The Peak Whale Oil Theory | Coyote Blog

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.

via The Peak Whale Theory | Coyote Blog.

The real beauty of this free-market price system is that it brings about its own kind of sustainability

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.

Tyler A. Watts

The NSA has its uses

Image

Cancelling a digital subscription to The Australian is a complicated process

I had to call Sydney from New Zealand via telephone to cancel my online subscription.

Their online My Account has no cancel button nor any instructions on how to cancel the account.

When you try and send them a message through their online enquiry form, they tell you to phone number in Sydney.

Got that off my chest now.

Why governments cannot pick winners

The salary of one top hedge fund manager exceeds the entire payroll of any of the government departments in New Zealand.

To get on the list of top 25 hedge fund manager you must earn at least $300 million a year. The best of these earned $3 billion last year.

Anyone who was any good at picking the share market would certainly not accept government wages.

Government employees have neither the aptitude nor the taste for risk that betting it all every day and losing everything perhaps requires.

The market process picks unusual winners

What World Bank consultant would risk his fee and return business on advising Egypt to specialise in the export of toilets to Italy? But Egypt’s largest single manufacturing export is toilets to Italy where it captured 93% of the market.

Kenya has a booming export business in cut flowers for men to buy for their wives. Kenya has 40% of the European markets for cut flowers. Nigeria has 84% of the Norwegian market for floating docks. The Philippines has 71% of the global market for electronic integrated circuits.

What development expert would have picked these winners? They’re far too far away from the conventional wisdom and the safe bets that are behind picking winners in government circles.

Picking winners by governments requires heroic assumptions not only about the information politicians and bureaucrats have about the present and their ability to predict the future, but also about their motivations and their ability to resist capture by special interests. The Economist explains:

None of these studies addresses a deeper problem with the way industrial policy tends to develop over time.

Earlier efforts have tended to degenerate into rent-seeking, lobbying and cosy deals between incumbent firms and bureaucrats, stifling innovation and the process of creative destruction.

The problem, of course, is that … industrial policy requires disinterested, benevolent policymakers who can do it well. Unfortunately, they do not yet have a recipe for how such policymakers can be created.

Policy is made by real people with political and personal motivations. What they come up with is unlikely to be as well designed as the ones in the models.

The Social Possibilities of Economic Chivalry (1907)

Alfred Marshall.jpg

A Government could print a good edition of Shakespeare’s works, but it could not get them written…

I am not urging that municipalities should avoid all such undertakings without exception. For, indeed, when a large use of rights of way, especially in public streets, is necessary, it is doubtless generally best to retain the ownership, if not also the management, of the inevitable monopoly in public hands.

I am only urging that every new extension of Governmental work in branches of production which need ceaseless creation and initiative is to be regarded as prima facie anti-social, because it retards the growth of that knowledge and those ideas which are incomparably the most important form of collective wealth.

The mismeasurement of prosperity

The average quality of goods: new goods and improved versions of older goods can provide variety and entirely new products and services previously unavailable at any price.

Measurement of the impact of new goods is ‘pretty much guesswork at present’ and ‘some very large gains in consumer welfare’ may be missed (Moulton 1996, p. 173).

An important bias affecting the measurement of prosperity is greater longevity.


The life expectancy of males at birth improved by 5.9 years between 1970-72 and 1995-97, and by another 3.6 years by 2005-2007 (Statistics New Zealand 2009a). Life expectancy of males at birth increased by a mere 1.3 years from 1950-52 to 1970-72!

Becker et al. (2005) estimated that the six year increase in New Zealand life expectancy between 1965 and 1995 amplified the 34.3 per cent increase in New Zealand GDP per capita to the income equivalent of a 47.3 per cent rise. Becker et al. (2005) estimated that the 73.5 per cent rise in Australian GDP per capita between 1965 and 1995 was enhanced to 95.5 per cent after adjustment for the seven year increase in life expectancy.

Reality television programmes are common-place using the large differences in even 20th century living standards as their theme. The latest niche targeting younger audiences is programmes about the technological backwardness of the 1970s and even the 1980s.

Is Thomas Piketty a double secret supply-side economist?

When a government taxes a certain level of income or inheritance at a rate of 70 or 80 percent, the primary goal is obviously not to raise additional revenue (because these very high brackets never yield much).

It is rather to put an end to such incomes and large estates, which lawmakers have for one reason or another come to regard as socially unacceptable and economically unproductive…

Piketty: A Wealth of Misconceptions by Don Boudreaux

Piketty’s method of doing economics involves frequent grand proclamations about "social justice" and economic "evolutions," but he offers no analyses of the dynamics of individual decision-making, often referred to as "microeconomics," that should be central to the issues he raises…

Revealingly, Piketty writes of income and wealth as being claimed or "distributed," never as being earned or produced. The resulting statistics are too aggregated—too big-picture—to reveal what is happening to individuals on the ground…

He imagines that such aggregates interact in robotic fashion through a logic of their own, unmoved by individual human initiative, creativity, or choice…

If we follow the advice of Adam Smith and examine people’s ability to consume, we discover that nearly everyone in market economies is growing richer…

THE U.S. IS THE bête noir of Piketty and other progressives obsessed with monetary inequality.

