Voting Rights Doublespeak

18 Tuesday Jan 2022

Posted by pnoetx in Voter Fraud, Voting Rights

Tags

Absentee Voting, Antifa, Armed Resistance, Ballot Harvesting, Ballot Security, BLM, Capitol Riot, Domestic Terror, Donald Trump, Early Voting, FBI, filibuster, Freedom To Vote Act, George Wallace, Glenn Reynolds, Insurrection, Joe Biden, Joseph M. Hanneman, LARP, Legal Insurrection, Mail-In Voting, Marco Rubio, NASA, Oathkeepers, Patrick Eddington, PATRIOT Act, Proud Boys, Ray Epps, Robert Byrd, Russian Collusion, Sedition, Transfer of Power, Voter ID, Voter Suppression, Voting Rights Act

The so-called insurrection that took place on January 6, 2021 (J6) has obsessed Democrats seeking to ram through a “voting rights” bill that they hope will advantage them in future elections. Oh, and to legitimize proposed new powers for agencies in the fight against “domestic terror”, and to somehow disqualify Donald Trump from holding the presidency again. We can thank a couple of moderate Democrats for shutting down the election bill, at least for the time being, by refusing to eliminate the filibuster.

The Real Threat to Voting Rights

If your real aim is to undermine ballot security and make it easier to cheat, you’d have to work hard to beat the election bill pushed by the Biden Administration: the Freedom To Vote Act (FVA). In their fashion, however, the Left prefers to stake-out phony rhetorical high-ground, replete with spurious charges against the opposition alleging racism and subversive, anti-democratic intent. Joe Biden demonstrated this vividly during his ill- advised speech in Georgia last week.

Here is a fairly thorough summary of the FVA, including an earlier version passed by the House last March. The overarching thrust of the bill is to substitute federal for state authority over the election process. States would not be permitted to demand that voters produce photo IDs. The bill would also require automatic voter registration at the department of motor vehicles and other government agencies, on-line registration, same-day registration, more days of early voting, excuse-free, notary-free, and witness-free absentee ballots, and extended counting of late-arriving ballots.

Democrats in the House of Representatives have now used a NASA funding bill as a shell for all these federally-prescribed protocols. Reportedly, this bill would legalize ballot harvesting nationwide, but that does not appear to be the case. Nevertheless, it includes all of the other provisions cited above, and many others.

While Congress certainly has the power to regulate elections, states were given the primary authority for conducting elections under the Constitution:

“The Times, Places and Manner of holding Elections for Senators and Representatives, shall be prescribed in each State by the Legislature thereof; but the Congress may at any time by Law make or alter such Regulations, except as to the Places of chusing Senators.”

The Voting Rights Act of 1965 helped secure minority voting rights that plainly exist under the Constitution, and it prescribed federal review of certain changes in state voting procedures (some aspects of which were struck down by the Supreme Court). However, never before has such sweeping federal authority been proposed as to the range of mechanics involved in casting and counting ballots. Ballot security would be compromised by several provisions of the legislation.

While voter registration should be relatively painless, it should not be so painless that non-citizens find it easy to register. That is likely to be the case under automatic voter registration. Surely many non-citizens have much to recommend them, but they have not yet demonstrated their commitment to the nation through earned citizenship. The right to vote is a benefit of citizenship; it serves as an inducement to learn about our system of government through the naturalization process. These individuals might not be interested in going to the trouble, however, or they might be loyal to a foreign power. Do we really want such individuals to have a vote? And to the extent that their interest is focused on public benefits, they surely do not have an equal claim to natural-born but similarly-situated Americans.

Voter ID is a safeguard against voter fraud, and a huge majority of Americans support it, including majorities of minorities. The very idea that a photo ID requirement would “suppress” the legitimate votes of minorities is based on the presumption that those voters might have difficulty obtaining identification such as a drivers license or other government ID. Oh really? We can safely file that contention under “the bigotry of low expectations”.

Extensive use of absentee ballots was intended to facilitate voting during pandemic restrictions that were expected to reduce the safety and efficiency of polling places. However, most developed countries ban “mail-in voting”, regarding it as a prescription for voter fraud. That threat seems all too real given the lax standards proposed in the FVA.

