Economics & Finance

“Why Sustainability Standards for Biofuel Production Make Little Economic Sense”

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This new paper (pdf) by Harry de Gorter and David R. Just, published in the Cato Institute’s journal, Policy Analysis, looks interesting.

From the executive summary:

Sustainability standards are based on “lifecycle accounting,” in which ethanol is assumed to replace gasoline; but in fact, it may be replacing coal or other energy sources. Life-cycle accounting also fails to recognize that if incentives are given for ethanol producers to use relatively “clean” inputs (e.g., natural gas), the “dirtier” inputs (e.g., coal) that might otherwise have been used for the ethanol production will simply be used by other producers to make products that are not covered by the sustainability standard. Sustainability standards reshuffle who is using what inputs—with no net reduction in national emissions.

Recession and Recovery

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One of the broad assumptions behind recessions and recoveries is that during the “boom”, excess capacity is built into the system as manufacturers & service providers expand to meet increasing needs (today, and in the future). During the recession, manufacturers & service providers pare back, leaving capacity idle.

Part of the reason that the recovery (typically) gains steam is that bringing back this idle capacity (both in physical and human capital) is cheaper than building (or training) new, and it allows the economy to “roar” back into high gear. In some high level sense WW2 leveraged all of the physical and human capital that was idled by the great depression; while huge plants were built and millions of workers mobilized much of the initial lift was caused by leveraging what we had that was unused at the time.

When I look at this “boom” and recession, however, from the point of view of the USA, it doesn’t seem that we over-invested in productive capacity. Much of the investment was in residential real estate and commercial real estate for distribution, retail and services.

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Money and Power, Continued

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There are few ways in which a man can be more innocently employed than in getting money

–Samuel Johnson

I was reminded of this quote by something Irving Kristol wrote:

In New York the ruling passion is the pursuit of money, whereas in Washington it is the pursuit of power. Now, the pursuit of power is a zerosum game: you acquire power only by taking it away from someone else. The pursuit of money, however, is not a zero-sum game, which is why it is a much more innocent human activity. It is possible to make a lot of money without inflicting economic injury on anyone. Making money may be more sordid than appropriating power—at least it has traditionally been thought to be so—but, as Adam Smith and others pointed out, it is also a far more civil activity.

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If Only Soylent Green Was an Option

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I’ve written about Detroit’s financial woes in these pages. High taxes, an anti-business mindset, and a surplus of government meddling has caused the city to lose residents at an alarming rate. Losing taxpayers results in reduced money for government budgets. When faced with such a situation, the only sane response is to make hard decisions and cut back on non-vital programs. If these decisions aren’t made, then eventually even vital government services will be overwhelmed.

The political leaders in Detroit have failed the test of their sanity. Things just keep sliding into the crapper, with no end in sight.

The latest chapter in this tale of woe is a doozy. It would seem that people in and around Detroit don’t have the cash to make arrangements for their deceased loved ones, and the city doesn’t have the cash to cremate the bodies which are now choking the morgue.

I don’t want to be anywhere near the place if they have a power blackout for a few hours!

Ghost Fleet of the Recession

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From the Daily Mail.

The biggest and most secretive gathering of ships in maritime history lies at anchor east of Singapore. Never before photographed, it is bigger than the U.S. and British navies combined but has no crew, no cargo and no destination – and is why your Christmas stocking may be on the light side this year.
 
It is so far off the beaten track that nobody ever really comes close, which is why these ships are here. The world’s ship owners and government economists would prefer you not to see this symbol of the depths of the plague still crippling the world’s economies. So they have been quietly retired to this equatorial backwater, to be maintained only by a handful of bored sailors. The skeleton crews are left alone to fend off the ever-present threats of piracy and collisions in the congested waters as the hulls gather rust and seaweed at what should be their busiest time of year.

Ghost Fleet

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