Category: Economics

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The crowd in West Side Park at the Occupy CU rally

I came out of college almost debt-free, because my parents paid for my education.

I got a job writing software. It was exactly what I wanted to do—the only thing I wanted to do as much as writing prose. I remember being glad that my manager didn’t know that I’d have worked for free, just to get access to the computers. (In 1981, computers were still expensive.)

I started my career right at the moment when software started to became important everywhere. Even though my degree was in economics, I had no trouble finding software jobs.

I got raises, because software went on becoming more important. Even when the companies I worked for fell on bad times, I found a new job without difficulty.

I saw things changing. After about 1990, jobs went away a lot quicker, and when they went away, they didn’t come back.

I was still okay, because software was still important.

I realized that software wasn’t going to remain special. I realized that millions of people around the world could write software just as well as I could. I realized that the ones in China and India could live a middle-class life on one-tenth the money I was earning. I realized that I couldn’t compete with them on price.

I figured I was safe for a while, but only because there were so many managers who were sure that an employee he couldn’t see working probably wasn’t working. But that wouldn’t last. Managers would adapt. And managers who couldn’t adapt would lose their jobs.

I started saving money. I could see that I wasn’t saving it fast enough, so I started living more frugally. That was a double win: Spending less left more money to save, and it also provided me with an existence proof that I could live on less.

I lost my job when Motorola closed its Champaign facility in August of 2007. By then, I had saved and invested a lot of money. Not enough to retire in any ordinary sense, but enough that I figured I could get by without a regular job.

I am a writer now. It’s exactly what I want to do.

I am very lucky. That’s not unusual; there are a lot of lucky people. What’s a little unusual is that I know just how lucky I’ve been.

I am the 99%.

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Ever since copying and storing bits became virtually free, there’s been a lot discussion about various ways “content creators” (writers, artists, musicians, etc.) might earn a living: per-copy sales, advertising, patronage, etc.

Felix Salmon’s recent piece on How the New Yorker monetizes old content is an interesting contribution to the discussion.

Apparently, the New Yorker is producing ebooks, drawing from their vast library of articles by great writers. The ebooks are paid for by a corporate sponsor, and then made available free to electronic subscribers and cheap to non-subscribers.

Now, on the one hand, having content paid for by selling advertising to sponsors is one of the standard models. But this is a little different. The things are cheap to produce (no printing costs) and cheap to market (free to subscribers, making them more willing to pay for their subscription). The New Yorker only needs to find one corporate sponsor—presumably a small task, compared to the regular job of their sales department.

I wouldn’t be surprised to see the model spread into speculative fiction. I can definitely see sf&f magazines finding sponsors willing to cover most of the cost of editing and the acquisition of reprint rights (all pretty cheap). Making the anthology ebooks free to the subscribers of their electronic editions would make the subscriptions more valuable, and making them available cheap for non-subscribers would be great advertising for both the magazine and the sponsor.

I’m always glad to see any new source of money for writers, and any new channel for getting old stories in front of new readers.

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There’s a whole genre of collapse-oriented investment writing. I’m something of a connoisseur of the form. But one really needs to treat that sort of literature as pornography—interesting to read, if you’re into that sort of thing, but almost nothing in it is stuff you’d actually want to do.

There are two ways most collapse writers go wrong. One is to assume that keen insight into the nature of the problems we face will allow one to make a bunch of smart investment moves in advance—as if there were some advantage to being the richest guy standing in a post-apocalyptic world.

In his recent post Where Should I Put My Money Before Things Collapse? John Robb avoids that trap pretty well. He understands that the systemic nature of the problem makes attempts to align your investments with the underlying trends pointless:

Looking for a safe asset class today, is like a Soviet bureaucrat in 1989, sensing trouble ahead, looking for the directorate with the safest job.

The other is to assume that there will be a collapse event. Those writers seem to suggest that you can spend your time until collapse behaving much as you do now (with some occasional time off to stock your shelter and practice your marksmanship), and then spend the end times hiding out in your shelter. That’s wrong, because there’s no reason to assume that there will be a collapse event. It’s at least as likely that things’ll go on much as they have been, with occasional points where a bunch of people lose their jobs, yet another class of investments suddenly becomes worthless, and various things (such as food or fuel) spike up in price.