The Threat to Political Opposition

The House investigative committee looking into the January 6th melee may recommend new intelligence powers for the federal government. Those powers aren’t needed to investigate the Capitol riot: the FBI has been in possession of teams of video evidence, and it has broad powers under the PATRIOT Act and other measures. Here’s Patrick Eddington from the link above:

“… the FBI already has unbelievably sweeping authority to surveil individual Americans or domestic groups without ever having to go before a judge to get a warrant.

Under an investigative category known as an assessment, FBI agents can search commercial and government databases (including databases containing classified information), run confidential informants, and conduct physical surveillance, all without a court order.”

The simple truth is that certain congressional Democrats and the Biden Administration are attempting to use the Capitol riot as an excuse to turn federal law enforcement against their political enemies. The claim by Biden, the guy who bragged of being mentored by Klansman Robert Byrd, and the same man who praised George Wallace on several occasions, is that his opponents are “domestic terrorists” and/or “white supremacists”. We’ve seen quite enough of this chicanery already. Having suffered through a lengthy “Russian collision” charade, a willingness to completely ignore massive riots and property destruction by BLM and Antifa activists in 2020, and an orchestrated attempt to treat concerned parents of schoolchildren as “domestic terrorists”, we’re expected to believe that these stooges need more power?

The J6 Fiasco

And that brings us back to the Capitol riot. It was, as Glenn Reynolds has said, a clownshow and a mess. But speaking of insurrection, let’s hope the FBI is keeping its eye on violent leftists as well, who perpetrated some unquestionably treasonous escapades in the not very distant past. From Legal Insurrection:

“…leftist rioters … attempted to stop the peaceful transition of power during President Trump’s inauguration. … did anti-Trump leftists riot, attack and injure police, set cars and buildings on fire… …

… the multi-day May, 2020 assault on the White House that left at least 60 Secret Service agents wounded and forced President Trump to be whisked away to a bunker for his personal safety.”

Even more dangerous leftist attacks on the Capitol building have been perpetrated, such as bombings by the Weather Underground in 1971 and the Armed Resistance in 1983.

Many people were hurt in the J6 riot through no real fault of their own, including Ashli Babbitt, who was shot and killed by a Capitol police officer shortly after she attempted to stop attackers from smashing windows. Nevertheless, those who breached the Capitol building were mostly a bunch of hapless goofballs encouraged to run amuck by certain instigators. Among those were the Oathkeepers, a gang who marched around in stack formation wearing gear that looked vaguely militaristic. They brought no weapons to the Capitol (though they had some stashed in the VA suburbs). Apparently, one of them did assist a crowd in barging through a door to the Capitol. Their activities on J6 have been described by one pundit as LARP — live action role playing. Nevertheless, there was much talk among them of interfering with the transfer of power to “the usurper”, as they called Joe Biden. And now, eleven of them have been charged with insurrection and sedition. Members of the Proud Boys were also at the Capitol, some of whom fought with police.

But what really happened to make things go off the rails on January 6th? This article by Joseph M. Hanneman offers an excellent discussion of the events of that afternoon, and the subsequent investigation. He notes the mysterious absence of a number of individuals involved in the breach of the Capitol and grounds from the FBI’s “Seeking Information” list of over 1,500 photos. That includes one Ray Epps, whose incitement was otherwise fairly well-documented. Some suspect certain parties with no interest in seeing Donald Trump remain in office actually encouraged the rioters, up to and including the FBI. Would that surprise anyone after the Whitmer kidnapping operation or the Russian collusion hoax?

The vast majority of the crowd on J6 came to the Capitol grounds to conduct a peaceful protest in the vain hope for congressional action to put a hold on the counting of electors pending state election audits, investigations, and court challenges. Many of those arrested were denied due process, and were held for months with no charges filed.

As for the “threat to the nation” posed by the crowd on J6, I found this Marco Rubio quote to be apropos:

“I don’t care how many candlelight vigils and musical performances you have from the cast of Hamilton, you’re not going to convince most normal and sane people that our government last year was almost overthrown by a guy wearing a Viking hat and speedos.”

Conclusion

Democrats still hope to vote to eliminate the Senate filibuster and then pass the FVA. That is a pipe dream at this point, but they would come to regret eliminating the filibuster in due course. They have used it themselves to defeat legislation hundreds of times in the recent past. The filibuster has its shortcomings, particularly its inability to restrain executive power. Nevertheless, it has never been more critical as protection against a tyrannical (and slim) majority in Congress.

The Freedom To Vote Act is doomed to failure. Still, no one should forget the mendacious rhetoric employed by Joe Biden and the leftist Democrat leadership in Congress on the issue of election integrity. Nor should anyone forget their dishonorable, anti-democratic intent to devalue legitimate voting rights.

