Archive for category Economics
CFCs, not CO2?
Posted by Joshua Sharf in Regulation on June 2nd, 2013
Could CFCs, already known to be responsible for the ozone hole, also be responsible for global temperature change, rather than CO2?
That’s the conclusion from a new paper in Modern Physics B, a high-level peer-reviewed journal. The paper found that while the correlation between recent temperature anomalies and CO2 was close to 0 – as in, no correlation whatsoever – the correlation to CFCs was close to 1, almost a perfect fit:
Climate scientists have been hard-put to explain the fact that there’s been no net warming since 1998, despite increases in atmospheric CO2. If this is true, it is extraordinarily good news. CFC usage has been heavily reduced since their effects on the ozone layer were discovered, and are slowly being removed from the atmosphere. The 15-year lull in warming would not, then, be a pause before further warming, but the top of the roller coaster before we headed back down.
But more important, even the publication of the piece pulls the rug out from underneath the climate alarmists, who have been telling us for well over a decade that The Science Is Settled, and that CO2 emissions are responsible for global warming – or, as they now prefer, “climate change.” There has been plenty of reason to doubt these conclusions – historically, CO2 levels have closely led, rather than closely training, global temperatures. Moreover, climate has been changing for millennia, long before the industrial revolution. And recent papers have also cast doubt on the speed with which temperatures have actually been increasing.
CO2 emissions have become something of a totem in current policy debates, inserting themselves into just about every discussion, and they have been responsible for some of the most distortionist of recent economic policies. The people who suffer from these policies most are, of course, the poorest. Globally, the poorest find themselves victimized by added costs for their countries to industrialize and modernize. Locally, Americans find themselves with higher utility costs from green subsidies, higher food costs from diverting massive amounts of corn to ethanol, higher housing costs from mandatory efficiency requirements in building codes, and higher transportation costs from boondoggles like “cash-for-clunkers.” And of course, such policies make jobs scarcer for college grads, and less remunerative for a middle class already finding it hard to save for their futures.
On a grander scale, “greenhouse gas emissions” end up being the justification for wasteful light-rail, high-speed rail, and streetcar projects, and the excuse for diverting ever-more tax dollars into losing efforts to force people out of suburbs an into higher-density city centers. The Supreme Court’s ruling that CO2 is a pollutant has given the EPA carte-blanche to interfere in just about every industrial process in the country. This despite the fact that natural gas use has allowed the US’s CO2 emissions to fall to 1992 levels, even as actual industrial production has risen, without massive government intervention.
As, the climate alarmists have been seeing the debate slip away from them, they have resorted to more anti-science, political hardball tactics. The Climategate I and Climategate II emails laid bare the ruthlessness with which they treated those who questioned their orthodoxy. Recently, it was revealed that the Texas A&M Atmospheric Sciences Department was requiring what amounted to a climate loyalty oath for its faculty – usually not a sign of security that one’s position is supported by the actual science.
Add this paper to the growing body of evidence undermining the need for massive reordering of the global economy in order to stave off a disaster that looks increasingly unlikely.
Uber vs. PUC
Posted by Joshua Sharf in Business, PPC, Regulation, Transportation on January 29th, 2013
This past Saturday’s Wall Street JournalWeekend Interview was with Uber founder Travis Kalanick (“Travis Kalanick: The Transportation Trustbuster“). Uber allows a customer to summon an otherwise idle limo or SUV, on demand, through a smartphone app. The prices are competitive with town car service, and don’t require pre-arrangement. The article details, in part, Kalanick’s battles with various municipal regulatory authorities, who, often acting on behalf of established taxi interests, seek to keep his company from operating:
When I suggest to Mr. Kalanick that Uber, in the fine startup tradition, was using the “don’t ask for permission, beg for forgiveness” approach, he interrupts the question halfway through. “We don’t have to beg for forgiveness because we are legal,” he says. “But there’s been so much corruption and so much cronyism in the taxi industry and so much regulatory capture that if you ask for permission upfront for something that’s already legal, you’ll never get it. There’s no upside to them.”