John Robb does pretty well avoiding that trap as well. He understands that the only sensible response is to find a lifestyle that works now, and that will continue to work as collapse proceeds.

Just as he indicates, the right responses to problems like peak oil, peak debt, climate change, environmental degradation, habitat loss, and so forth are going to be community-level responses. With that in mind, he’s putting his money into supporting efforts to create that community response and those communities.

Having said all that, four decades of reading collapse literature have convinced me that collapse happens slowly. Very slowly. Slowly enough that we’re going to need to go on investing in ordinary investments for quite some time to come.

It seems like it would make sense to want those investments to be informed by the societal problems that we face, but my experience has been that an understanding of the sources of impending collapse doesn’t lead to useful investment insights.

There are a lot of reasons. First, as I said, collapse happens slowly, meaning that shorter-term trends will end up dominating. Second, a lot of governmental power will be brought to bear in support of pre-collapse norms, meaning the sort of large profits that might be produced if your investments do align with the large trends are prone to being seized or taxed away. Third, the situation is intractably complex, meaning that even a clear understanding of several of the problems may yield predictions that end up being trumped by other problems—no one can say whether peak debt or peak oil will influence the course of the economy more strongly or more suddenly.

The upshot is that investing for collapse is as pointless as Robb points out; I merely disagree with his analogy. Rather than being like a Soviet bureaucrat in 1989, I figure it’s more like being CEO of a department store chain in 1969. There are still opportunities to get ahead following the old arrangements, but all the most powerful forces of society, human nature, and nature itself are arrayed against you. You’d be much better off charting an entirely new course—and Robb’s suggestions are good ones.

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I’ve already shared this on Google Reader (you can follow my shared items if you’re interested), but I wanted to blog it as well.

The always-interesting Dmitry Orlov is interviewed by Lindsay Curren in Transition Voice. As usual, Orlov is funny, but here he’s hitting on a lot of the same points that I like to hit on—that is, the points that I think are important—and is saying some really interesting stuff:

There’s this iron triangle of House-Car-Job, and the entire landscape is structured so you have to have all three or your life falls apart. People have to be creative in escaping from there.

He has a bit of advice (that I’m living right now): Retire immediately.

. . . make what ever adjustments are needed considering that you’re not going to have much of an income. Have a little bit of an income. But get rid of the mortgage, obviously. Get rid of the car.

He suggests that you shirk off for a couple of years and see where that takes you, then go back to work and earn enough to support the kind of lifestyle that you’ve already adjusted to.

A lot of people have, of necessity, already done this. But a lot have taken the opposite tack: they have abandoned any hope of every retiring. With their retirement savings destroyed and their kids unable to support themselves, they’re figuring that they’re going to have to keep working for years—maybe a decade or more—past what used to be retirement age. But that’s a crappy strategy. (For many reasons, but especially because it may well not be possible. There’s a good chance that your job will go away, even if it seems secure now. And there’s a good chance that your health won’t allow you to maintain your current pace, even if it’s holding up pretty well so far.) Orlov’s suggestion is a much better idea.

Check out the whole interview: No shirt, no shoes, no problem.

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Jackie and I went to the Forest Glen Preserve, a nature preserve in eastern Illinois, over near the Indiana border.

We scouted the campgrounds, because the local Esperanto group is planning to some tendumado. We found two, although there’s at least one more.

One is a pretty ordinary Midwestern campground with a mixture of tents and RVs. It was pretty full, but only as crowded as you’d expect on Saturday morning of Memorial Day weekend. It had showers and flush toilets, firewood on sale, etc.

Near that one (but far enough away that noise wouldn’t be a problem) was the “tent campground.” It was different in that it didn’t have parking spaces for the campsites. There was an area just a few yards away where you could leave your car for up to 20 minutes to unload, and then you were supposed to move it to a parking area that was still really quite close—I’ve carried my luggage further in a hotel. Still, it seemed to be enough to discourage campers. Even Memorial Day weekend, there was nobody there—sixteen vacant campsites. (It did lack flush toilets. Also, the recent rain had left some of the campsites under water, although the dry sites were also vacant.)