Price Controls: Political Gut Reaction, Gut Punch To Public

06 Thursday Jan 2022

Posted by pnoetx in Price Controls, Shortage

≈ Leave a comment

Tags

Artificial Tradeoffs, Big Meat, Big Oil, Black Markets, central planning, Excess Demand, Federal Reserve, Inflation, Isabella Weber, Joe Biden, Money Supply, Paul Krugman, Price Controls, Relative Prices, Scientism, Shortage, Unintended Consequences

In a gross failure of education or perhaps memory, politicians, policymakers, and certain academics seem blithely ignorant of things we’ve learned repeatedly. And of all the dumb ideas floated regarding our current bout with inflation, the notion of invoking price controls is near the top. But watch out, because the Biden Administration has already shifted from “inflation is transitory” to “it only hurts the rich” to “it’s fine because people just want to buy things”, and now “greedy businessmen are the culprits”. The latter falsehood is indeed the rationale for price controls put forward by a very confused economist at the University of Massachusetts-Amherst named Isabella Weber. (See this for an excerpt and a few immediate reactions.) She makes me grieve for my profession… even the frequently ditzy Paul Krugman called her out, though he softened his words after realizing he might have offended some of his partisan allies. Of course, the idea of price controls is just bad enough to gain favor with the lefty goofballs pulling Biden’s strings.

To understand the inflation process, it’s helpful to distinguish between two different dynamics:

1. When prices change we usually look for explanations in supply and demand conditions. We have supply constraints across a range of markets at the moment. There’s also a great deal to say about the ways in which government policy is hampering supplies of labor and energy, which are key inputs for just about everything. It’s fair to note here that, rather than price controls, we just might do better to ask government to get out of the way! In addition, however, consumer demand rebounded as the pandemic waned and waxed, and the federal government has been spending hand over fist, with generous distributions of cash with no strings attached. Thus, supply shortfalls and strong demand have combined to create price pressures across many markets.

2. Economy-wide, all dollar prices cannot rise continuously without an excess supply of a monetary asset. The Federal Reserve has discussed tapering its bond purchases in 2022 and its intention to raise overnight interest rates starting in the spring. It’s about time! The U.S. money supply ballooned during 2020 and its growth remains at a gallop. This has enabled the inflation we are experiencing today, and only recently have the markets begun to react as if the Fed means business.

Weber, our would-be price controller, exhibits a marked ignorance with respect to both aspects of price pressure: how markets work in the first instance, and how monetary profligacy lies at the root of broader inflation. Instead, she insists that prices are rising today because industrialists have simply decided to extract more profit! Poof! It’s as simple as that! Well what was holding those greedy bastards back all this time?

Everyone competes for scarce resources, so prices are bid upward when supplies are short, inputs more costly, or demand is outpacing supply for other reasons. Sure, sellers may earn a greater margin on sales under these circumstances. But the higher price accomplishes two important social objectives: efficient rationing of available quantities, and greater incentives to bring additional supplies to market.

So consider the outcome when government takes the advice of a Weber: producers are prohibited from adjusting price in response to excess demand. Shortages develop. Consumers might want more, but that’s either impossible or it simply costs more. Yet producers are prohibited from pricing commensurate with that cost. Other adjustments soon follow, such as changes in discounts, seller credit arrangements, and product quality. Furthermore, absent price adjustment, transaction costs become much more significant. Other resources are consumed in the mere process of allocating available quantities: time spent in queues, administering quotas, lotteries or other schemes, costly barter, and ultimately unsatisfied needs and wants, not to mention lots of anger and frustration. Lest anyone think this process is “fair”, keep in mind that it’s natural for these allocations to take a character that is worse than arbitrary. “Important people” will always have an advantage under these circumstances.

Regulatory and financial burdens are imposed on those who play by the rules, but not everyone does. Black market mechanisms come into play, including opportunities for illegal side payments, rewards for underworld activity, along with a general degradation in the rule of law.

Price controls also impose rigidity in relative prices that can be very costly for society. “Freezing” the value of one good in terms of others distorts the signals upon which efficient resource allocation depends. Tastes, circumstances, and production technology change, and flexible relative prices enable a smoother transitions between these states. And even while demand and/or input scarcity might increase in all markets, these dynamics are never uniform. Over time, imbalances always become much larger in some markets than others. Frozen relative prices allow these imbalances to persist.

