Quotulatiousness

March 21, 2011

The nuclear power industry’s technological lock-in

Filed under: Economics, History, Science, Technology — Tags: , , , — Nicholas @ 09:20

Leon Neyfakh looks at how light water reactors became the “default” choice of the nuclear power industry:

Japan’s reactors are “light water” reactors, whose safety depends on an uninterrupted power supply to circulate water quickly around the hot core. A light water system is not the only way to design a nuclear reactor. But because of the way the commercial nuclear power industry developed in its early years, it’s virtually the only type of reactor used in nuclear power plants today. Even though there might be better technologies out there, light water is the one that utility companies know how to build, and that governments have historically been willing to fund.

Economists call this problem “technological lock-in”: The term refers to the process by which one new technology can prevail over another for no good reason other than circumstance and inertia. The best-known example of technological lock-in comes from the 1970s, when VHS and Betamax, two different kinds of videotape, competed in the market until VHS gained a slight lead and then leveraged it to total domination. Whether the VHS format was actually superior to Betamax didn’t matter. After the lock-in, consumers no longer had a choice.

Much more is at stake in nuclear power. Some reactor designs are safer than others in an accident; some are more efficient than others in their use of fuel and produce less nuclear waste. The fact that the industry settled on light water over any number of alternatives was determined in the years after World War II, when the US Atomic Energy Commission and Navy Admiral Hyman Rickover made a series of hasty decisions that irreversibly set the course for how nuclear power plants around the world are built today.

“There were lots and lots of ideas floating around, and they essentially lost when light water came to dominate,” said Robin Cowan, a professor at the University of Strasbourg and the University of Maastricht who wrote a 1990 paper in The Journal of Economic History about the nuclear industry’s technological stagnation. “The market tends to choose a dominant design before it’s optimal, and it tends to under-explore.”

March 20, 2011

A different way to visualize the proposed US budget cuts

Filed under: Economics, Government, Politics, USA — Tags: , , , — Nicholas @ 10:53

Jon sent me an interesting link on a different way to visualize the relative size of the proposed budget cuts:

That struck me as a pretty good analogy. I wondered: if you do the math, what part of a Big Mac Extra Value Meal would a $6 billion budget cut represent?

The arithmetic is pretty simple, due to the extensive nutrition information that McDonalds makes available online. A Big Mac Extra Value Meal has three components: a Big Mac, a large order of french fries, and a medium soda. The McDonalds site tells us that a Big Mac has 540 calories, a large fries has 570 and a medium Coke has 210, for a total of 1,320 calories.

Meanwhile, the federal budget is currently around $3.8 trillion, which means that a $6 billion cut represents one 633rd of the total. What would be an equivalent cut in a Big Mac Extra Value Meal?

One variable is not readily available online; that is, how many french fries are there in a large order? To answer that question, I went to a nearby McDonalds at lunch time, paid for a large order of fries, and counted them. There were 87. (I counted fries regardless of size, but did not count the hard bits in the bottom of the container.)

This allows us to complete the calculation. If there are 570 calories in a large order of fries, and 87 fries per order, each french fry, on the average, contains 6.5 calories. One 633rd of the total calorie content of a Big Mac Extra Value Meal is 1,320/633, or 2.1 calories. That equals almost exactly one-third of an average sized french fry.

March 15, 2011

Shang-Jin Wei on the Chinese sex imbalance and its economic impact

Filed under: China, Economics, Government — Tags: , , — Nicholas @ 12:19

China’s one-child policy not only intruded into the personal lives of Chinese couples, but it may also have been a key contributor to the economic bubble:

Could a reproductive policy have caused the financial crisis? Could it still be wreaking havoc with the world economy? During a lively discussion at the Council on Foreign Relations yesterday, Columbia professor Shang-Jin Wei said this could be the case. He claimed that the skewed Chinese sex ratio (there are more men than women) can explain much of global trade imbalances. Mr Wei reckons the Chinese sex ratio can explain the high Chinese saving rate, and this is what’s behind China’s current-account surplus.