Once we’d scouted the campgrounds, we went for a hike. We picked the Big Woods trail, which a posted list had described as the most rugged of the preserve’s trails. We took that with a grain of salt. Here in the flatland, pretty much any change in elevation seems to qualify a trail as rugged,  but it was somewhat rugged. The train went down twice into ravines, then back up again, and ended at an observation tower at what I assume is the high point of the preserve.

We saw plenty of neat stuff—sugar maples and tulip trees, white oak, sassafras, ferns, various kinds of mushrooms. (I saw what might be the tallest sassafras tree I’ve ever seen. It was huge. I usually think of sassafras as being scrubby little things.)

The trail was muddy, but only very muddy in a few places (plus, of course, the places where it crossed running water). We ran into three very wet, dirty guys with tools who said they’d been doing trail maintenance.

The trail was only a little more than 1 mile, but out-and-back so we got in maybe 2 ¼ miles of hiking.

We left it at just that much hiking, because we still needed to go to the Viking Reenactment, which was the reason that we were visiting Forest Glen this weekend in particular.

Two of the reenactors seemed to focus on fiber crafts. One is a member of the spinners and weavers guild, and was using some of Jackie’s handspun yarn to demonstrate weaving with a warp-weighted loom. We had a fun chat.

The other fiber-crafty person told us about her theory of mud-colored peasants. Many reenactors, she said, end up with clothing in colors of sheep, because dyeing fabric is another whole skill that you need to learn—and making your own natural dyes is two or three more skills (growing or gathering dye plants, and learning how to prepare them for dye use). However, in her experience meeting actual modern-day poor peasants, even the really poor ones go to considerable effort to not be the color of mud. Hence, she proposed, actual Viking-era villagers probably wore clothing that was as brightly colored as possible, within the limits of the natural dyes that were available to them. (They had several sources of yellow, yellowish green, red, and purplish red. Blue was available. A really good green was tricky, because you had to get a good yellow and then overdye with blue.)

Despite her theories, all the other reenactors seemed to be wearing clothing in natural colors.

What with scouting and hiking and viking, it was already lunch time. We had lunch at Gross’ Burgers, then headed home (pausing just a bit at a rest stop to let a severe thunderstorm pass).

A good outing.

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independent Media Center
Independent Media Center in Urbana

Jackie and I spent Saturday morning at the Maker Fair at the Independent Media Center in downtown Urbana.

I’m late to the Maker movement. Being very much not handy, I’ve always avoided making things. It’s part of the reason that both writing and software have always appealed to me—you don’t have to actually make anything.

Gradually, though, I’ve been coming around.

For one thing, I’ve come to appreciate two ideas: Getting help, and starting by learning the narrowest possible skill set (which can then be expanded if you enjoy the activity).

Me wearing the scarf I wove
Me wearing the scarf I wove (photo by Jackie Brewer)

For example, a couple of years ago, I wove a scarf. I say I wove it, and that’s technically true: I did all the weaving. However, I had quite a bit of help with the other parts. In particular, Jackie wound the warp and put it on the loom. (I came up with the design myself, based on some scarves that we saw for sale that were surprisingly inexpensive for handwoven. The key to the modest price was that they used fuzzy yarn set very wide—about 4 threads per inch. That meant that it both used less yarn and took less time.)

If I’d had to wind my own warp and put it on the loom myself, I doubt if I’d have made it. I’d have had to learn three new skills, and I’d have had to execute all three without making any unrecoverable errors. Instead I got gentle introductions to two of those skills, and actually learned the third. And I made a scarf.

The Maker Fair was great. There’s all kinds of cool stuff going on in Champaign-Urbana. We had great fun talking with Jonathan Manton who was making paper polyhedrons using Inkscape images of the flat shapes of the faces, software he’d written that added tabs and slots, and then a digitally controlled paper cutter to cut out the shapes. He called the whole thing the Large Hedron Collider.

One of the most interesting things that I hadn’t been aware of is the FabLab, a community facility sponsored by the University (and many other organizations) that has various fabrication devices—computer-controlled cutters, routers, engravers—available for use by members of the community. We’re definitely going to spend some time there.