For example, the true value of good A at the imposition of price controls might be two units of good B. Over time, the true value of A might grow to four units of good B, but the government insists that A must be traded for no more than the original two units of B. Good B thus becomes overvalued on account of government intervention. The market for good A, which should attract disproportionate investment and jobs, will instead languish under a freeze of relative prices. Good B will continue to absorb resources under the artificial tradeoff imposed by price controls. Society must then sacrifice the gains otherwise afforded by market dynamism.

The history of price controls is dismal (also see here). They artificially suppress measured inflation and impose great efficiency costs on the public. Meanwhile, price controls fail to address the underlying monetary excess.

Price controls are destructive when applied economy-wide, but also when governments attempt to apply them to markets selectively. Posturing about “strategic” use of price controls reveals the naïveté of those who believe government planners can resolve market dislocations better than market participants themselves. Indeed, the planners would do better to discover, and undo, the damage caused by so many ongoing regulatory interventions.

So beware Joe Biden’s bluster about “greedy producers” in certain markets, whether they be in “Big Meat”, or “Big Oil”. Price interventions in these markets are sure to bring you less meat, less oil, and quite possibly less of everything else. The unintended consequences of such government interventions aren’t difficult to foresee unless one is blinded with the scientism of central planning.

Break the Market, Blame It, Then Break It Some More

28 Sunday Nov 2021

Posted by pnoetx in Energy, Environmental Fascism, Free markets, Uncategorized

≈ 1 Comment

Tags

Antitrust, Asymmetric Information, Build Back Better, Capital Controls, central planning, Endangered Species Act, Energy Policy, Externalities, Fossil fuels, Fracking, FTC, Government Failure, Green New Deal, Greenbook, Hart Energy, Industrial Policy, Industry Concentration, Joe Biden, Keystone XL Pipeline, Knowledge Problem, Line 5 Pipeline, Mark Theisen, Market Failure, Monetary policy, OPEC, Price Gouging, Principles of Economics, Quotas, Regulatory Overreach, Stephen Green, Strategic Petroleum Reserve, Subsidies, Tariffs, Taxes, The Fatal Conceit

Much of what is labeled market failure is a consequence of government failure, or rather, failure caused by misguided public intervention, not just in individual markets but in the economy more generally. Misguided efforts to correct perceived excesses in pricing are often the problem, but there are myriad cases of regulatory overreach, ham-handed application of taxes and subsidies for various enterprises, and widespread cronyism. But it is often convenient for politicians to appear as if they are doing something, which makes activism and active blame of private enterprise a tempting path. The Biden Administration’s energy crisis offers a case in point. First, a digression on the efficiency of free markets. Skip the next two sections to get straight to Biden’s mess.

Behold the Bounty

I always spent part of the first class session teaching Principles of Economics on some incredible things that happen each and every day. Most college freshmen seem to take them for granted: the endless variety of goods that arrive on shelves each day; the ongoing flow of services, many appearing like magic at the flick of a switch; the high degree of coincidence between specific wants and all these fresh supplies; the variety and flow of raw materials and skills that are brought to bear; the fantastic array of sophisticated equipment deployed to assist in these efforts; and the massive social coordination necessary to accomplish all this. How does it all happen? Who collects all the information on what is wanted, and by whom? On the feasibility of actually producing and distributing various things? What miracle computer processes the vast set of information guiding these decisions and actions? Does some superior intelligence within an agency plan all this stuff?

The answer is simple. The seemingly infinite set of knowledge is marshaled, and all these tasks are performed, by the greatest institution of social cooperation to ever emerge: decentralized, free markets! Buying decisions are guided by individual needs and wants. Production and selling decisions are guided by resource availability and technology. And all sides react to evolving prices. Preferences, resources, and technology are in a constant state of flux, but prices react, signaling producers and consumers to make individual adjustments that correct larger imbalances. It is tempting to describe the process as the evolving solution to a gigantic set of dynamic equations.

The Impossible Conceit

No human planner or government agency is capable of solving this problem as seamlessly and efficiently as markets, nor can they hope to achieve the surplus welfare that redound to buyers and sellers in markets. Central planners or intervening authorities cannot possess the knowledge and coordinating power of the market mechanism. That doesn’t mean markets are “perfect”, of course. Things like external costs and benefits, dominant sellers, and asymmetric information can cause market outcomes to deviate from the competitive “ideal”. Inequities can arise from some of these imperfections as well.

