Tag: Economics

Posted on
by

In my review of Dmitry Orlov’s book Reinventing Collapse, I talk a bit about how everyone says that the book is funny, but no one ever quotes the funny bits. There’s a reason: The humor sneaks up on you, building on previous bits. All the really funny bits are only funny if you’ve read up to them.

For those of you who want to read something really funny about peak oil, but were unconvinced that such humor was worth shelling out the cost of a book (or taking the time to read it), there is now an alternative: Dmitry Orlov’s latest article at Culture Change, Peak Oil is History.

Once again, it’s tough to quote a sentence or a paragraph that’s funny, but that’s okay: Just click on over and read the article. It’s free, and it’s much shorter than a book.

Whether you’re one of the people who understood peak oil some years ago or one of the people who just figured it out, Orlov wants to make sure that you understand that the reality of life on the declining side of the oil production curve won’t look like the mathematically smooth logistic function that’s usually displayed. Rather, it will look something like the front side of the curve, with spikes and dips that map to wars and recessions and other catastrophes. Further, he wants to make sure that you know those little jerks up and down—especially the jerks down—matter to you.

It would be theoretically possible to ride the downward curve of oil production in a fashion that would look like the reverse of riding it up. In fact, if we’d spent the thirty years since Jimmy Carter warned that our “intolerable dependence on foreign oil threatens our economic independence and the very security of our nation” preparing to do so—improving our rail infrastructure, switching to wind and solar energy, and generally becoming much more efficient—we’d be in a position to do that pretty comfortably.

In practice, though, things are going to suck.

Things will, however, suck rather differently than people expect—which is Orlov’s point. People expect that the rich will go on much as they have, while the poor will get squeezed by high prices—and there will be plenty of that. But after laying out the reasons why it won’t work that way, Orlov concludes by saying, “it becomes difficult to imagine that global oil production could gently waft down from lofty heights in a graceful smooth and continuous curve spanning decades. Rather, the picture that presents itself is one of stepwise declines happening in more and more places, and eventually encompassing the entire planet.” A stepwise decline that quickly results in even rich people having “no access to transportation fuels and severely restricted transportation options.”

Orlov makes doom just about as funny as possible, perhaps even a little funnier.

Posted on
by

Cardiff de Alejo Garcia links to a paper by economists Gianmarco IP Ottaviano and Giovanni Peri that tries to make the case that, because US and foreign-born workers choose different occupations, they’re really not competing for the same jobs. (The paper itself is behind a paywall.)

The main thrust of the argument seems to be this:

Certain jobs get lots of foreign-born workers while others get almost exclusively US workers (tailors 54% foreign-born, crane operators 1% foreign-born). Because of this, more foreign workers won’t increase unemployment, because the foreigners would just be competing with other foreigners for those jobs. Further, more foreign workers won’t even decrease US wages, because even another thousand tailors won’t put any pressure on wages for crane operators.

No doubt my own experience as a software engineer colors my perceptions (computer engineers are 33% foreign-born), but I’m unconvinced.

For one thing, these sorts of pressures occur at the margin. Even a modest number of workers (of any nationality) willing to work for less, will have the effect of holding down wages for everyone else.

For another, there is indirect pressure. Even if a Chinese cook doesn’t compete with a US cook for a job at a diner, another thousand of them will hold down wages for Chinese cooks. That will result in lower costs for Chinese restaurants, which do compete with diners. That puts pressure on diners to hold down their costs—including wages for cooks.

Finally, people’s job and career decisions aren’t static in the face of these pressures. Perhaps few software engineers decided to become lawyers (only 4% foreign-born), but a great number of software engineers have moved on to doing something different. Each one who does so is now competing in that new field, potentially holding down wages over there.

Of course, outsourcing production overseas has had at least as strong an impact on employment and salary levels as immigration has. I’m just glad that I figured out early that I would shortly be competing with someone who could live a middle-class lifestyle on $6000 a year. That gave me a few years to take the necessary steps to arrange my life otherwise.

Posted on
by

I’m as outraged as anyone at the incompetence that led to the Deepwater Horizon oil spill in the gulf: both the slipshod regulation by the government and the incompetence and criminality of BP, Transocean, and Halliburton. I wouldn’t mind one bit if all three companies were broken by cleanup costs, restitution to injured parties, and civil and criminal penalties. But I’m a bit sad to see all the blame being laid at their doorstep.

