Category: Economics & Finance

Recent book again ignores intelligence and “The Wealth of Nations”.

I just finished reading The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good, by William Easterly, 2006. I purchased the book because I thought it would be another socialist screed trashing capitalist systems—I was very wrong. The book is very well written from the perspective of a very knowledgeable economist, familiar with The World Bank, the International Monetary Fund, etc.,  and the countries and problems they try to assist.

The crux of the book is that “planners” are incapable of solving problems, and that “searchers” for solutions are better able to decide where money should be spent and how. He also does not give specific policy recommendations, and concedes we just need to try and do things differently.

Continued...

Posted by Matt Nuenke on Sunday, May 21, 2006 at 11:51 AM in Economics & Finance
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Are the Ethanol Wars Over?

I think I have probably harassed enough by now the economic ignoramuses who groan about the “peak oil” problem but I could not resist posting an article below which argues that even the brain-dead method of producing ethanol from corn may now be an economic proposition as a motor fuel:

Ethanol—the gasoline substitute made by distilling corn or other vegetation—has long been the subject of intense debate. According to its critics, ethanol does little to improve air quality and may actually contribute to smog, costs taxpayers billions of dollars in subsidies, and doesn’t do much to reduce our dependence on foreign oil.  Ethanol’s defenders say its environmental effects are more positive than negative, the so-called subsidies are mostly federal and state tax breaks, and as the cost of making ethanol falls while the cost of fossil fuels remains high, ethanol could substantially reduce the nation’s oil consumption and even overtake gasoline as the preferred transportation fuel.

Ethanol was in the news recently [January 5] when General Motors, Chevron, the state of California, and other partners unveiled at the Los Angeles Auto Show a plan to greatly expand the use of E85, a motor fuel composed of 85 percent ethanol. GM already has manufactured 1.5 million “flexible fuel vehicles” able to run on E85, but they seldom do because the fuel is not widely available. Chevron announced plans to provide the fuel at selected gas stations, and Pacific Ethanol, another one of the partners, announced plans to build four ethanol plants in California over the next two years.

I’ve observed this debate for many years as a citizen and as a scientist. As a citizen, I don’t like subsidies or regulations that distort markets. But as a scientist, I’ve long supported ethanol as a “win-win” proposition for farmers and consumers alike.  I view the recent announcements as evidence that ethanol has reached a tipping point, and that the debate over the fuel may be over. Ethanol’s advocates have won.

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Posted by jonjayray on Tuesday, February 14, 2006 at 10:18 PM in Economics & Finance
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Olduvai Recrudescence

Richard Duncan has written a new paper on his Olduvai theory, which he traces back to (among other sources) Henry Adams. In a way it is a comfort to know that our current situation was foreseen long ago. Actually, no, on second thought, it isn’t much comfort.

The Olduvai Theory states that the life expectancy of industrial civilization is approximately 100 years: circa 1930-2030. Ackerman’s Law defines it: e = Energy/Population. Four postulates follow:

1. The exponential growth of world energy production ended in 1970.
2. Average e will show no growth from 1979 to circa 2008.
3. The rate of change of e will go steeply negative circa 2008.
4. World population will decline proximate with e.

Henry Adams in 1893 envisioned that electric power would accelerate society into chaos and ruin. Frederick Ackerman in 1932 showed that social change could be quantified by e. King Hubbert graphed the shape of the e curve in 1949. Thus an Olduvai scenario existed before 1950.

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Posted by Søren Renner on Thursday, February 9, 2006 at 12:57 PM in Economics & Finance
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Ethanol update:  Something for the peak oil freaks to think about

If George W. Bush needs an example of how ethanol can help to reduce dependence on oil imports, he need look no further than Brazil.  What Saudi Arabia is to crude oil, Brazil is to ethanol - the environmentally friendly, renewable fuel of which it is the largest producer.  Brazil makes the fuel by fermenting and distilling its sugar cane crop, the biggest in the world, and then using the liquid to fuel a rapidly increasing proportion of its transport fleet.

Seven out of 10 of all new cars sold in Brazil are now “flex-fuel” - owners can fill them with either ethanol or petrol.  Computer sensors inside the engine then decide what will be the best mix of whatever is in the tank for optimum performance. Finding ethanol is not a problem either - almost all petrol stations have pumps selling pure ethanol, while all regular petrol sold at the pumps is in fact a mix called “gasohol”, a blend that contains up to 25 per cent ethanol.  Ethanol produces a cleaner burn than petrol, resulting in less pollution and smog.