Brian Duggan (one of the organizers, and a guy I know from work) told me that there was a group there working on deploying a meshing networking system, an important technology for protecting our rights. (See my recent post on whether civil unrest would threaten our network connectivity).

Lots of other cool stuff: model rockets, zines, art, music, etc. I’m going to have to get more involved with all this. In particular, I’m planning to start going on Thursday evenings to get involved with the meshing networks project.

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People are bad at comparing risks, and people like to point this out by making comparisons to risks that people tolerate on a daily basis. For example, pointing out that many more people die in car accidents than are killed by terrorists, or pointing out that providing electricity by burning coal kills and injures more people than providing electricity by fissioning uranium.

At one level, I find these arguments compelling. I find it preposterous that we spend so much money on homeland security. That money would be much better spent (in terms of lives saved per dollar) on traffic safety, or probably a lot of other things. I gather, based on the fact that people keep pointing this out without producing any visible change in funding priorities, that most people don’t find this a compelling argument.

I’ve always wondered about that, and perhaps I’ve figured out why in the “coal versus nuclear” argument, which I don’t find compelling.

Plenty of people die to provide us with power from coal. Miners die from accidents. People die in road accidents moving coal from the mine to the power plant. Workers die in ordinary industrial accidents at power plants. People die from respiratory problems caused by or exacerbated by pollution from burning coal. People die in severe weather—which is becoming more common, probably because of global warming.

Except for that last, this is our baseline status. We know the costs and risks, and we accept them. Some people work to improve things—better mine safety, better level crossings for trains, lower emissions from coal burning—but the baseline is accepted. Importantly, an individual can do a lot to reduce his or her risk, such as by not making a career in coal mining, by exercising due care at rail crossings, and by living some place with clean air (and not smoking).

With nuclear power, things are different. The baseline status is safer. Deaths in uranium mining are very small, because the volume of uranium ore needed is so small compared to the volume of coal. Deaths from industrial accidents are small, because the number of workers is small (and, perhaps, because some additional attention is paid to safety at a nuclear plant for reasons having to do with greater regulation and particular concerns about public perceptions of safety). Deaths caused by the release of radiation are very, very small, because we go to vast effort and expense to avoid them.

But although the baseline status is relatively safe, the contingent risks are huge. The problems that led to the catastrophe we’re seeing now at the Fukushima Daiichi plants are replicated all over the world. It’s not just plants built on fault lines and plants built places where tsunamis can occur. It’s things like redundant safety systems that aren’t really redundant. Most especially, it’s committing to providing active safety over a period that’s much longer than human institutions reliably persist.

On the former issue, I have an oddly relevant memory. As a boy I attended public hearings in Kalamazoo on the licensing of the nuclear power plant at Palisades. At one hearing, a lawyer opposing licensing pointed out that a line carrying backup power for the plant ran through the same conduit as a line carrying the regular power. In some clever showmanship, he snapped a pencil in two to illustrate the fact that this produced a common point of failure. Learning that the backup generators at Fukushima were in basements where they would be lost in a tsunami produced an odd echo of that memory.

The latter issue is really more to the point. We are relying on corporations to actively manage the safety of these plants and the spent fuel—corporations that will cease to exist if the cost of this management burden ever grows to the point that it consumes the corporation’s profits.

I think the degree to which these safety issues needed to be actively managed has surprised a lot of people. I’ve many times heard people suggest that managing nuclear waste was no big deal—just put the stuff in a concrete vault and put a fence around it with signs saying “If you come in here you’ll probably die.” I always knew that was dumb, but I was mostly worried about people deliberately coming in to use the waste to make dirty bombs and the like. I didn’t quite realize to what an extent the spent fuel rods depended on a whole complex system of cooling equipment to keep them from bursting into flame and spreading radioactive smoke and steam wherever the wind blew.