What can be much worse is the damage to market performance caused by government policy. Usually the intent is to “correct” imperfections, and the rationale might be defensible. The knowledge to do it very well is often lacking, however. Taxes, subsidies, regulations, tariffs, quotas, capital controls, and manipulation of interest rates (and monetary and credit aggregates) are very general categories of distortion caused by the public sector. Then there is competition for resources via government procurement, which is frequently graft-ridden or price-insensitive.

Many public interventions create advantages for large sellers, leading to greater market concentration. This might best serve the private political power of the wealthy or might convey advantages to investments that happen to be in vogue among the political class. These are the true roots of fascism, which leverages coercive state power for the benefit of private interests.

Energy Vampires

Now we have the curious case of the Biden Administration and it’s purposeful disruption of energy markets in an effort to incentivize a hurried transition from fossil fuels to renewable energy. As I described in a recent post on stagflation,

“… Biden took several steps to hamstring the domestic fossil fuel industry at a time when the economy was still recovering from the pandemic. This included revoking permits for the Keystone pipeline, a ban on drilling on federal lands and federally-controlled waters in the Gulf, shutting down production on some private lands on the pretext of enforcing the Endangered Species Act, and capping methane emissions by oil and gas producers. And all that was apparently just a start.

In addition to killing Keystone, there remains a strong possibility that Biden will shut down the Line 5 pipeline in Michigan, and there are other pipelines currently under federal review. Biden’s EPA also conducted a purge of science advisors considered “too friendly” to oil and gas industry. This was intertwined with a “review” of new methane rules, which harm smaller, independent oil and gas drillers disproportionately.

Joe Biden’s “Build Back Better” (BBB) legislation, as clumsy in policy as it is in name, introduces a number of “Green New Deal” provisions that would further disadvantage the production and use of fossil fuels. Hart Energy provides descriptions of various tax changes that appeared in the Treasury’s so-called “Greenbook”, a collection of revenue proposals, many of which appear in the BBB legislation that recently passed in the House. These include rollbacks of various deductions for drilling costs, depletion allowances, and recovery rules, as well as hikes in certain excise taxes as well as taxes on foreign oil income. And all this while granting generous subsidies to intermittent and otherwise uneconomic technologies that happen to be in political favor. This is a fine payoff for cronies having invested significantly in these rent seeking opportunities. While the bill still faces an uphill fight in the Senate, apparently Biden has executive orders, held in abeyance, that would inflict more pain on consumers and producers of fossil fuels.

Biden’s energy policies are obviously intended to reduce supplies of oil, gas, and other fossil fuels. Prices have responded, as Green notes:

“Gas is up an average of 57% this year, with corresponding increases of 44% for diesel and a whopping 60% for fuel oil.”

The upward price pressure is not limited to petroleum: electricity rates are jumping as well. Consumers and shippers have noticed. In fact, while Biden crows about wanting “the rich” to pay for BBB, his energy policies are steeply regressive in their impact, as energy absorbs a much larger share of budgets among the poor than the rich. This is politically suicidal, but Biden’s advisors have chosen a most cynical tact as the reality has dawned on them.

Abusive Victim Blaming

Who to blame? After the predictable results of cramping domestic production and attacking fossil fuel producers, the Biden team naturally blames them for rising prices! “Price gouging” is a charge made by political opportunists and those who lack an understanding of how markets allocate scarce resources. More severe scarcity means that prices must rise to ration available quantities and to incentivize those capable of bringing forth additional product under difficult circumstances. That is how a market is supposed to function, and it mitigates scarcity!

But here comes the mendacious and Bumbling Buster Biden. He wants antitrust authorities at the FTC to investigate oil pricing. Again from Stephen Green:

“… the Biden Administration has decided to launch a vindictive legal campaign against oil producers in order to deflect blame for the results of Biden’s policies: Biden’s Solution to Rising Gas Prices Appears to Be Accusing Oil Companies of Price Gouging.”

There’s nothing quite like a threat to market participants to prevent the price mechanism from performing its proper social function. But a failure to price rationally is a prescription for more severe shortages.

Biden has also ordered the Strategic Petroleum Reserve (SPR) to release 50 million barrels of oil, a move that replaces a total of 2.75 days of monthly consumption in the U.S. The SPR is supposed to be drawn upon only in the case of emergencies like natural disasters, so this draw-down is as irresponsible as it is impotent. In fact, OPEC is prepared to offset the SPR release with a production cut. Biden has resorted to begging OPEC to increase production, which is pathetic because the U.S. was a net exporter of oil not long ago … until Biden took charge.