China adopted the one child law in the early 1980s. It resulted in a skewed sex ratio because many couples preferred a male baby and aborted female fetuses. In 1980, 106 boys were born were born for every 100 girls. By 1997, it was 122 boys for every 100 girls. This means that today one in nine Chinese men will probably never marry and the situation is expected to get worse as time goes on. It’s been suggested that the large pool of single men with no marriage prospects can lead to social unrest. What that will mean for China’s political future is uncertain and potentially troubling. But the world may already be experiencing the economic impact of this policy. Trade imbalances, specifically the Chinese current account surplus and America’s current account deficit, are often cited as a cause of the financial crisis. They provided a glut of cheap, easy capital which fed the housing bubble.

[. . .]

The lack of a social safety net is often blamed for the high Chinese saving rate. Without welfare and government pensions the Chinese must save to self-insure themselves. But Mr Wei pointed out that even as the government has extended more social welfare programmes, the saving rate has continued to rise. He believes the uneven sex ratio can explain half of the increase in private saving between 1990 and 2005. He explained that the marriage market is becoming very competitive with so few girls. Chinese parents want to accumulate as much wealth as possible to ensure that their son can attract a wife. It is also important to provide sons with the best education possible. A competitive marriage market means that members of the disadvantaged gender must raise their game, which in China means greater wealth and education.

Mr Wei also reckons the sex ratio can explain capital accumulation in the corporate sector. The desire to accumulate wealth means that boys and their parents are more likely to become entrepreneurs, work more hours and take more unpleasant jobs. He found higher rates of entrepreneurship in areas with more skewed sex ratios.

This, of course, is the optimistic view of things. The pessimistic view involves those tens of millions of men who can never find wives and projects that into social unrest, civil disorder, and military adventurism. Let’s hope the optimistic view is closer to being correct.

March 14, 2011

Government debt: “U.S Treasuries increasingly look like Wile E. Coyote running in midair; they’ll keep selling only as long as nobody actually looks down”

Filed under: Economics, Government, USA — Tags: , , , , , — Nicholas @ 16:17

To borrow a phrase from Monty at Ace of Spades HQ, here’s a hot steaming bolus of DOOM for you, courtesy of Eric S. Raymond:

Insolvency is no longer a sporadic problem, it’s become pervasive at all levels of government everywhere. This is why the recent brouhaha in Wisconsin was so surreal. The public-employee unions weren’t just rearranging the deck chairs on a sinking Titanic, they were fighting to preserve their right to bore more holes in the hull.

When these are the objective conditions, what point is there in arguing that the whole system is corrupt and that middle-class entitlements have to go on the scrap-heap along with every other big-government program? It’s going to happen anyway soon enough. A year ago the U.S. government was only taking in a third of what it needed to cover annual outlays; today it’s so much worse that individual monthly deficits are larger than the entire Bush administration’s. The money’s all gone. Our options are closing down to default or hyperinflation.

It’s going to get ugly out there. A lot of old people are either not going to get their pensions and Social Security at all or get them in hyperinflated dollars that won’t be worth anything. Anyone else dependent on government transfer payments will be similarly screwed. Urban poor, farmers, veterans, the list goes on. Imagine the backlash when that really hits — when it sinks in that the promises were lies, the bubble has popped, the Ponzi scheme is over.

Toledo, Ohio

Filed under: Economics, History, Railways, USA — Tags: — Nicholas @ 08:37

P.J. O’Rourke remembers his home town:

My hometown, Toledo, Ohio, is one of those junkyards of American capitalism, a deindustrialized old industrial city. The population has declined from 383,818 in 1970 to 316,851 today. The unemployment rate is 10.4 percent. Jeeps are still made there, but most Toledo factories are gone — Auto-Lite, Willys-Overland, Champion Spark Plug, the glass plants of Owens-Illinois and Libbey-Owens-Ford. Toledo Scales aren’t made in Toledo anymore.

Downtown, the department stores are closed, as are most of the shops, theaters, restaurants, and bars. The city’s center looks plucked. Half the buildings have been razed. Toledo is a failure.