So that, I think, is why we accept coal power and think of nuclear as dangerous. We could give up coal power anytime we, as a society, decided that the cost was too high. If we were willing to cut way back on air conditioning, electric lighting, and all the other things we run with electricity, we could just quit the whole thing. The only dangers left behind would be some moderately dangerous holes in the ground, some toxic heaps of ash, and the pollutants that are already in the air. With nuclear power that’s very much not true. We could give up nuclear power today and we’d be on the hook for decades of active management of the high-level waste and generations of (mostly passive) management of the low-level waste.

I think maybe the issue with risks from terrorism is the same. People know what the trade-offs are for driving. If we, as a society, decided to give up driving, we could cut deaths from road accidents almost to zero. But terrorism isn’t like that. There’s nothing we could give up to prevent terrorism, and the contingent risks are huge. An endless stream of terrorist acts that killed tens, hundreds, or thousands of people seems very different from the many other activities that we engage in that cost tens, hundreds, or thousands of lives.

It’s a bummer about nuclear power, though. It would be cool if a network of high-speed electric trains could provide transportation in a post-peak oil world, and I’d begun to think it might be a reasonable alternative. A mere twenty-five years with no major nuclear accidents was enough to make nuclear power start seeming pretty safe again. This is a good reminder that it really isn’t—and that we need to think carefully about the difference between accepting risks for ourselves now, and accepting risks for everyone stretching off into the future.

[Update 2011-03-23: There’s a lot of  misinformation about whether very low doses of radiation are harmful. Here’s a paper with a survey of what we actually know about the effects of low doses of ionizing radiation (from the Proceedings of the National Academy of Sciences).]

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In 2008 I posted Ron’s paper on Peak Debt. He recently extended his work, in a new paper called Peak Debt and Income.

Once again, I’ve got a piece up at Wise Bread that provides an overview of paper:

Laszewski creates a simple model of the economy as a tool for investigating the question of how to get household balance sheets back in order after suffering the problems diagnosed in the earlier Peak Debt paper…

Really, though, you ought to read the paper. (The math in this one isn’t as tricky as the math in the original Peak Debt paper.)

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Fabric on loom

 

 

[This article originally appeared as a guest post on Self Reliance Exchange, but that site no longer exists and the successor site doesn’t seem to be using my post. Rather than just let the article disappear, I figured I’d post it here.]

Fabric on loom
Fabric on Loom

There’s a reason we don’t see more self-sufficiency: It’s not frugal. It almost always takes more time to make something than it takes to earn enough money to buy one—and that’s without even considering the time it takes to learn the skills (let alone the cost of tools and materials). On the other hand, frugality is a powerful enabler for self-sufficiency. So, how do you find the sweet spot?

My wife spins and weaves. I have a beautiful sweater that she hand knit from hand spun yarn. It’s wonderful—and it’s comforting to know that my household is not only self-sufficient in woolens, we produce a surplus that we can sell or trade. But the fact is you can buy a perfectly good sweater at Wal-Mart for less than the cost of the yarn to knit it.

If you try to be genuinely self-sufficient—in the sense of producing through your own labor everything your household uses, like a hunter-gatherer or a subsistence farmer—you’re going to be poor. Your neighbor who works at a job for wages or a salary is going to be better off by almost every measure.

Oh, his factory-made microwave meals won’t be as good as home-cooked food from your garden and his furniture from Ikea won’t be as good as what you make in your wood shop. But he’ll have so much more! In the time it takes you just to build a kiln he’ll earn enough money to buy a thirty piece set of Corelle ware. Unless he’s only making minimum wage, he’ll probably have enough left over to buy an iPod—and you’ll never be able to make your own iPod from sand and vegetable oil.

That’s why we have trade. If everybody specializes in one or a few things, and then trades with others for what they need, everybody can be better off. It raises your standard of living, but it means that you can’t be self-sufficient.

There are still many reasons to do for yourself. You can make exactly what you want, instead of having to make do with whatever happens to be available on the market. You can use superior materials, and take them from the environment in a sustainable manner. You don’t have to worry that the stuff you use was made in a sweatshop by children or prisoners or slaves. You aren’t dependent on the continued smooth functioning of the vast global economy. But you can’t be self-sufficient in very many things—even if you had the skills and the tools and the land, you’d quickly run out of time.

