets. And abelardlindsay comments on The Oil Drum post about the film that Cuba is much less efficient at turning energy into wealth than its neighbors.

Sustainability Conference I

I attended a sustainability conference this weekend. It started with scariest "documentary" ever seen, "The End of Suburbia", a very one-sided point-of-view film that does not attempt to examine both sides of the Peak Oil issue (or at least the portion they showed didn't). The only two laughs of the first half of the conference were sparked by James Kunstler's use of "clusterf#@&" and "$#!tstorm". Though they carefully crafted the message to point out that "Peak" doesn't mean "End of", the editors then went on to paint a picture of 21st century living devolving into 16th century living. Jim Hamilton's How to Talk to an Economist about Peak Oil is highly recommended reference material, including the comments.

Politically, the film was relatively balanced: when they talked about politicians not getting or acknowledging the problem, they started with photos of the Kerry campaign. When discussing increasing militarization of the Gulf region, a commenter noted the Carter doctrine. Clearly, the Bush/Cheney doctrine and the neocon plan to re-shape the middle east is a continuation of that doctrine (Carter/Reagan involvement in Afghanistan, Iran, Lebanon, Bush I in Kuwait, Iraq, Somalia, Clinton in Kuwait, Afghanistan, Somalia, Iraq, Sudan).

I have two notes on this: In 1956, Hubbert predicted peak American extraction in 1965-1970. It actually occurred in 1970-71. Unfortunately, most of his followers have portrayed production curves as if they were symmetric, half before and half after the peak (notably, Hubbert didn't, if the tail on this is any guide). Technology has been improving, including technology for scraping the last little bit out of every well, so more will be pumped after the peak than before, as shown in the chart below (note that the actual (blue) line is gradually drifting above the pseudo-Hubbert-style symmetric prediction (yellow)). What does this mean for world oil peak? The counterargument is that, yes, technology has been improving, so we're only pumping it dry faster than ever.














Other note: The only alternative fuel covered by the documentary was hydrogen. While I agree with the assessment (hydrogen is not an energy source, it is an energy carrier), hydrogen is not our only potential fuel. Nor is fuel replacement our only potential hope (see next post on this subject).

Global Warming Part III - The Case for Continuing Skepticism in a Nutshell

Part I - The Physical Science in a Nutshell
Part II - The Social Science in a Nutshell

So, if I think there is something to global warming, how can I still consider myself to be a skeptic?

First, my skepticism has always fallen on the alarmist tone taken by the true believers.

When John Christy's satellite measurements failed to align with the theory, the true believers were ready to dismiss the data. In one online debate I had with a global warming enthusiast, he responded by condemning John Christy as incompetent and by bizarrely declaiming the importance of satellite and balloon data because what was of primary concern were ground temperatures, not atmospheric temperatures. Now that the data have been corrected and are closer to the other predictions (though they are still lower than other data sets), they claim that this is as it should be. It's easy to gloat when the data get realigned to your preconceived view of the world, but what happens when they don't? In other words, what made them convinced of their rightness long before the data problems worked out?

Consider the example of the Premature Ice Age alarmism of the 1970s. Activists are quick to point out that the claims never showed up in scientific journals despite the 1971 Schneider and Rasool article, "Atmospheric Carbon Dioxide and Aerosols: Effects of Large Increases on Global Climate" (Science 173, 138–141) in which they claimed, "our calculations suggest a decrease in global temperature by as much as 3.5 °C. Such a large decrease in the average temperature of Earth, sustained over a period of few years, is believed to be sufficient to trigger an ice age." True, the Premature Ice Age scare was more of a popularization by news magazines, but that didn't prevent it from drawing policy makers into its orbit, did it? And now that everyone has agreed that was an unlikely outcome, the same alarmists that espoused it are dismissing it as irrelevant - not because they were wrong, but because the science was not published in scientific journals. Yet, they believed it and wanted immediate action, the same as they did with other manufactured scares. History is replete with such scares (opium, marijuana, Germans in the WWI era, Commies in the 1950s, there will be mass starvation and England won't exist by 2000, the saccharin cancer scare in the 1980s, the silicon implants scare in the 1990s, Y2K disaster, nucular (r) meltdown), but very few repenters.

More recently, people blamed the 2005 hurricane season on AGW and predicted more of the same. It escaped their attention that the problem was not the strength of Katrina (it was degraded from Category 5 to Cat 3), it was the fact that it hit a large population area with two unique characteristics: it was below sea level, and it was poorly protected by a set of water projects whose funding had been diverted by years of bipartisan corruption and ineptitude. Many seized on that opportunity to hype the idea that AGW means more severe hurricanes, but few if any publicly apologized when 2006 failed to yield even a single landfall hurricane; in fact, people still mistakenly use the Katrina/NOLA fiasco to support such statements as, "Extremes are non-linear in their effects." The dearth of hurricane landfalls in 2006 alone doesn't disprove AGW any more than 2005 proved it, but there should be little doubt as to which side gets the most press. They trumpet loudly when the data fits their theory, but fail to sound retreat when they don't.