Actually, Toledo always was a failure. Incorporated in 1837, with a fancy name for what had been called the Great Black Swamp, Toledo was a land scam. A canal joining the Ohio River to Lake Erie was supposed to have its terminus there. The scam collapsed that very year, in the Panic of 1837, when Andrew Jackson ended easy land-buying credit. The canal did open, but not until 1845, by which time railroads had taken over shipping.

Toledo tried to be a rail hub. In 1860 it had six railroads. They were all short-line operations, each with a different track gauge and none connected to long-haul routes. Toledo’s Erie and Kalamazoo Rail Road never reached Kalamazoo.

March 11, 2011

Examining externalities

Filed under: Economics, Government, Liberty — Tags: , — Nicholas @ 12:54

Predrag Rajsic looks at the economic case for governments to address externalities:

Some theorists claim that externalities are probably the most legitimate reason for state intervention in human interactions. The ethical case for intervention is that it can presumably increase overall economic efficiency. This article demonstrates that, even if one accepts this ethical principle, the usual choice of externality-generating actions that are believed to justify state intervention is purely arbitrary.

In fact, according to the definition of actions with external effects, any human action in a multi-individual society would qualify for regulation under the banner of improving economic efficiency (i.e., internalizing externalities). However, the nature of human existence renders this internalization impossible. Thus, we end up with a paradoxical situation where every action inevitably fails the ethical criterion we have put in front of ourselves.

[. . .]

Government intervention is commonly believed to be the correcting mechanism. In the cases where too much of an action is being performed, the government should coercively limit the externality-creating action (regulations, taxes, penalties, quotas, etc.) Alternatively, actions that result in positive externalities should be encouraged using the means available to the government (i.e., subsidies).

These government interventions are supposed to move the economy to the output mix as close as possible to the mix supposedly predicated by the model of perfect competition. In this sense, the model of perfect competition is adopted as a measuring stick for determining the ethical validity of individual action. According to this principle, one ought not act without taking into account the effect of his or her actions on all other individuals within the economy.

Reason.TV: Should governments subsidize alternative energy?

Filed under: Economics, Government, Technology — Tags: , — Nicholas @ 12:48

Amazon recommendation fail

Filed under: Books, Economics, Europe, France, History, Media — Tags: — Nicholas @ 08:45

Like many of you, I’ve bought lots of books from Amazon over the years. Knowing a fair bit about my book-buying habits, their recommendations for books I might be interested in are usually pretty good. Today’s email rather missed the mark:

I’m not sure how that book relates in any way to the work of Fernand Braudel:

Fernand Braudel (24 August 1902 – 27 November 1985) was a French historian and a leader of the Annales School. His scholarship focused on three main projects, each representing several decades of intense study: The Mediterranean (1923–49, then 1949–66), Civilization and Capitalism (1955–79), and the unfinished Identity of France (1970–85). His reputation stems in part from his writings, but even more from his success in making the Annales School the most important engine of historical research in France and much of the world after 1950. As the dominant leader of the Annales School of historiography in the 1950s and 1960s, he exerted enormous influence on historical writing in France and other countries.

Braudel has been considered one of the greatest of the modern historians who have emphasized the role of large-scale socioeconomic factors in the making and writing of history.[1] He can also be considered as one of the precursors of World Systems Theory.

If you’ve browsed the history section, you’ll have seen them:

March 10, 2011

Stephen Gordon: “business groups are pro-BUSINESS, not pro-MARKET”

Filed under: Cancon, Economics, Government — Tags: , , — Nicholas @ 13:01

Stephen Gordon provides a useful reminder about not conflating “business” interests with “free market” interests: they’re often in conflict.

This is something that should always be kept in mind in economic policy discussions: business groups are pro-BUSINESS, not pro-MARKET.

It is especially important to keep this in mind when we read news items such as this, in which several of Canada’s largest banks voice their opposition to the proposed TMX-LSE merger.

It is true that business groups will often make use the language of markets, and it is obviously in their interest to portray themselves as defenders of markets.

But they are a lobby group like any other, and cannot be relied upon to defend the general public interest.

This point is sometimes hard to see, especially since many business groups have the reputation of favouring such pro-market policies such as free trade. And so they do, but for precisely the wrong reason: as a way of increasing exports.