But middle-class Americans take for granted their air-conditioned homes, cars, and workplaces—along with their smartphones, safe air travel, and pills for ailments ranging from hypertension to erectile dysfunction…

At the end of World War II, when monetary income and wealth inequalities were narrower than they’ve been at any time in the past century, these goods and services were either available to no one or affordable only by the very rich.

So regardless of how many more dollars today’s plutocrats have accumulated and stashed into their portfolios, the elite’s accumulation of riches has not prevented the living standards of ordinary people from rising spectacularly…

Piketty’s disregard for basic economic reasoning blinds him to the all-important market forces at work on the ground—market forces that, if left unencumbered by government, produce growing prosperity for all. Yet, he would happily encumber these forces with confiscatory taxes.

via Piketty: A Wealth of Misconceptions – Barron’s.

Olympic Happiness: Better to win Bronze than Silver Medals?

Olympic Happiness: Better to win Bronze than Silver Medals? | Psychology Today.

The bronze winner is happy as Larry looking at all those losers that won nothing.

medals

The silver medal winners came second. At least they know that their mum will remember their great day when they almost made it. A 1924 silver medal winner was still brooding about it in his 80s.

Warren Buffett: I Build Wind Turbines To Lower My Taxes

“I will do anything that is basically covered by the law to reduce Berkshire’s tax rate,” Buffett told an audience in Omaha, Nebraska this weekend. “For example, on wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”

Warren Buffett, co-chair of the 10,000 Small Businesses Advisory Council, takes part in a panel discussion following a news conference announcing a $20 million partnership to bring Goldman Sachs

Buffett has invested billions into wind power to get federal subsidies.

via Warren Buffett: I Build Wind Turbines To Lower My Taxes | The Daily Caller.

The next time you make an allegation of price fixing

Remember this, firms are only likely to collude in certain market environments.

Brozen and Posner suggest the following pre-conditions to collusion

  • market concentration on the supply side;
  • no fringe of small sellers;
  • high transport costs from neighbouring markets;
  • small variations in production costs between firms;
  • readily available information on prices;
  • inelastic demand at the competitive price;
  • low pre-collusion industry profits;
  • long lags on new entry;
  • many buyers (otherwise selective discounting to big buyers will be too tempting while monitoring adherence to the agreement will be difficult);
  • no significant product differentiation;
  • large suppliers selling at the same level in the distribution chain;
  • a simple price, credit and distribution structure;
  • price competition is more important than other forms of competition;
  • demand is static or declining over time; and
  • stagnant technological innovation and product redesign.

Stable collusive arrangements are thus likely to be rare; the absence of any of the conditions will tend to undermine the potential for successful collusion.

Super-Economy “pre-reviewed ” Piketty in 2010

The French are poorer that the 3rd poorest American state: Arkansas. The EU-15 as a whole would qualify to be the 49th poorest American state.

The rich in Europe are poor by American standards. The poor in the USA are middle class by European standards. The European middle class has smaller houses, few cars and few consumers durables that the average poor in the USA.

via Super-Economy: Dynamic America, Poor Europe  and Tino Sanandaji

Housing space per capita

via Heritage Foundation

Media conspiracies versus cartel theory

Media conspiracy theories suggest someone is in control; that dark, all-powerful cabals of men in cultish robes control the world. The truth is no one is in control. What about 57 channels, nothing on!

Newspapers, TV and cable, are not a monopoly. A monopoly is a single seller of as product with a legal right to bar new entry. It is an exclusive right to sell something.

At best, newspapers, TV and cable, are a large and unwieldy cartel under pressure from costs and new entry. The Internet makes electronic news competition global.

There are many different Australian news outlets and media types, three national networks, plus many cable news networks and 9 media owners. That is more than enough to destabilise any cartel.

Why is the mass media special? A supply-side model of media ownership suggesting that media outlets weigh the rewards of bias—political influence or personal pleasure—against the cost of bias—lost circulation from providing faulty news.

The mass media is a big business, and they increase readership and revenue by presenting factual and informative news.

The most likely to turn-off are women, and women vote to the Left more often than do men. The media is perhaps pandering to this centre-left marginal buyer.

A news cartel is like any other cartel. All cartels break-down and only some get back together.

Cartels contain seeds of their own destruction. Cartel members are reducing their output below their existing potential production capacity, and once the market price increases, each member of the cartel has the capacity to raise output relatively easily.

All cartels must decide how to allocate the reduction of output that follows the price increases across members with different costs structures and spare capacity.:

  • The tendency is for cartel members to cheat on their production quotas, increasing supply to meet market demand and lowering their price.
  • Most cartel agreements are unstable and at the slightest incentive they will quickly disband, and returning the market to competitive conditions.

One sign of a cartel that was developed by Aaron Director is periods of stable prices, despite cost fluctuations, followed by sudden price changes when the cartel collapses or decide to increase prices.

For a news cartel, this means toeing the line and then periods of truth, and then a sudden return to the party line when the cartel starts-up again.

The exercise of collective market power will not be stable unless sellers agree on prices and production shares; on how to divide the profits; on how to enforce the agreement; on how to deal with cheating; and on how to prevent new entry.

A cartel is in the unenviable position of having to satisfy everyone, for one dissatisfied producer can bring about the feared price competition and the disintegration of the cartel.

Thus a successful cartel must follow a policy of continual compromise. Little wonder that John. S McGee wrote that:

The history of cartels is the history of double crossing

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