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Posted by jonjayray on Friday, February 3, 2006 at 12:35 AM in Economics & Finance
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TOD Redux

I try not to cudgel MR with this stuff, really I do. But today’s post on The Oil Drum is as close to a must-read as you could ask for. Stuart Staniford really likes graphs. Where is the carbon? Find out here.

Posted by Søren Renner on Monday, January 30, 2006 at 01:25 PM in Economics & Finance
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More on ethanol for the peak-oil freaks

Below is a plain-English summary from “Science” magazine followed by the abstract of one of the two papers mentioned.  It is impressive that even using the moronic corn-sugar route, ethanol production has a positive energy balance.  With half a dozen co-authors of the paper, however, it is pretty amazing that none of them seem to be aware of the enormously cheaper and more environmentally friendly method of producing ethanol directly from sugarcane.

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Posted by jonjayray on Thursday, January 26, 2006 at 09:18 PM in Economics & Finance
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Dissecting Corporatism

I got a kick out of this one:

http://blog.vdare.com/archives/2005/12/26/new-orleans-blacks-betrayed-by-their-leaders/

Continued...

Posted by Svyatoslav Igorevich on Tuesday, December 27, 2005 at 05:13 PM in Business & Industry,  Economics & Finance,  Immigration
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The Bear’s Lair: The Approaching Latin Slum

In the late 1990s, Latin America was believed to have adopted a “Washington Consensus” of democratic politics and moderately free market economics. At the end of 2005, it is becoming only too clear that the two parts of the Washington Consensus are in conflict in the region, with the democratic politics leading to increasingly anti-market economics, which will inevitably be followed by decline.  It’s worth asking why.

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Posted by karlmagnus on Monday, December 26, 2005 at 10:20 AM in Economics & Finance
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The Bear’s Lair: Economic Swords of Damocles

In 4th Century BC Syracuse, Damocles was the court sycophant who wished to change places with the wealthy tyrant Dionysius, and discovered that to do so involved having a sword suspended over his head by the finest of horsehairs, since Dionysius was in permanent danger of assassination. Likewise those who designed today’s U.S. economy sought to create an era of permanent prosperity; only in 2006 will we come to notice the slender thread by which hangs the prospect of economic catastrophe.

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Posted by karlmagnus on Monday, December 19, 2005 at 10:52 AM in Economics & Finance
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Another one in the eye for the “peak oil” fruitcakes

As you will see from the news excerpt below, Brazil is now filling up its motorists’ cars with ethanol for HALF the cost of petrol (gasoline).  Most calculations of ethanol costs that you see are based on the insane American system of producing ethanol from corn sugar.  In Brazil, ethanol production is fully integrated, with the sugarcane going straight from the farm to the distillery—thus VASTLY lowering costs.  The distillery just puts the cane through a crusher and then immediately starts fermenting the squeezed-out juice.

The only thing holding up investment in ethanol production elsewhere is uncertainty about which way the oil price will go—and since that depends mainly on how much the Saudis decide to pump, the price could easily lapse right back, as it has done in the past.

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Posted by jonjayray on Sunday, December 11, 2005 at 09:57 PM in Economics & Finance
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Two stories from other sites.

Both these are so very relevant to my concerns. The second one has great graphs.

http://www.marginalrevolution.com/marginalrevolution/2005/12/dont_trust_expe.html
Nutshell: The worm turns, and the hedgehog becomes the fox.

http://www.theoildrum.com/story/2005/12/5/133418/045
Nutshell: The Hubbert decline may be quite slow.

Posted by Søren Renner on Tuesday, December 6, 2005 at 11:21 PM in Economics & Finance
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Bill Gates invests in ethanol

Smart move

Bill Gates seems to want a piece of the action when it comes to renewable energy. The billionaire’s investment company, Cascade Investment, has agreed to invest $84 million in Pacific Ethanol which will help it finance construction of several planned fuel-additive plants on the West Coast. Cascade’s investment gives Gates a 27% stake in Pacific Ethanol.  Gates will be sharing the company with petroleum distributor SC Fuels, which owns the majority stake in the ethanol producer and is one of its biggest customers. It could be a lucrative investment, since federal law requires that the U.S. nearly doubles the amount of ethanol it uses annually to 7.5 billion in 2012 from 4 billion gallons in 2006.