…
Then, last year, came the clash with regulators in the city where they order red tape by the truckload: Washington, D.C. A month after Uber launched there, the D.C. taxi commissioner asserted in a public forum that Uber was violating the law.
This time Uber was ready with what it called Operation Rolling Thunder. The company put out a news release, alerted Uber customers by email and created a Twitter hashtag #UberDCLove. The result: Supporters sent 50,000 emails and 37,000 tweets. Mr. Kalanick says that Washington “has the most liberal, innovation-friendly laws in the country” regarding transportation, but “that doesn’t mean the regulators are the most innovative.” The taxi commission complained that the company was charging based on time and distance, Mr. Kalanick says. “It’s like saying a hotel can’t charge by the night. But there is a law on the books, black and white, that a sedan, a six-passenger-or-under, for-hire vehicle can charge based on time and distance.”
In July, the city tried to change the law—with what were actually called Uber Amendments—to set a floor on the company’s rates at five times those charged by taxis. “The rationale, in the frickin’ amendment, you can look it up, said ‘We need to keep the town-car business from competing with the taxi industry,’ ” Mr. Kalanick says. “It’s anticompetitive behavior. If a CEO did that kind of stuff—you’d be in jail.”
A determined PR campaign by Uber was able to derail DC’s efforts. By coincidence, this week, Uber posted on its Denver blog that the Colorado PUC is up to the same tricks:
Unfortunately, the Colorado Public Utilities Commission proposed rule changes this month which, if enacted, would shut UberDenver down. We need your help to prevent these regulations from taking effect! Sign the petition!!
Here’s a sampling of what’s being proposed (Proposed Rules Changes):
- Uber’s pricing model will be made illegal: Sedan companies will no longer be able to charge by distance (section 6301)
- This is akin to telling a hotel it is illegal to charge by the night.
- Uber’s partner-drivers will effectively be banned from Downtown — by making it illegal for an Uber car to be within 200 feet of a restaurant, bar, or hotel. (section 6309)
- This is TAXI protectionism at its finest. The intent is to make sure that only a TAXI can provide a quick pickup in Denver’s city center.
- Uber’s partner-drivers will be forced OUT OF BUSINESS — partnering with local sedan companies will be prohibited. (section 6001 (ff))
The PUC has run interference for the taxicab cartel here before, last year shutting down a popular airport ride sharing program. In 2011, they denied additional permits to Yellow and a proposed start-up, Liberty Taxi. And the Union Taxi Cooperative’s battle to begin service (eventually successful) was the stuff of legend. Their actions to the detriment of electricity ratepayers have been well-documented by Amy Oliver and Michael Sandoval over at the Independence Institute. But at least in those cases, they had the fig leaf of enforcing existing law. Here, as in DC, they’re actually proposing to change the rules in order to run the company out of town.
As a living, breathing example of regulatory capture, Colorado’s PUC is in a league of its own. Let’s hope that Uber’s supporters are able to persuade them to cease and desist their harassment of the company.
Inflation – Bad for the Economy, Bad for Society
Posted by Joshua Sharf in Economics, Inflation, PPC on October 29th, 2012
In The Great Wave, his history of price revolutions and inflation, David Hackett Fischer associates waves of inflation with social instability, and a pessimistic culture as reflected in the art and philosophy of that time. If he’s correct, we could be in for much more than just a bout of price instability. Indeed, it’s possible that the recent increases in gas prices and food prices may already be stirring some dark forces we’d probably rather leave along.
The FBI reports a continuing drop in both property and violent crime. It’s important to remember that the BJS report and the FBI report draw from two difference sources, and that they are intended to complements each other, like the household and employer surveys of employment. One might show changes sooner than the other, for instance, or simply be more volatile.
There’s plenty of evidence for this even in the last century. Germany was primarily destabilized by inflation, not so much by the relatively quick Depression. It was the brief but horrid inflation of 1923-24 that wrecked people’s faith in the institutions of Weimar. In the meantime, the US was wracked by a long, deflationary Depression, which didn’t come close to tearing the country apart. Compare that to crime rates in the 60s and 70s, which only began to subside once people recognized that inflation was dead and buried, at least for the time being.