So, we find ourselves trying to figure out where we belong on the continuum between actual self-sufficiency and ordinary self-reliance. How do you find the sweet spot? Here are my thoughts:

  1. Focus on necessities. It’s a lot more important to be self-sufficient in food, clothing, and housing than it is to be self-sufficient in tennis rackets and rollerblades.
  2. Focus on capabilities. Instead of trying to fill your pantry by hunting and fishing, do enough to maintain and improve your skills—and then start developing your next capability.
  3. Focus on what’s practical. It’s really hard to be self-sufficient in window glass and impossible to be self-sufficient in digital watches. Don’t waste your time.

Start with the few things where homemade actually is cheaper, like gardening. Then move on to things that can be done as a hobby—and that you’d enjoy doing as a hobby. Don’t let point above (necessities) keep you from developing self-sufficiency in something that’s fun and interesting just because it’s not important. It may not be important to be self-sufficient in beer, but the equipment is cheap, brewing is a pretty easy skill to acquire, and the result is better than what you can buy.

Finally, remember that there’s a vast range between being “self” sufficient and being dependent on a global supply chain. It’s almost as good as self-sufficiency to source things from your neighbors. Short of that, it’s still an improvement to source things closer rather than farther—your home town, your region, your state, your country.

Once you set your priorities, don’t hesitate to go with the cheapest option for things that don’t make the cut.  That frees up money that you can use on the important underpinnings of self-sufficiency—things like land and tools in particular, but also things like books, training classes, materials to practice with, and so on.

Then you’re in your sweet spot.

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As someone who’s written quite a bit about what’s a decent standard of living, I was intrigued by the post on the growing global middle class that Tobias Buckell just linked to in his post the exploding middle class to come. Toby includes a graph from the source article that shows a rapidly shrinking population of poor people, squeezed by modest growth in the rich combined with surging growth in the middle class.

I quickly clicked through to the source article, to see what their definition of “middle class” was, which turned out to be daily spending of between $10 and $100 per person.

Now, in a sense, that’s pretty reasonable. For a family of two that would multiply out to annual expenses between $7,300 and $73,000. At the low end there’s considerable overlap between “middle class” and “poverty” (the US Census Bureau has $13,991 as the poverty threshold for a family of two), but I think that’s fair: From a global perspective, just barely in poverty in the US probably counts as middle class.

But I know, from my own experience writing about our rising standard of living, that people have very strong feelings about these sorts of things. Would a couple getting by on $14,000 a year in the United States feel middle class? Some would. Some people, especially rural folks living a subsistence lifestyle, feel very strongly that they’re not poor, despite a money income below the official poverty threshold. But I don’t think that will be a typical response.

I wrote an article called “Our High, High Standard of Living,” that made the case that, just like in the 1950s, a working man could still support a family with just one income—as long as they lived at a 1950s standard of living. Full-time work at minimum wage would bring in just over $15,000 a year—not only solidly in “the middle class,” but comfortably above the poverty threshold. And yet, many commenters on that article suggested that it would be utterly impossible to support a family on that income.

My sense is that it would only be possible to live a middle-class lifestyle on $14,000 to $15,000 per year under very specific (very lucky) circumstances. At a minimum, you’d have to live in an inexpensive part of the country and you’d have to find unusually cheap housing close enough to where you worked that you wouldn’t need a car. You’d also have to be young and healthy. (My wife and I would qualify as part of the global middle class just on our health insurance spending. But if we had no money for food or a place to live, we wouldn’t feel very prosperous.)

I think this order-of-magnitude spending range for “the middle class” is also at the heart of Toby’s deeper issue—whether or not a rising middle class is good for the planet.

If we see surging growth in households moving out of poverty into the lower end of this range—able to spend $7,000 to $14,000 a year ($10 to $20 per day per person)—we’re likely to see some positive effects. People with that sort of income are in a position to say no to the most pernicious efforts to turn their neighborhoods into dumping grounds for toxic waste, to insist on some level of protection for nearby natural areas, and so on. But if we see surging growth in households moving into the upper reaches of middle class—able to spend $70,000 a year or more—I think we’re in big trouble.

Those people are going to want cars.