The fact is, spills like this are an entirely predictable result of consuming 85 million barrels of oil per day. If you consume that much, you have to produce that much. And if you produce that much, you will have accidents. Some of the accidents will kill people. Some will contaminate huge swaths of the ocean.

Sure, BP et al deserve much of the blame. But there’s plenty of blame to go around. A good share of it belongs to every one of us who drives a car, heats their home, or buys anything made out of plastic.

What did you think was going to happen?

Posted on
by
Backyard Chickens
Backyard Chickens
Chickens at Creque Dam Farm in St. Croix

When I was looking for a house a few years ago, I only looked in Urbana. The main reason was that Champaign prohibits residents from keeping chickens, while Urbana allows it. As you can imagine, I was delighted to learn that the topic of legalizing chickens has come before the Champaign City Council.

I know a little about what it’s like to have chickens in the yard, from one summer when my parents got a flock of chicks and raised them up to fryer size. We didn’t keep them for eggs, but they were around for several months, and I was never bothered by noise, smell, or any of the other problems that backyard chickens are supposed to bring.

I’ve had eggs from free-range chickens—real free-range chickens, not the mockery of free-range allowed under USDA regulations. They’re not just better; they’re so much better as to not even be the same thing.

So, I’ve written to my city council representatives:

I was very pleased to see in the local paper that the topic of changing the law to allow Champaign residents to keep chickens has come before the council. I urge you to support this change.

One of the most important changes we need to make Champaign a more sustainable community is to stop viewing the household purely as a center of consumption: it needs to become a center of production as well. Allowing residents to raise chickens is a step in the right direction.

Many communities (including Urbana) allow residents to raise a modest number of chickens in their backyard. With a few sensible restrictions (no roosters, adequate space for each bird), there’s no reason that chickens can’t be kept in an ordinary backyard without adversely impacting neighbors.

I urge you to support such a change in the law.

The picture that illustrates this post was taken at the Virgin Islands Sustainable Farming Institute’s Creque Dam Farm, which I visited in August of 2008 and about which I wrote a piece for Wise Bread: Learn Techniques for Sustainable Living. I’d earlier written a piece for them on backyard chickens called Real Eggs.

Update to add: I got a quick response from Thomas Bruno, one of the at-large city council members. He described the process for getting an item considered by the city council and adds:

Get a science teacher involved or a scout troop and your chances of success will skyrocket.

So, I guess my next step is to get in touch with some of the other people mentioned in the article as pushing for a change in the law, and see if anyone knows a science teacher or a scoutmaster.

Second update: I found and linked to a great article on how to get your town to legalize backyard chickens.

Posted on
by

In his article Saving Yourself [Note: article is now behind a paywall] Daniel Akst buries at the end a particularly good statement of the central point I try to make in my personal finance writing:

Thrift is thus a way to redeem yourself not just from the unsexy bondage of indebtedness but also from subjugation to people and efforts that are meaningless to you, or worse. Debt means staying in a pointless job, failing to support needy people or worthwhile causes, accepting the strings that come with dependence, and gritting your teeth when your boss asks you to do something unethical instead of saying “drop dead”. Ultimately, thrift delivers not just freedom but salvation—which makes it a bargain even Jack Benny could love.

To get there, though, he takes you on a wonderful journey through the American history of thrift, from Jack Benny to the Puritans and back again, with a couple of side trips to Sexyland.

Posted on
by

My Wise Bread post Buy Your Groceries European-Style picked up mentions at both the Discovery Channel’s Planet Green and Lifehacker.

Jason Fitzpatrick had kind words for my post in his piece Shop European-Style for Fresher, Cheaper Food.

Lloyd Alter was especially generous, saying (in a green-living piece subtitled “I thought I was a lonely failure as a frugalista, but I am not“):

I thought we were pretty much along among the frugal living types to do this. However, one of my favourite writers on frugal living, Philip Brewer at Wisebread, agrees…

Thanks guys!