Crime isn’t just the poor and lower middle-class losing faith in their futures, it also eats away at the social fabric generally, because the middle class ends up being the most victimized. It results in frustration an anger. Wages go up, masking price increases that always stay ahead of wage increases, and nobody knows what their savings or earnings are worth any more.
I’m obviously not the first one to propose this relationship. It’s been observed in other countries, as well as the United States. According to that study, macroeconomic factors don’t explain more than 15% of the changes in property crimes over time, but almost all of that explanatory power comes from inflation.
None of this is to say that you can’t have serious social upheaval in times of deflation or even price stability. Gold standard enthusiasts point to the 19th Century as a sort of golden age of macroeconomics. But the changes wrought by industrialization, along with the over-expansion and inevitable contraction of the railroads, led to serious social unrest and the first stirrings of mass unionization. Walter Russell Mead has been sounding the alarm about a similar reconfiguration now, we just don’t yet know what the other side is going to look like.
But if we are going through a Great Recalculation, a metaphor preferred by Arnold Kling, it’ll be a lot easier to meet without the complicating destabilization of people not knowing what their dollar is worth.
Does Primary Care Actually Save Money?
Posted by Joshua Sharf in Economics, Health Care, PPC on October 28th, 2012
One of the arguments for Obamacare has been the claim that increased access to primary care will result in long-term cost savings, but studies show conflicting results. The theory in favor of this is that early detection will allow treatment in earlier stages. The theory opposed to it is that keeping people alive costs money, as well.
Still, before we commit to a government takeover of health care, isn’t there a pretty simple experiment that we could run to find out? If access to primary care really does save money in the long run, why aren’t insurance companies providing incentives to the insured to make more and better use of their PCPs? There are some experiments in the works to incentivize doctors to be more accessible, and Anthem is even cutting them in on the presumed savings.
But the problem may be on the demand side as well – people just don’t like going to doctors, and not only because of the wait times. Presumably the problem isn’t just putting off going to the doctor when you’re sick, it’s also putting off the routine physical or the annual checkup that could catch trouble early, before there are any symptoms at all. So why not cut the co-pays? Or why not mimic the safe-driver discounts and rebate an increasing portion of the co-pay for every year you go for your physical? The latter would also help create the habit of going to the doctor regularly.
Insurance companies live and die on the sort of actuarial math that would let them detect any positive results from these experiments pretty quickly. And if anyone is culturally geared not to fall for the fallacy of the seen and the unseen, it’s insurance companies. (The fallacy states that people fall for redistributionist schemes because the beneficiaries are immediately identifiable, while the costs are distributed among the many. In this case, presumably, the beneficiaries are largely unseen, while everyone sees the hit to the bottom line.)
So, is there are good reason that insurance companies don’t do this? Is it just that they haven’t thought of it, or is there actual evidence that it doesn’t work? Is anyone aware of any results from the Anthem experiment that show one way or the other?
Tonight’s Surprise – China?
Posted by Joshua Sharf in 2012 Presidential Race, China, Economics, National Politics, PPC on October 22nd, 2012
In trying to anticipate Monday night’s debate, we’re all thinking about Benghazi. (Well, all of us except the New York Times, in whose Sunday edition the word does not appear.) But the White House has more or less gone silent on Benghazi in the last few days, refusing to answer questions about it. And they have to know that Romney will know the timelines backwards and forwards, ready to remind people of what they know they’ve heard.
What if, instead of trying to rebut the charges – surely a futile task – President Obama tries instead to divert attention? Where would they turn.
I think the answer is China. First, reports are that the administration is going to trot out a 5-year-old video from Mitt Romney’s last presidential run, showing him, ah, not hating China. Here’s what he says:
You know, I think it’s important first for the American people and our leadership to understand that China is not like the Soviet Union of old. The Soviet Union, Khrushchev in particular, wanted to bury us. China doesn’t want to bury us, they want to see us succeed and thrive so that we can buy more Chinese products and they’re a competitor economically. More power to ‘em, we know how to compete. We want to make sure that competition is fair and legal, and that they protect our intellectual property rights and that they have a monetary policy that’s fair, so we’ve got some challenges to make sure that the playing field is level with China, but we can compete, we can be successful with China, and I will reach out to them, I’ve already met with their leadership and will do so again if I’m lucky enough to be president. Making China a partner for stability in the world will be one of my highest priorities.