More here

For background on ethanol as a solution to the “peak oil” non-problem, see here

Posted by jonjayray on Monday, November 21, 2005 at 10:06 PM in Economics & Finance
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Use the axe while the rest of us row!

I never understood economics. It seemed to me that it was a discipline in which A and ~A could simultaneously be true. It turns out that there is a good explanation for my difficulty: the whole thing is based on lies. If you think this is too strong, please set me straight: but first, could you look at this site?  dieoff

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Posted by Søren Renner on Monday, October 31, 2005 at 02:30 PM in Economics & Finance
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The Bear’s Lair: The glass is half empty

The “advance” estimate of third quarter Gross Domestic Product growth, released by the Bureau of Economic Analysis Friday, at 3.8 percent, was greeted by the stock market with a huge sigh of relief. It appeared to vindicate the view of market bulls and the George W. Bush administration that the U.S. economy remained in fine shape.  On closer analysis, however, and taking into account other recent economic announcements, the picture is much gloomier.

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Posted by karlmagnus on Monday, October 31, 2005 at 11:24 AM in Economics & Finance,  U.S. Politics
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The Bear’s Lair: Life after Greenspan

President George W. Bush’s selection of his personal lawyer Harriet Miers for the Supreme Court has enthralled the blogosphere for three weeks, peeling off much of Bush’s support from the right. Yet Bush will soon make a selection with even more potential for good or ill in everybody’s lives: that of a successor to Fed Chairman Alan Greenspan, due to retire in January. In this selection however he should aim to be unpopular, as distinct from merely achieving unpopularity by accident.

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Posted by karlmagnus on Monday, October 24, 2005 at 11:41 AM in Economics & Finance,  U.S. Politics
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The Bear’s Lair: Towards tax reform

President George W. Bush’s Tax Advisory Commission, due to issue a preliminary report November 1, was reported Wednesday to be considering capping the home mortgage interest deduction at $300,000 principal amount, capping corporate tax deductions for employee healthcare premiums at $11,000 and eliminating the Alternative Minimum Tax.  These proposals and the furore they aroused bring into sharp focus the question of how the over-complex and economically destructive U.S. tax code might be reformed.

For more, please use the following link to the “Great Conservatives” website:

http://www.greatconservatives.com/pages/6/index.htm

Posted by karlmagnus on Monday, October 17, 2005 at 09:58 AM in Economics & Finance,  U.S. Politics
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The Bear’s Lair: The Kamikaze economy

Since 2002, indeed to some extent since 1995, the U.S. economy has been managed on Kamikaze principles. Long term goals and traditional prudential controls have been sacrificed in order to keep the stock and housing bubbles inflated.  In this traditionally tricky month of October, it appears that the kamikaze approach to economics may no longer be working, and collapse may be near.

For more, please link below to the “Great Conservatives” website:

http://www.greatconservatives.com/pages/6/index.htm

Posted by karlmagnus on Monday, October 10, 2005 at 11:09 AM in Economics & Finance
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One to freak the peak oil freaks

A quick excerpt 

“The price of oil remains high only because the cost of oil remains so low. We remain dependent on oil from the Mideast not because the planet is running out of buried hydrocarbons, but because extracting oil from the deserts of the Persian Gulf is so easy and cheap that it’s risky to invest capital to extract somewhat more stubborn oil from far larger deposits in Alberta. The market price of oil is indeed hovering up around $50 a barrel on the spot market. But getting oil to the surface currently costs under $5 a barrel in Saudi Arabia, with the global average cost certainly under $15. And with technology already well in hand, the cost of sucking oil out of the planet we occupy simply will not rise above roughly $30 a barrel for the next 100 years at least”.

Posted by jonjayray on Tuesday, October 4, 2005 at 09:49 AM in Economics & Finance
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The Bear’s Lair: The costs of political impossibility

Gordon Hanson, presenting his new book “Why Does Immigration Divide America” at the Institute for International Economics Thursday, referred to a restrictionist policy on illegal immigrants as “politically impossible.”  The Wall Street Journal Friday made the same reference in relation to Congress potentially shutting down Fannie Mae’s economy-threatening derivatives operation. Why are apparently plausible policies “politically impossible” and what are the economic consequences of this?

