David Foster

Ethanol Tariff Update

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A couple of months ago, I wrote about the 54-cent-a-gallon tariff on imported ethanol (here, also here.) On Friday, President Bush suggested that the tariff should be eliminated, or at least temporarily waived in order to ease the gasoline supply & price crunch which is expected for the summer.

Both the corn farmers and the sugar industry will oppose this initiative, and it’s unlikely that it will make it though Congress unless the administration does some very effective PR work.

Update: Today’s WSJ endorses the elimination of the tariff, and credits Congressman John Shadegg (Arizona) for pushing this idea. (Shadegg’s specific proposal is to suspend the tariff until 2007.)

Ethanol policy also needs to consider impact on the transportation network. Ethanol cannot be shipped via conventional pipelines (a fact which has received little media attention until very recently) and has to go by rail or barge if long distances are involved. Major railroad bottlenecks seem likely, given that some of the routes needed for domestic ethanol are already heavily used for coal and grain. The Union Pacific has already slowed down shipments of ethanol to the DFW area due to heavy congestion in its rail terminal there.

Imported ethanol might help the overall transportation-capacity situation to some extent, since it can come directly into major east and west coast ports, but isn’t going to help with bottlenecks at blending facilities.

Missed Opportunities

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Writing in The Washington Times, Oliver North quotes a representative of the Disabled American Veterans about high unemployment among veterans of the Iraq war. North thought initially that he was talking about those who had been wounded, but the DAV rep disabused him: “You don’t have to have been wounded in action to be ‘unemployable.’ Just to have served in this war makes it tougher to get a job.”

North goes on to tell about a recent experience on an airline flight. His seatmate, a corporate CEO, asked if “all the troops coming back from over there were ‘screwed up,'” and went on to cite a study alleging that more than a third of those who served in Iraq and Afghanistan needed psychological treatment.” (There is apparently an AMA study that cites a number of 35 percent.)

Seems to me that when members of a profession publish studies showing an increased need for the services of that profession, one should be a little cautious in accepting the conclusions…just as you should assume your dog is not totally disinterested if he shows a preference for T-bone steak for your dinner choice. But whatever the methodology and threshold used for the study…is it really likely that the need for “psychological treatment” among Iraq and Afghanistan veterans is greater than among veterans of, say, D-Day, the Battle of the Bulge, and Iwo Jima? And yet clearly, history has shown that large numbers of the latter category have done very well in their careers.

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Hovering Parents in the Workplace

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A couple of months ago, I wrote about kids whose self-esteem has been artificially raised to such extreme levels that they cannot stand criticism or disappointment…and who are now entering the workplace. In many cases, it seems that the parents of such kids are confronting the kids’ employers when their offspring get fail to get expected promotions, receive performance appraisals that aren’t all roses, etc.

More on this theme in yesterday’s Wall Street Journal.

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Specialization and Liberal Education

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David Brooks recently wrote in the NYT (won’t bother with a link, because it’s “Times Select”) about the difficulty of obtaining a true liberal education in most universities as currently structured, and suggested that students take more responsibility for their own learning…and offered some tangible suggestions for doing so. One problem Brooks identified as facing those seeking a liberal education is the high specialization that exists within academic disciplines today.

In a letter to the editor responding to the column (yesterday), someone defended specialization in academia, arguing that this specialization is beneficial for the same reasons that division of labor is effective in business.

Seems like it would be interesting to discuss whether this logic is valid.

As a thought starter: Division of labor within a business requires considerable planning effort to ensure that the multiple activities represent some kind of coherent flow. Mass production plants have industrial engineers, methods engineers, production planners, and others whose charter cuts across the specialized functions, and who often have almost absolute authority over the structure of the work. It’s not clear that such functions either exist or should exist in academia.

Also: In recent years, it’s been recognized that excess division of labor can have a real cost, particularly in terms of flexibility. The noted consultant Michael Hammer (creator of the term “business process reengineering”) has been a particular leader in identifying the need to focus on the gestalt of processes that flow across functions, not just on those individual functions.

So…What do we think about specialization in academia, particularly in the liberal arts? Has it gone too far? How valid is the letter writer’s analogy with the division of labor in business?

Sweet Energy, Sour Politics–Update

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Several days ago, I posted about an improved variant of sugarcane, designed for use as a fuel and developed by Barbados. The post also discussed the irrationality of the 54-cent-per-gallon tariff that the US currently imposes on imports of ethanol.

Today’s Wall Street Journal has an editorial “What’s Wrong with Free Trade in Biofuels?” which amplifies the point. Excerpt:

Brazil has already established itself a low-cost producer of cane-based ethanol churned out in large volume at the oil-equivalent price of $25 a barrel without any heroic biogenetics involved. Its example is already inspiring copycat behavior by other Latin, Caribbean, African and South Asian countries, with similar conditions that make them potentially prolific exporters of biofuels.

Unfortunately, against the danger that poor countries might find profitable new niches for themselves as energy producers, rich countries have been busy erecting trade barriers to kill off the incipient competition to their own farmers. The U.S. imposes a 54-cent-a-gallon tariff on Brazilian ethanol, to discourage competition with domestic ethanol, which receives a 54-cent subsidy from taxpayers. The European Union just slapped new duties on Pakistani ethanol.

This should lay bare the fraud that what’s going here has anything to do with energy security. It has only to do with the agricultural lobby masquerading its interests behind foolish and misleading rhetoric about energy security.

Take the pressure for flex-fuel mandates, requiring auto companies to build cars capable of running on 85% ethanol. Unmodified cars can already burn fuel comprised 10% of ethanol. If we were honestly keen on diversifying supply and squeezing out imported oil, we’d throw open our dense coastal markets to ethanol producers in Brazil, India, Pakistan, Nigeria and Thailand, displacing perhaps 10 billion gallons of current gasoline use without any vehicle modification or taxpayer subsidy at all.

I don’t think the $25/bbl number for Brazilian cane-based ethanol is right; at least it’s not consistent with the $.87/gallon number quoted in the Farm Bureau article (linked from my earlier post)…but even with the $.87/gallon number (cost after ocean shipping charges $1.01/gallon) and considering the lesser energy in a gallon of ethanol vs a gallon of gasoline, the cane-based ethanol sounds like a winner. The tariff should go.