Posted on
by

Two of my Wise Bread posts, The Ethics of Hoarding and Healthy, Frugal Eating, got very kind mentions in the Doctor Oz blog:

Wow. Just a stellar post… Philip Brewer strikes again with a straightforward, no-bull piece on why we gotta suck it up and stop eating expensive crap. Stern, but informative!

I find it surprisingly difficult to extract quotes like that—it seems too much like bragging. I guess that’s why it’s useful to have a publicist.

Posted on
by

This is exactly right:

Subjecting children to daily unpleasantness – in the form of arbitrary rules, dysfunctional socialization, scholastic regimentation, age-segregation, teasing, bullying, verbal abuse, or what have you – in the name of acclimatization to the “real world” simply lowers their standards for the life they will accept.

via The Lazy Faire » Blog Archive » It’s OK to give your kids high standards

The idea that parents should stand aside from protecting their kids—or even go so far as to deliberately do things that are cruel or capricious—to make sure that children learn the various lessons that add up to understanding that “life is tough” or “life isn’t fair” is an insane one. No child, no matter how coddled or protected, is going to fail to confront the sorts of problems that drive those lessons home.

I’ve written on the same topic.  In particular, in Find Work Worth Doing, where I criticize mock work (such as most school work) and go on to say:

I think parents also do their kids no favors when they encourage them to take low-skill, part-time jobs to earn pocket money.  (Sometimes they do so with the explicit motivation that it will teach their kids the value of work!)  Kids will be far ahead of the game if they’re taught how to identify work that’s worth doing, and how to find a job doing that work.

Protecting a child from the hard knocks of life will not prevent your child from learning the truth about the real world. Nothing can.

Posted on
by

Jay Lake gently suggests that just waving your hands and saying “Cross-subsidy” is not a complete answer to the notion of what Amazon thinks its doing, and that’s a fair point. I think Amazon’s real objectives have a lot to do with controlling the marketplace. By selling ebooks below cost they do several things at once; in particular, they make it expensive for anyone else to enter the ebook market for new bestsellers.

If they can establish the one true price for the ebook edition of a new hardback, and keep other booksellers out of the market by selling the books at a loss, they’ll soon be in a position to dictate terms to the publishers in the same way that big-box retailers dictate terms to their suppliers in other markets. (Clearly they were supposing that they were already in that position, else I don’t think the “disappearing buy button” fiasco would have happened. Fortunately, it looks like Amazon pushed too hard too early.)

I think the result of an Amazon victory would have been very similar to what we have seen in the big-box stores over the past few years: Consumers would enjoy low(ish) prices while suppliers would see ever-increasing pressures on their profits. (I’m seeing the publishers as suppliers here, although the profit pressure would pretty quickly flow on to authors as well.) Choice would decline as profit pressures forced all but the lowest-cost suppliers out of business.

So, I’m glad that seems to have been headed off, at last for the moment.

Having said all that, though, I think the cross-subsidy analysis is also correct. I think Gillette made its own razors to give away, but it wouldn’t have needed to. Nowadays it would surely outsource razor manufacture, but that wouldn’t be necessary either. It could just as easily announce that it would sell any razor that matched the specs for its blades, and then sell them for less than it paid its suppliers. (In fact, that might be a perfectly viable business model. Surely some shavers would go for a cool-looking limited-edition art razor and accept the resulting lock-in to Gillette blades, as long as the razor wasn’t too expensive.)

Posted on
by

Toby has a good take on ebook pricing issues.

Very briefly, mainline publishing houses would prefer to go with a pricing model similar to the model for physical books, where books start at a premium price when they’re new and then are sold at gradually cheaper prices. Amazon, on the other hand, wants to sell a cheap(ish) $10 ebook edition of new hardbacks, because that’s a price point and market segment that drives sales of the kindle, but shows no sign of further lowering the price as cheaper editions of the physical book come out. (One supposes Amazon’s theory is that there are a lot of people will pay $300 for a kindle to read the latest bestsellers for $10, but many fewer who will pay that much to be able to read last year’s bestseller for $4.)

The whole issue (Amazon taking down the Buy button for most books sold by Macmillan imprints, etc.) has produced a lot of talk by non-authors about how publishers are obsolete anyway and authors should just produce and market their own ebooks. But that sort of talk just goes to show that they don’t understand that publishers are specialized venture capital firms (as opposed to specialized manufacturing companies).