This is why you can often find big business working hand-in-mailed-gauntlet with regulators to shut down competitors and make it harder for new competitors to enter their markets: corporations do not naturally favour free markets. Corporations exist to maximize profit for their shareholders, not primarily to serve customers. Serving customers is one way to accomplish that end, but in a regulated economy it may not be the best way to do it. If you can get the naked force of government to muscle in and suppress other businesses, that leaves more profit for you (as long as you co-operate with the government, that is).

Small businesses don’t have the ability to cosy up to government in the same way big corporations can, so even if they band together in trade groups, they won’t have the ability to capture and direct the regulators in the way big businesses often can.

Time to audit the Federal Reserve?

Filed under: Economics, Government, USA — Tags: — Nicholas @ 10:51

March 9, 2011

“It’s the libertarians who push this crap”

Filed under: Economics, Liberty, Politics, Technology, USA — Tags: , , , — Nicholas @ 12:22

Dave Weigel tries to find the answer to the burning question “Why do conservatives hate trains so much?”:

But it could hardly make less sense to liberals. What, exactly, do Republicans, conservatives, and libertarians have against trains? Seriously, what? Why did President George W. Bush try to zero out Amtrak funding in 2005? Why is the conservative Republican Study Committee suggesting that we do so now? Why does George Will think “the real reason for progressives’ passion for trains is their goal of diminishing Americans’ individualism in order to make them more amenable to collectivism”?

“You need to distinguish between Republicans and conservatives and libertarians when you look at this,” says William Lind, the director of the American Conservative Center for Public Transportation. “It’s the libertarians who push this crap.”

Libertarians, of course, have no problem with trains (see, e.g., Atlas Shrugged). They do have a problem with federal spending on transportation, as do many Republicans. Atlas Shrugged was published in 1957; Amtrak took over the rails in 1971. Since then, conservatives will sing the praises of private rail projects but criticize federally funded projects that don’t meet the ideal. Rep. John Mica, R-Fla., for example, pushed a high-speed rail initiative through Congress in 2008. By 2010, he was denouncing “the Soviet-style Amtrak operation” that had “trumped true high-speed service” in Florida. In 2011, as the chairman of the House Transportation Committee, he is interested in saving the Orlando-Tampa project by building 21 miles between the airport and Disney World. This is about 21 miles farther than local Republicans want to go.

March 8, 2011

Canadian banks forced to enter 21st century

Filed under: Bureaucracy, Cancon, Economics, Government — Tags: — Nicholas @ 12:27

In a long-overdue move, the Canadian government is putting pressure on the banks to improve their glacial cheque-clearing time:

Ottawa is cutting the amount of time banks can hold cheques up to $1,500 to four business days from seven for consumers and small- and medium-sized businesses.

The measures detailed today, part of last year’s budget, will also give consumers “immediate access” to the first $100 deposited by cheque. There will be a 30-day period for comment.

“Lower-income seniors, Canadians without significant balances in their accounts, younger Canadians who do not have a long banking history, and people who receive cheques from newer employers or clients are often subject to longer cheque hold periods,” the Department of Finance said. “These are often the Canadians who most need quick access to their funds.”

This is great news for me personally: I’m self-employed. I bill my clients directly for a month’s work, they take time to process my invoice and issue a cheque, then I deposit it into my business account. Seven business days later after that, I can actually get some of that money into my personal account. It’s amazing how long seven business days can seem when you’re juggling the mortgage, property tax bills, utilities, and all the other things that can’t be postponed to a time when the bank lets you get at your own money.

H/T to Elizabeth for the link.

March 7, 2011

Your energy consuming future

Filed under: Britain, Economics, Government, Technology — Tags: , — Nicholas @ 11:00

Britain is facing a very different future, from the point of energy consumption, according to Steve Holliday, CEO of National Grid:

Because of a six-fold increase in wind generation, which won’t be available when the wind doesn’t blow, “The grid is going to be a very different system in 2020, 2030,” he told BBC’s Radio 4. “We keep thinking that we want it to be there and provide power when we need it. It’s going to be much smarter than that.

“We are going to change our own behaviour and consume it when it is available and available cheaply.”

