Who Is More Irrational – Consumers or Regulators?
08 Sep 2014 Leave a comment
in economics of regulation, energy economics, entrepreneurship, environmental economics, environmentalism, global warming Tags: Bjørn Lomborg, expressive voting, futile gestures, global warming, Kip Viscusi, nanny state, regulatory failure, The fatal conceit, The pretence to knowledge
A study by Ted Gayer and W. Kip Viscusi looked into this implied irrationality of consumers. They have found no empirical evidence to support the view that if consumers are so irrational that government agencies must prohibit certain energy consuming products for us to make the right choices:
Rather than accept the implications that consumers and firms are acting so starkly against their economic interest, a more plausible explanation is that there is something incorrect in the assumptions being made in the regulatory impact analyses.
Indeed, upon closer inspection it is apparent that there is no empirical evidence provided for the types of consumer failures alleged.
Even the EPA acknowledged this logical gap in its economic analysis of energy efficiency regulations:
it is a conundrum from an economic perspective that these large fuel savings have not been provided by automakers and purchased by consumers
Not surprisingly Kip Viscusi observed that
The regulatory impact analyses examined in this study contain virtually no empirical evidence to support the irrationality proposition.
• This proposition ignores the fact that consumers and firms purchase products based on a number of factors—only one of which is energy efficiency.
• Government agencies exhibit a parochial bias by ignoring all product attributes other than energy efficiency.
The seen and the unseen: electric cars – where does the electricity come from?
02 Aug 2014 Leave a comment
The poor carbon footprint of wind and solar
01 Aug 2014 Leave a comment
in economics of climate change, energy economics, environmental economics, environmentalism, global warming Tags: bootleggers and baptists, global warming, green rent seeking, solar power, wind power
Paul Joskow pointed out that these costs do not take account of the costs of intermittency: wind power is not generated on a calm day, nor solar power at night. Conventional power plants must be kept on standby. Electricity demand also varies during the day in ways that the supply from wind and solar generation may not match.
HT: The Economist via Sinclair Davidson
W.S. Jevons and peak coal
24 Jun 2014 Leave a comment
in energy economics Tags: peak coal, peak oil, pessimism bias, W. S. Jevons
HT: The Oildrum
In The Coal Question from 1865, William Stanley Jevons examined for how long British prosperity could rely on cheap supplies of coal. His estimate was that within a hundred years, or perhaps one or two generations, coal production would decline due to increases in the cost of mining.
Given that coal was a non-renewable energy resource, Jevons raised the question
Are we wise in allowing the commerce of this country to rise beyond the point at which we can long maintain it?
His central thesis was that the UK’s economic prosperity was transitory given the finite nature of its primary energy resource, which was coal.
I must point out the painful fact that such a rate of growth will before long render our consumption of coal comparable with the total supply. In the increasing depth and difficulty of coal mining we shall meet that vague, but inevitable boundary that will stop our progress.
Although British coal production peaked in 1913, plainly Jevons got peak coal wrong in terms of limiting economic growth and this Industrial Revolution.
Jevons failed to appreciate that as the price of an energy source rises, entrepreneurs have a growing incentive to invent, develop, and produce alternatives, use coal more efficiently and develop technologies that cut the cost of discovering and mining resources.
W. S. Jevons (1865) on Wind power — MasterResource
20 Jun 2014 Leave a comment
in energy economics Tags: W. S. Jevons, wind power
1) wind power is not new.
2) wind power is intermittent and unsuitable for modern work:
The first great requisite of motive power is, that it shall be wholly at our command, to be exerted when, and where, and in what degree we desire. The wind, for instance, as a direct motive power, is wholly inapplicable to a system of machine labour, for during a calm season the whole business of the country would be thrown out of gear (p. 122).
3) wind power is land constrained:
No possible concentration of windmills … would supply the force required in large factories or iron works. An ordinary windmill has the power of about thirty-four men, or at most seven horses. Many ordinary factories would therefore require ten windmills to drive them, and the great Dowlais Ironworks, employing a total engine power of 7,308 horses, would require no less than 1,000 large windmills! (p. 123)
4) wind power for transportation did not work:
Richard Lovell Edgeworth spent forty years’ labour in trying to bring wind carriages into use. But no ingenuity could prevent [wind carriages] from being uncertain; and their rapidity with a strong breeze was such, that … ‘they seemed to fly, rather than roll along the ground.’ Such rapidity not under full control must be in the highest degree dangerous (p. 126).
via W. S. Jevons (1865) on Windpower (Memo to Obama, Part I) — MasterResource.
The share market speaks on renewable energy
19 Jun 2014 Leave a comment
in applied price theory, energy economics, financial economics Tags: Bjørn Lomborg, event studies, renewable energy
The Peak Whale Oil Theory | Coyote Blog
18 Jun 2014 Leave a comment
in energy economics, entrepreneurship, environmental economics Tags: peak oil
As the US Population reaches toward the astronomical total of 40 million persons, we are reaching the limits of the number of people this earth can support. If one were to extrapolate current population growth rates, this country in a hundred years could have over 250 million people in it! Now of course, that figure is impossible – the farmland of this country couldn’t possibly support even half this number. But it is interesting to consider the environmental consequences.
Take the issue of transportation. Currently there are over 11 million horses in this country, the feeding and care of which constitute a significant part of our economy. A population of 250 million would imply the need for nearly 70 million horses in this country, and this is even before one considers the fact that “horse intensity”, or the average number of horses per family, has been increasing steadily over the last several decades.
It is not unreasonable, therefore, to assume that so many people might need 100 million horses to fulfil all their transportation needs. There is just no way this admittedly bountiful nation could support 100 million horses. The disposal of their manure alone would create an environmental problem of unprecedented magnitude.
Or, take the case of illuminant. As the population grows, the demand for illuminant should grow at least as quickly. However, whale catches and therefore whale oil supply has levelled off of late, such that many are talking about the “peak whale” phenomena, which refers to the theory that whale oil production may have already passed its peak. 250 million people would use up the entire supply of the world’s whales four or five times over, leaving none for poorer nations of the world.
The real beauty of this free-market price system is that it brings about its own kind of sustainability
17 Jun 2014 Leave a comment
in energy economics, entrepreneurship, environmental economics Tags: peak oil
This is not so much sustainability in the use of particular resources — for particular goods fall in and out of favour according to supply and demand factors — but sustainability of high economic growth and high standards of living in the economically developed, capitalist economies.
Take, as an example, the transition in the market for interior illumination: tallow candles were replaced by whale-oil lamps, which were replaced by kerosene lamps, which were replaced by incandescent bulbs powered by electricity.
There was no social or political pressure needed to accomplish this evolution; there was no “peak whale oil” movement, no kerosene conservationists, no sustainability crusade of yore. All it took was a functional price system, combined with the ever-present entrepreneurial drive for profits under a competitive, free-market order.
Peak oil versus global warming
16 Jun 2014 Leave a comment
in economics of climate change, energy economics, environmental economics, global warming Tags: global warming, peak oil
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The environmental movement manages to believe in both peak oil – oil will run out in the next two decades or so – and global warming based on runaway carbon emissions for the rest of the century burning the increasingly expensive and increasingly scarce crude oil that had ran out a long time ago previously.
Global warming will solve itself as long as we are willing to accept that the environmental movement is genuine in its predictions about peak oil.
The ideal green share market portfolio would be made up of shares in green energy companies and futures contracts in the natural resources sector to take advantage of peak oil.
Utopia, you are standing in it! 
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