Conclusion

Properly stated, the challenge mounted against markets as an institution is not that they fall short of “perfection”. It is that some other system would lead to superior results in terms of efficiency and/or equity. Central planning, including the kind exercised by the Biden Administration in it’s hurried and foolish effort to tear down and remake the energy economy, is not even a serious candidate on either count.

Granted, there is a long history of subsidies to the oil and gas sector. I cannot defend those, but the development of the technology (even fracking) largely preceded the fruits of the industry’s rent seeking. At this point, green fuels receive far more subsidies (despite some claims to the contrary). Furthermore, the primacy of fossil fuels was not achieved by tearing down competing technologies and infrastructure. In contrast, the current round of central planning requires destruction of entire sectors of the economy that could otherwise produce efficiently for the foreseeable future, if left unmolested.

The Biden Administration has adopted the radical green agenda. Their playbook calls for a severe tilting of price incentives in favor uneconomic, renewable energy sources, despite the economy’s heretofore sensible reliance on plentiful fossil fuels. It’s no surprise that Biden’s policy is unpopular across the economic spectrum. His natural inclination is to blame a competitive industry victimized by his policy. It’s a futile attempt to avoid accountability, as if he thinks doubling down on the fascism will help convince the electorate that oil and gas producers dreamt up this new, nefarious strategy of overcharging customers. People aren’t that dumb, but it’s typical for the elitist Left presume otherwise.

Hyperbolic Scenarios, Crude Climate Models, and Scientism

07 Sunday Nov 2021

Posted by pnoetx in Climate science, Global Warming

≈ 3 Comments

Tags

Carbon Efficiency, Carbon forcing, carbon Sensitivity, Cloud Feedback, COP26, G20, Global Temprature, IEA, Intergovernmental Panel on Climate Change, International Energy Agency, IPCC, Joe Biden, Joe Brandon, Judith Curry, Justin Ritchie, Net Zero Emissions, Nic Lewis, Precautionary Principle, Prince Charles, RCP8.5, rent seeking, Representative Concentration Pathway, Roger Pielke Jr., Scientism, United Nations

What we hear regarding the dangers of climate change is based on predictions of future atmospheric carbon concentrations and corresponding predictions of global temperatures. Those predictions are not “data” in the normal, positive sense. They do not represent “the way things are” or “the way things have been”, though one might hope the initial model conditions align with reality. Nor can the predictions be relied upon as “the way things will be”. Climate scientists normally report a range of outcomes produced by models, yet we usually hear only one type of consequence for humanity: catastrophe!

Models Are Not Reality

The kinds of climate models quoted by activists and by the UN’s Intergovernmental Panel on Climate Change (IPCC) have been around for decades. Known as “carbon forcing” models, they are highly simplified representations of the process determining global temperatures. The primary forecast inputs are atmospheric carbon concentrations over time, which again are themselves predictions.

It’s usually asserted that climate model outputs should guide policy, but we must ask: how much confidence can we have in the predictions to allow government to take coercive actions having immediate, negative impacts on human well being? What evidence can be marshaled to show prospective outcomes under proposed policies? And how well do these models fit the actual, historical data? That is, how well do model predictions track our historical experience, given the historical paths of inputs like carbon concentrations?

Faulty Inputs

The IPCC has been defining and updating sets of carbon scenarios since 1990. The scenarios outline the future paths of greenhouse gas emissions (and carbon forcings). They were originally based on economic and demographic modeling before an apparent “decision by committee” to maintain consistency with scenarios issued in the past. Roger Pielke Jr. and Justin Ritchie describe the evolution of this decision process, and they call for change:

“Our research (and that of several colleagues) indicates that the scenarios of greenhouse gas (GHG) emissions through the end of the twenty-first century are grounded in outdated portrayals of the recent past. Because climate models depend on these scenarios to project the future behavior of the climate, the outdated scenarios provide a misleading basis both for developing a scientific evidence base and for informing climate policy discussions. The continuing misuse of scenarios in climate research has become pervasive and consequential—so much so that we view it as one of the most significant failures of scientific integrity in the twenty-first century thus far. We need a course correction.”