China is really key in many respects as they become a very large economy; their GNP is going to surpass ours at some point just given the scale of the nation’s population. We have to recognize that they’re going to be an economic powerhouse like us. And with that reality we gotta make sure that we are friendly, that we understand each other, that we’re open in communicating, and that we’re collaborating on important topics, like keeping North Korea from pursuing the nuclear armament which they’ve begun, getting Iran to abandon their nuclear ambitions, China and we together will have a great deal of positive influence for stability if we’re able to work that relationship properly.
It’s unclear why the Obama campaign thinks this is damning, but I suppose you could take the words, “China doesn’t want to bury us, they want to see us succeed and thrive so that we can buy more Chinese products,” out of context, and try to portray Romney as a flip-flopper on China. I don’t think it’ll work. I think Romney knows what he said, and in his calm, smooth, reassuring style will remind us that he was insisting that we make China play by the rules, because it’s in everyone’s interest.
I suppose it’s also possible that they’ll use the second half of the statement to claim that Romney is naive on China. But coming from a president whose naivete on the Middle East is unsurpassed in several generations, and whose “pivot to Asia” is about to be undermined by drastic budget cuts to the Navy, that probably won’t work too well, either.
Obama may also try to use China to salvage his Solyndra payoff investment, inasmuch as that company’s remnants are suing Chinese solar companies, trying to blame them for Solyndra’s failed business model. Doing that would give him a two-fer: getting to play the Romney-the-outsourcer card, while saying that China is eating our lunch on green technologies, and that he’s the guy to put a stop to it. (Never mind that China’s paying a heavy price for its own market interventions, even as they continue to blame the West for it.)
So keep an eye on China this evening. That may be where the real fireworks come from.
PERA Gains a New Client Group
Posted by Joshua Sharf in Budget, Business, Colorado Politics, Economics, PERA, PPC on October 19th, 2012
What makes it so hard to fight the growth of government is its ability to create client groups seemingly at will, with the money of the very people it’s seeking to co-opt. I see it myself all the time at the JCRC, where what had been private, service groups are reduced to begging for scraps and favors in front of legislative committees. At one time they thought it more expedient to do that than to make the case for the value of their work to the community they served and represented. Now they’re caught, and even when they’re not temperamentally inclined to go along with the leftist agenda, they often do because they can no longer imagine doing business without government support.
So it happens with PERA, too, which has announced the Colorado Mile High Fund, a fund geared towards investing in Colorado entrepreneurs who have partners, but are also having a hard time finding additional capital.
“We heard from businesses around the state during the development of the Colorado Blueprint that increased access to capital is critical to their success and that of our state’s economy,” said Gov. John Hickenlooper. “The creation of the Colorado Mile High Fund will improve that access to capital and we are pleased that Colorado PERA’s partnership will benefit and help grow companies here in Colorado.”
The risks to the taxpayers and the foolishness of this sort of government adventure are all around us, but it’s hard to tell if that’s a bug or a feature of this plan. I don’t think PERA’s out to deliberately lose money, but investing in high-risk start-ups may not be the best decision for a defined benefit retirement fund.
Even if this turns out to be one fund in the option and under-used 401(k) option, entrepreneurs and start-ups will now have a reason to support increased funding for a government-sponsored employee retirement plan, whose money much come from the pockets of the taxpayer. The most dynamic sector of the state’s economy will be effectively recruited on behalf of its most stifling.
Everything Ends Up Subsidized Or Illegal
Posted by Joshua Sharf in Economics, Health Care, National Politics, PPC, Regulation on October 16th, 2012
We are Orthodox Jews.
We keep kosher.
And as we all know, kosher meat is expensive. A typical cut of kosher meat is something like twice the price of a comparable non-kosher cut. Ground beef is at $2.49 a pound? Kosher ground beef runs about $4.99 a pound. I just check the price of ribeye. Treif at $6.99, it’ll run you $14.89 a pound at the East Side Kosher Deli. (They’re not necessarily gouging here in Denver; it’s that way everywhere.)