Second, my skepticism extends not only to the abuse of the science models, whose expected outcome keeps becoming less in line with the extremists and alarmists each time they are updated, but to the supposed implications. Those include the assumption that if global warming is a fact, that (1) man must be responsible, (2) it must be reversed, and (3) only central planning can reverse it. I am unsure about the first of those claims, but I think it is probably true. Still, it concerns me that there have been drastic variations in the past that cannot be explained with human behavior.

The second is worth some examination. The idea that the warming must be stopped or reversed is predicated on two assumptions: that the ideal temperature is that which existed in the past, and that stopping or reversing is going to be less costly than adapting. There are lots of reasons to question which climate is best.

• More people die due to extreme weather events in the winter than in the summer.
  
• The recent Stern Review notes that crops will do better under a mildly warmer climate, though much worse under a substantially warmer climate. That suggests that the best climate may be slightly warmer.
  
• Plants grow larger in CO2-rich environments. Because the amount of nitrogen does not increase, all things remaining equal, they are no more nutritious (in fact, pound for pound they are less nutritious), but all things do not remain equal. Those plants require less water because of decreased transpiration, and since it is frequently water rather than fertilizer that is a limiting factor, this means crop yields may go up in the future. I note, for example, that dry-land cotton crops yield about 300-500 pounds/acre, whereas the same plants yield 500-800 pounds/acre when irrigated.
• As noted in Part I (linked at the top), CO2-driven warming means specifically warmer nights and winters. That means longer growing seasons with fewer crop freezes in the spring and fall. It also opens up more viable cropland to the North and at higher elevations. In fact, Greenland is seeing increased agriculture and decreased reliance on hunting, and Germany is seeing later eiswein harvests while other grapes are moving farther north and uphill, resulting in the increased consumption of red wines grown locally; that strikes me as a neutral to positive change, not a change for the worse.
  
• The climate has - all by itself, without human intervention - fallen into an Ice Age in the past and will likely do so in the future. Crop yield will definitely plummet when that happens. Should we do something to forestall it?

The third implication - that only central planning will fix the problem - is at least a little dubious. In fact, I believe that most AGW enthusiasts have been thrashing about for something to revive central planning ever since the collapse of communism, and global warming has provided it. This would certainly explain their rejection of any and all skepticism early on. AGW is a perfect problem for them: The bad outcomes are 100 years away, so planners have no need to show any progress now. If the predictions become more dire, they can raise the alarmist tone of their rhetoric; if the predictions become less dire, they can claim success as the result of existing policies. Heads they win, tails you lose.

I have no more faith in the government solving this problem than in solving poverty. The free market (or what there was of it) was arguably doing a better job of the latter prior to Johnson's Great Society (both income disparity and income-based poverty rates were falling until around 1968, and have been flat or increasing since then), and if anyone is going to find viable alternatives to carbon-based energy, it is going to be lots of scientists acting independently, i.e. not the government. If there is one thing the government can do, it's to stop supporting the existing paradigm through subsidy and regulation.

In fact, that is the lesson that we should be taking: the government is a contributor to the current situation, and there is bipartisan guilt, so why should we trust the government to remain neutral in the "new" era? Reducing our contribution to CO2 buildup is going to require changes in technology and product mix on the supply side, customer values on the demand side, and changes in social, political, and economic structures. There is no "right" answer to this, and planning arguably only works well when an answer is already known when all that remains is getting there from here. Here, Hayek is correct.

Global Warming Part II - The Social Science in a Nutshell

Part I

It is unfortunate that people think that Global Warming is exclusively a phenomenon of physical science. Activists tend to argue as if scientists have proven anthropogenic global warming (AGW) as an accomplished fact. By that, I mean that they believe that the outcomes predicted for 100 years from now are fully realized today. This is made odder when they insist that we do something about it - if it were already done, what point is there in "doing something about it"? It is the fact that global warming is something predicted for the future that compels us to make changes now in the hopes that we can alter that future.* However, there are two reasons why AGW is not exclusively the realm of the physical sciences:

On the one hand, all predictions of future CO2 content rely on estimations of the continuation of present patterns of energy and natural resource use. Those depend largely on social, political, and economic conditions and developments. This trend is unlikely for two reasons:

1) The first reason it is unlikely is that our energy use patterns are extremely likely to change. Going back 200 years, we depended mostly on humans, water, wind, whale oil, and wood for our energy needs. 150 years ago, we started making a transition to coal. 100 years ago, we started making a transition to oil (and the Anglo-Saxon whaling fleets collapsed). Today, our needs are met by a broad variety of coal (for electricity production, augmented with natural gas and to a lesser extent, wind), oil (for heating and transportation), natural gas (for electricity and heat), and nuclear energy, and the forests have been coming back, especially in North America. We are about due for another change, eh?

a) On one hand, there are some people that believe that we will be forced to change our energy sources by our own avarice. Citing the "irrefutable" research of M. King Hubbert, they claim that we are about to hit the peak production of oil, after which oil will become much more expensive. They may be right.

b) On the other hand, there are a number of us who think that there are other good reasons for transitioning away from fossil fuels regardless of Hubbert's predictions. Not only are those fuels ultimately physically limited in quantity, but they are inefficient in a number of other ways: they inherently cause pollution (spills, SOx, NOx, particulates, and CO2, all externalities); they are the funding source for despots and terrorists who try to gain control first of the resource and then of the markets (rent-seeking through violence and then cartelization); and they are politically unpopular and hard to find, extract, and distribute, leading to capital-intensive organizations that use unknowing political activists to gain control of markets, subsidies, and regulatory bodies (more rent-seeking via the Baptist-bootlegger method). Meanwhile, other entrepreneurs are searching for alternative energy sources and storage/distribution systems, including nuclear (both fusion and fission) and solar (including photovoltaic, thermal, wind-based, and biomass). When they succeed, they will begin pulling market share and then political influence away from the fossil fuels. Case in point: we learned just recently (NY Times article: Tech Barons Take on New Project: Energy Policy) that Solar Barons have decided to start lobbying for subsidies, displacing the Oil Barons. "The investors in recent years have poured billions of dollars into alternative energy start-ups in areas like solar and wind power or the production of fuel for cars from feedstock and crop waste. Many of these projects, they say, could stall without subsidies or government mandates for greater energy efficiency."

c) Meanwhile, other scientists are working on ways of averting forced warming, including using sulfates and other products to reflect solar energy back into space (the "smoke and mirrors" gambit) and sequestering CO2 in plants, underground, and in the ocean (plankton tend to consume CO2, so efforts to increase plankton populations may prove effective). A combination of these may be useful.

2) The other reason it is unlikely that trends will continue is that if it does in fact begin to get hotter, and the results are increasingly worse, there will definitely be a shift in the political, economic, and social structures to counteract the warming problem. These may be forced conversion to mass transit, urbanization, and so on, or it may consist of mass migration to cooler climates, wars, and so on, or possibly even mass starvation. I am obviously not endorsing these, but rather pointing out that these are possible responses that are clearly outside the domain of physical science or at least show an exchange between physical and social science.

Thus, the real question is not whether or not global warming is or is not real, but rather what the appropriate set of responses to the existing science should be. This lands the question squarely in the camp of economics, though I also think there will be questions of politics and sociology. I should note that I've previously suggested that the most promising means of dealing with CO2 concerns application of Coase via tradable permits, but this calls out two perplexing reactions: the anti-free-marketeers demand free trade in the form of Kyoto but otherwise oppose it on principle, and the free-traders who cite Coase refuse to accept the fact that a government is required to define those property rights and thus make that market work.


* Note this is different than Tyler's statement (and the claim made in the comments), "We already have wrecked our environment with global warming; the truth is, it is simply too late to do anything about it." I am turning that on its head and asking if it can be undone in the future by political means now, why do we claim that it is an accomplished fact? There can be no "before it's too late" if it is already too late.

Global Warming I - The Physical Science in a nutshell

When I was working on my Master's thesis, it suddenly occurred to me one night as I wrestled with ModTran that one aspect of it closely corresponded to the science involved in global warming. I was trying to calculate the effects of the atmosphere on light; light is electromagnetic energy; global warming is the result of what happens when energy tries to radiate from earth to space.

My problem had to do with what happens when light from the sun, which can be approximated as a black body of approximately 6600 K (or other values, depending on what you're doing), comes through the atmosphere. A black body emits light over a broad range of wavelengths in a manner first successfully described by Planck (his breakthrough that led to the development of quantum theory). Only three things can happen as energy moves from one medium (space) through another (the atmosphere): it can be reflected, absorbed, or transmitted. It turns out that there are several "windows" in the atmosphere that selectively pass light of certain wavelengths. The largest window happens to correspond to the wavelengths to which our eyes respond (roughly 0.4-0.7 microns), so it is called the visible window or band. This also happens to correspond to the peak wavelengths of the sun. Other windows lie in the ultravi