One would certainly expect the predicted growth of atmospheric carbon to evolve over time. However, as Pielke and Ritchie note, the IPCC’s baseline carbon scenario today, known as RCP8.5 (“Representative Concentration Pathway”), is remarkably similar to the “business as usual” (BAU) scenario it first issued in 1990:

“The emissions scenarios the climate community is now using as baselines for climate models depend on portrayals of the present that are no longer true. And once the scenarios lost touch with reality, so did the climate, impact, and economic models that depend on them for their projections of the future. Yet these projections are a central part of the scientific basis upon which climate policymakers are now developing, debating, and adopting policies.”

The authors go on to discuss a few characteristics of the BAU scenario that today seem implausible, including:

“… RCP8.5 foresees carbon dioxide emissions growing rapidly to at least the year 2300 when Earth reaches more than 2,000 ppm of atmospheric carbon dioxide concentrations. But again, according to the IEA and other groups, fossil energy emissions have likely plateaued, and it is plausible to achieve net-zero emissions before the end of the century, if not much sooner.”

Pielke and Ritchie demonstrate that the IPCC’s baseline range of carbon emissions by 2045 is centered well above (actually double) the mid-range of scenarios developed by the International Energy Agency (IEA), and there is very little overlap between the two. However, global carbon emissions have been flat over the past decade. Even if we extrapolate the growth in atmospheric CO2 parts per million over the past 20 years, it would rise to less than 600 ppm by 2100, not 1,200 ppm. It’s true that a few countries (China comes to mind) continue to exploit less “carbon efficient” energy resources like coal, but the growth trend in concentrations is likely to continue to taper over time.

It therefore appears that the IPCC’s climate scenarios, which are used broadly as model inputs by the climate research community, are suspect. As one might suspect: garbage in, garbage out. But what about the climate models themselves?

Faulty Models

The model temperature predictions have been grossly in error. They have been and continue to be “too hot”. The chart at the top of this post is typical of the comparisons of model projections and actual temperatures. Before the year 2000, most of the temperature paths projected by the particular model charted above ran higher than actual temperatures. However, the trends subsequently diverged and the gap has become more extreme over the past two decades.

The problem is not merely one of faulty inputs. The models themselves are deeply flawed, as they fail to account adequately for natural forces that strongly influence our climate. It’s been clear for many years that the sun’s radiative energy has a massive impact on temperatures, and it is affected not only by the intensity of the solar cycle but also by cloud cover on Earth. Unfortunately, carbon forcing models do not agree on the role that increased clouds might have in amplifying warming. However, a reduction in cloud cover over the past 20 years, and a corresponding increase in radiative heat, can account for every bit of the warming experienced over that time.

This finding not only offers an alternative explanation for two decades of modest warming, it also strikes at the very heart of the presumed feedback mechanism usually assumed to amplify carbon-induced warming. The overall effect is summarized by the so-called carbon sensitivity, measured as the response of global temperature to a doubling of carbon concentration. The IPCC puts that sensitivity in a range of 1.5C to 4.5C. However, findings published by Nic Lewis and Judith Curry are close to the low end of that range, as are those found by Frank Bosse reported here. The uncertainties surrounding the role of cloud cover and carbon sensitivities reveal that the outputs relied upon by climate alarmists are extreme model simulations, not the kind of reliable intelligence upon which drastic policy measures should be taken.

The constant anxiety issued from the Left on the issue of climate change, and not a little haranguing of the rest of us, is misplaced. The IPCC’s scenarios for the future paths of carbon concentration are outdated and seriously exaggerated, and they represent a breach of scientific protocol. Yet the scenarios are widely used as the basis of policy discussions at both the domestic and international levels. The climate models themselves embed questionable assumptions that create a bias toward calamitous outcomes.

Yet Drastic Action Is Urged

The UN’s 2021 climate conference, or COP26 (“Conference of the Parties …”) is taking place in Glasgow, Scotland this month. Like earlier international climate conferences, the hope is that dire forecasts will prompt broad agreement on goals and commitments, and that signatory countries will translate these into policy at the national level.

Things got off to a bad start when, before COP26 even began, the G20 nations failed to agree on a goal of “net-zero” carbon emissions by 2050. Another bad portent for the conference is that China and India, both big carbon emitters, will not attend, which must be tremendously disappointing to attendees. After all, COP26 has been billed by Prince Charles himself as “the last chance saloon, literally”, for saving the world from catastrophe. He said roughly the same thing before the Paris conference in 2014. And Joe Brandon … er, Biden, blurted some hyperbole of his own:

“Climate change is already ravaging the world. … It’s destroying people’s lives and livelihoods and doing it every single day. … It’s costing our nations trillions of dollars.”