The more of your electricity that is produced from wind power, the more there will be very noticeable peaks and valleys in available electricity. Not only do you need more sources, you need over-capacity in some areas to generate sufficient power to supply to areas which are becalmed.

Under the so-called “smart grid” that the UK is developing, the government-regulated utility will be able to decide when and where power should be delivered, to ensure that it meets the highest social purpose. Governments may, for example, decide that the needs of key industries take precedence over others, or that the needs of industry trump that of residential consumers. Governments would also be able to price power prohibitively if it is used for non-essential purposes.

Perhaps it’s just the libertarian in me that finds the term “highest social purpose” to be very disturbing: just who the hell is going to be making that determination? And on what basis will the new high priests of the lightnings be making that call?

Smart grids are being developed by utilities worldwide to allow the government to control electricity use in the home, down to the individual appliance. Smart grids would monitor the consumption of each appliance and be capable of turning them off if the power is needed elsewhere.

Like the idea that someone at your local electrical board can decide that you don’t really need to run that TV set or that toaster right now? If the control freaks at the utilities manage to foist this off on us, we’ll be techno-peasants who are only allowed to run electrical devices that meet “social purpose” guidelines.

QotD: Mercantilism

Filed under: Economics, History, Humour, Quotations — Tags: , , — Nicholas @ 09:56

You actually had a short, but interesting chapter in your book explaining why you think our trade balance with China is mostly irrelevant. Could you give people a short, but sweet synopsis of that argument?

Adam Smith was the first to point this out in the Wealth of Nations. The common wisdom at the time, mercantilism was the name it went by, was that the way a nation got rich was by exporting things. In return for the exports they’d get gold. And Smith’s going, I’m paraphrasing broadly here, “You can’t eat gold, you can’t kiss gold, and gold won’t keep you warm at night. Gold is just gold.”

He said the exports, that’s real stuff, and you’re giving it away in favor of gold. He said imports are the good thing. Imports are when you’re getting something you like. You’re getting French wine. You’re getting American tobacco. You’re getting furs from Russia, getting whatever they were getting back in those days. He said exports are the way you pay for those imports. So imports are Christmas morning. Exports are January’s Visa bill.

People getting so upset because everything seems to be made in China — I understand it on the level of the jobs have moved overseas. I think it’s probably an important thing to remember that if the jobs hadn’t moved overseas, they probably would have just gone away. So, it’s not like the Japanese have all of our car making jobs.

John Hawkins, “The P.J. O’Rourke Interview”, Grendel Report, 2010-10-11

March 6, 2011

Don’t worry, liquor fans, they’ll soon stop over-serving you

Filed under: Cancon, Economics — Tags: , , — Nicholas @ 12:05

Did you know that the US shot glass is ever so slightly larger than the Imperial one? These guys didn’t, but they do now:

To be fussy about it — and who’s fussier than a liquor tax auditor? — a U.S. fluid ounce works out to 29.574 millilitres while the imperial (that is, Canadian) ounce is 28.413. While that may not sound like a big discrepancy to you, it means Canadian bars using U.S. shot glasses, as virtually all of them do, have spent years serving countless more litres of liquor than legally required. The upshot for your shots is that they’ll soon be 7% lighter.

Owners had no idea there was a difference between a U.S. shot and a Canadian one. “I’d say it’s totally unrecognized,” Tweter says. Finding imperial shot glasses proved impossible, and Tweter and Wilson took matters into their own hands. They sourced a factory in China to make a slightly smaller-than-usual vessel. Meet the Can-Pour, probably the only imperial ounce shot glass on the Canadian market.

As a result of rounding, the standard U.S. shot glass actually works out to 30 millilitres while the Can-Pour pours an even 28. Tweter points out this falls within Weights and Measurements Canada’s tolerances. A chart on Tweter and Wilson’s website shows how a bar with annual liquor purchases of $360,000 could save more than $25,000 by pouring a little less. Doesn’t that cheat the customer? “The two-millilitre difference is virtually undetectable. It’s literally drops,” Tweter says.

So drink up, Vancouver shot fans: you’ll soon be paying the same for slightly less alcohol per drink.

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