Now, Susie just got a mailer from the Colorado Democrats stating that Mitt Romney would “[take] away vital health services for women,” by, “[signing] laws allowing your employer and your insurance company to make your birth control decisions.” Presumably, they mean he’d repeal the HHS Mandate requiring employers and insurers to pay for employees’, without co-pay.
They’re arguing that, now that such coverage is the law, going back to making someone pay for it themselves is the same thing as “restricting” it (their word), or allowing someone else decide whether or not you use it.
So what this means is that you, every one of you now reading this piece (unless you also keep kosher), are deliberately restricting Susie and me from our Constitutional right to keep kosher. You are in fact making our food choices for us. Unless, of course, you take out your checkbook right now and send Susie and me a check to cover the difference in cost between kosher and non-kosher meat. And you wouldn’t want that on your conscience, would you?
This is the reductio ad absurdum of the liberal line that not having someone else pay for something legal that you want is the same thing as restricting it. So ultimately, everything is either free or illegal.
Children of the Corn
Posted by Joshua Sharf in Business, Colorado Politics, Economics, Energy, PPC on July 27th, 2012
My latest for Who Said You Said:
“When everyone says you’re drunk, you’d better sit down.” When both The Wall Street Journal and NPR have questions about a policy, it’s time to rethink it.
The Renewable Fuel Standard’s ethanol mandate requires an increasing amount of ethanol be blended in gasoline every year. Last year, more than a third of America’s corn crop went to ethanol; this year, with decreased production and increased diversion, that proportion is expected to rise to at least 40%. This requirement has pitted ethanol producers against food and feed consumers of corn, driving up corn prices even faster than normal supply shortages would dictate.
The EPA could, if it chose, suspend the ethanol mandate altogether for the year, but so far has chosen not to do so. Not only Agriculture Secretary Tom Vilsack, but Interior Secretary Ken Salazar have been strong supporters of ethanol. On July 16, 2008, Salazar, then a U.S. Senator from Colorado, spoke on the floor of the Senate in terms of ethanol’s contribution to America’s “energy independence,” its importance in keeping gas prices down, and the jobs that were then being created on Colorado’s eastern plains in the new ethanol plants being opened there.
The Obama Administration may have been caught off guard by the severity of the current drought, but questions about price distortions caused by the mandate aren’t new. Last year, in February of 2011, Vilsack addressed exactly these same concerns at a press conference [See CNSNews.com video above]:
“Certainly not worried in the long term about our capacity to produce enough corn to meet our food and feed needs as well as our fuel needs. The last time we had any issue relative to food prices when this issue was raised about ethanol production, our studies indicated that the ethanol production was a very, very, very small percentage of the food price increases.
“When you look at food price increases, you’re looking more at marketing, advertising, refrigeration, transportation, expenses that are incurred in the food chain. And you’re also recognizing that farmers are receiving an ever shrinking share of the retail food dollar. There are a lot of folks that have to be satisfied out of that retail dollar.
“So I’m not concerned about it. We obviously will continue to look at what the Spring will bring, in terms of cropping decisions. Part of what’s happening worldwide is the result of weather conditions in a number of countries. Export controls and restrictions by some countries have made it a little more difficult. But here in this United States, we’re anticipating food prices to rise somewhere between 2-3%, which is relatively moderate.”
The problem, of course, is that neither people nor livestock can wait for the long run to eat. It may be easy enough for us to adjust to some food price increases, but folks living closer to the margin, as in Mexico, don’t have that luxury. See Egypt for what happens when entire countries have to choose between food and fuel.
And while Vilsack has correctly identified the price inputs into food production, he’s forgotten that prices change because of action on the margin, and the price of corn has proven to be especially volatile, but also especially remunerative to farmers in recent years. A large part of this increase is a result of the ethanol mandate. And contrary to Sec. Vilsack’s protestations that little of the money is flowing through to farmers, agricultural land values have been shooting through the roof, indicating that investors see corn production as a good investment.