For more, go to the “Great Conservatives” website link below:

http://www.greatconservatives.com/pages/6/index.htm

Posted by karlmagnus on Monday, October 3, 2005 at 09:22 AM in Economics & Finance,  Social Sciences,  U.S. Politics
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The Bear’s Lair: An agenda for 2008’s Democrats

It’s increasingly likely that an unpopular war and a teetering economy will bring Republican House and Senate losses in 2006, and throw the 2008 Presidential election wide open. Free market economists, frustrated by the George W. Bush administration, should thus be thinking about ideas to pitch to the potential Democrat Presidential contenders of 2008, who will shortly start scouring the country for campaign money and voter-friendly policies.

For more, click on the link to the Great Conservatives website below:

http://www.greatconservatives.com/pages/6/index.htm

Posted by karlmagnus on Monday, September 26, 2005 at 08:50 AM in Economics & Finance,  Globalisation,  Immigration,  U.S. Politics
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Lovely Rita, Hurricane

Rita has the potential to hit our economy pretty hard.  If you are interested in oil depletion and infrastructure, you should look at The Oil Drum.  Right now there is a nice animation of our newest anti-clockwise friend.  Below that is a great analysis of “unconventional” oil (tar sands, oil shale, etc).  The relevance to our . . .er . . . particular concerns . . . should be obvious, although I know there are different opinions here.  But none of us, I trust, are optimists (in the Julian Simon sense, not the Gramscian one*).

*“Pessimism of the intellect, optimism of the will.”—Antonio Gramsci, Prison Notebooks

Posted by Søren Renner on Wednesday, September 21, 2005 at 04:03 PM in Economics & Finance
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The Bear’s Lair: The unfunny money pits

By filing for Chapter 11 bankruptcy Wednesday Delta Airlines and Northwest Airlines should finally have made it clear to all that fixed-asset-rich businesses combine with a lax U.S. bankruptcy code to create a uniquely unpleasant money pit for investors, in which long term investor profitability is impossible.  Corporate bankruptcy reform is essential for the survival of these businesses, enabling them to access the capital they need to build a sound future.

For more, link to the “Great Conservatives” website:

http://www.greatconservatives.com/pages/6/index.htm

Posted by karlmagnus on Monday, September 19, 2005 at 09:25 AM in Economics & Finance
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Waiting for the Apocalypse

The S&P 500 is a stock index designed to track performance of the broad US economy and this index, along with the tech heavy NASDAQ, are seeing new highs: a 1 year annualized return of 12% and a 3 month return of 21% for the S&P. Readers may recall in 1999 the S&P scored a 25% annualized return, though by March of 2000 the money had disappeared. Poof!

I really don’t understand it? Perhaps my horizon is too long term, for how can we import a mass of low IQ helots and export any job not tied to the soil; and don’t forget the dangerous levels of debt held by government and households.

Congressman Ron Paul summed it up this way:

Our current account deficit is more than $600 billion annually. Our foreign debt is more than $3 trillion. Foreigners now own over $1.4 trillion of our Treasury and mortgage debt. We must borrow $3 billion from foreigners every business day to maintain our extravagant spending. Our national debt now is increasing $600 billion per year, and guess what, we print over $600 billion per year to keep the charade going. But there is a limit and I’m fearful we’re fast approaching it.

Perhaps that is why gold is at 17 year high? What is your vision of the future? 

Posted by leslie on Saturday, September 17, 2005 at 11:21 AM in Economics & Finance
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The Bear’s Lair: The boxed-in Federal Budget

The $62.5 billion voted last week for relief of the sufferers from Hurricane Katrina throws light on an important budget truth. The games Congressional budget-busters have been playing since 1999 and the George W. Bush administration since 2001 are about to come to an unpleasant end. The Federal budget is becoming boxed in by reality.

For more, link to the “Great Conservatives” website:

http://www.greatconservatives.com/pages/6/index.htm

Posted by karlmagnus on Monday, September 12, 2005 at 12:06 PM in Economics & Finance,  U.S. Politics
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The Bear’s Lair: The Incompetent Market Hypothesis

The Efficient Market Hypothesis, propounded by Eugene Fama in 1965, postulated that stock markets are efficient and rational in discounting all available investment information. Not only has this theory in all but its weakest forms been repeatedly disproved by reality, but in the “funny money” period of the last decade its converse appears to have become true: the stock market is not merely inefficient in processing information, but actively incompetent in doing so.

Read more on the “Great Conservatives” website:

http://www.greatconservatives.com/pages/6/index.htm

Posted by karlmagnus on Monday, September 5, 2005 at 09:01 AM in Economics & Finance
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