The winners include ethanol producers, who are guaranteed a market for their product, corn farmers, who see the results of the government bidding against private ranchers and farmers for their product, and fertilizer companies, whose nitrogen-based product is needed to save the soil from the increased corn crop. Much of the increased corn planting takes place at the expense of soybeans, which replenish the soil. (As a side note, a major component of fertilizer is natural gas; the combination of falling natural gas prices and rising corn plantings has been a windfall for those companies, so to the extent that the farm vote is in play, look for politicians to make hay with that.)
The losers include ranchers, who are having to bid against the government for corn to feed their herds, and you. Because not only are food prices rising faster than your paycheck, there’s little to no statistical evidence that all this diversion of food to fuel is keeping gas prices down. And in spite of the mandates, ethanol plants are shutting down, anyway.
For decades, as their agriculture became a running joke, the Soviet Union used to blame chronic food shortages and poor crops on the weather. A Russian history professor of mine responded to a student’s question about Gorbachev’s political prospects, “Well, he’s got his main rival (Yeltsin) in charge of agriculture, so I’d say he’s in pretty good shape.”
It’s doubtful that Barack Obama felt threatened by Vilsack’s presidential ambitions (his abortive presidential run ended in early 2007, about a year before his home-state Iowa Caucuses), but it’s likely that Vilsack will end up as collateral damage of this Administration’s misbegotten economic and energy policies, nevertheless, when he finds himself – hopefully – looking for work after the November elections.
I Guess We Are the 1%
Posted by Joshua Sharf in Economics, Health Care, PPC on July 24th, 2012
This afternoon’s mail brought a letter from UnitedHealthcare, my insurance company from a previous job.
“They never write you to say they’re giving you back money,” said Susie.
Surprise.
The Affordable (sic) Care Act requires UnitedHealthcare Insurance Company to rebate part of the premiums it received if it does not spend at least 80 percent of the premiums [it] receives on health care services…
In 2011, UnitedHealthcare Insurance Company spent only 79% of a total of $58,159,006,54 in premium dollars on health care and activities to improve health care quality. Since it missed the 80 percent target by 1% of premium is receives, [it] must rebate 1% of the total health insurance premiums paid by the employer and employees in your group health plan.
I’m always happy to get money back, and getting money back from an insurance company is particularly delicious. But you know, it’s a little like finding out you won that game with Florida State three years ago because they committed a recruiting violation.
In all seriousness, what business is it of the government’s what G&A margin a private company has. For some reason, 20% is exactly right, but forcing 0% borrowing on these clowns is a violation of every holy democratic republican principle since the Romans.
Of course, we’ll take the money, though.
Adolescence Just Keeps Getting Longer
Posted by Joshua Sharf in Economics, Health Care, National Politics, PPC on July 11th, 2012
Two posts getting some attention today. First, this from Derek Thompson at the Atlantic:
And then this, from Taylor Cotter over at the Huffington Post:
I suppose that I’m grateful that I can make all my car payments and start saving for retirement while most of my friends are living at home and working part-time jobs — but I often find myself lamenting the fact that I’m not living at home and not working a part-time job. From my perspective, these are just some of the life-changing, character-building experiences that I may never have.
Now, it’s easy to laugh at Taylor, and Lord knows, I have. Oh, the struggles of not starving, not having to live at home. The horrors of being able to go out for drinks and read a book from time to time. The sheer insipidness of knowing that your rent is paid and there’s food on the table. Really, who wants to live like that?
But at a more serious level, the fact that she seriously thinks that she’s missing out on something by not spending mandatory time in her parents’ basement or her old room, shows that that may slowly be turning into the norm. It slows down adulthood, accumulation of both social and financial capital, and becomes harder and harder to reverse. Subsidizing the trend by putting 25-year-olds with masters degrees on their parents’ health insurance only aggravates the problem.
As young Taylor shows, it can become a desirable thing to start off your life that way. And when you think about it, why stop at 26? Or 30? Why not keep going all the way to early retirement. (Retirement from what? If you have to ask, man, you just don’t get it.) Well, the Greeks and the Spaniards show why.
Michael Barone likes to say that American has the worst 18-year-olds and the best 30-year-olds. That’s because the time immediately after college toughens kids up, and teaches them what the real world is like.
God help us when 40 becomes the new 30.
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