All this is unadulterated hogwash. But it is the stuff upon which a crisis-hungry media feeds. This hucksterism is but one form of climate rent-seeking. Other forms are much more troubling: scary scenarios and model predictions serve the self-interest of regulators, grant-seeking researchers, interventionist politicians, and green investors who suckle at the public teat. It is a nightmare of scientism fed by the arrogance of self-interested social planners. The renewable energy technologies promoted by these investors, politicians, and planners are costly and land-intensive, providing only intermittent output (requiring backup fossil fuel capacity), and they have nasty environmental consequences of their own.

The precautionary principle is no excuse for the extreme policies advocated by alarmists. We already have economically viable “carbon efficient” and even zero-carbon energy alternatives, such as natural gas, modular nuclear power, and expanded opportunities for exploiting geothermal energy. This argues against premature deployment of wasteful renewables. The real crisis is the threat posed by the imposition of draconian green policies to our long-term prosperity, and especially to the world’s poor.

Electric Vehicle Fueling Costs in the Real World

31 Sunday Oct 2021

Posted by pnoetx in Electric Vehicles, Renewable Energy

≈ Leave a comment

Tags

Anderson Economic Group, Biomass, Charging Time, Commercial Power Rates, Deadhead Miles, Dispatchable Capacity, Disposal Costs, Electric Vehicles, EVangelists, Fast Chargers, Fueling Cost, Intermittency, Internal Combustion Engines, Joe Biden, Nuclear Energy, Opportunity cost, Phantom Drain, Power Failures, Power Grid, Recharging Costs, Renewable Power, Thermal Energy

While the photo above exaggerates, honest electric vehicle (EV) owners will tell you that “refueling” is often not cheap or convenient. However, less jaded EV drivers and enthusiasts seem to view recharging costs through an oversimplified economic lens. A realistic accounting involves a variety of cost factors, including the implicit cost of the time needed to recharge when away from home. An analysis recently published by Anderson Economic Group (AEG) provides a thorough comparison of the costs of fueling EVs relative to vehicles powered by internal combustion engines (ICEs).

Promoting the Narrow Focus

AEG notes the shortcomings of most cost studies quoted by “EVangelists” (not AEG’s term):

“Many commonly-cited studies of the cost of driving EVs include only the cost of electric power for EVs, but compare this with the total cost of fueling an ICE vehicle. Moreover, many presume drivers can routinely charge at favorable residential rates, ignoring the much higher costs of the commercial chargers EV drivers must use when they are away from a residential charger (if they have one).”

The kind of incomplete assays to which AEG refers can lead to statements like the following, from none other than Joe Biden:

“When you buy an electric vehicle, you can go across America on a single tank of gas, figuratively speaking. It’s not gas. You plug it in.”

Well no, it’s not a single tank of “gas”. You still have to stop, plug into a source of power mostly generated by fossil fuels, and it might take a while to get back on the road.

Cost Categories

The AEG report concludes that vehicles powered by ICEs are far cheaper to fuel on average than EVs. The analysis considers several categories of fueling costs including:

Gasoline Prices vs. Commercial & Residential Power Rates: EV drivers recharging away from home often pay more costly commercial rates.
Registration Taxes: applied at EV charging stations, but bundled in fuel price for ICEs;
EV Charging Equipment: upgraded “Level 2” chargers are generally “encouraged” at purchase of an EV;
Deadhead Miles: usage costs on fueling/charging runs; there are far fewer EV charging stations than gas stations in the U.S., which can lead to costly “excursions”;
Charging/Refueling Time: much higher for EV drivers away from home;

Direct Costs

AEG performed their analysis using electric rates, gas prices, and other cost factors as of mid-2021. They did so for six “representative” vehicle classes: entry level, mid-priced and luxury EVs and ICEs. Direct monetary costs account for the first four factors listed above; they do not include the time costs of refueling.

AEG calculates that the direct monetary costs of driving 100 miles in a mid-priced ICE vehicle is $8.95, while the cost in a mid-priced EV using a high proportion of commercial charging is $12.95, about 50% more. The direct cost in a luxury ICE is $12.60, but for a luxury EV it is $14.15 (12% more) for mostly home charging and $15.52 (23% more) for mostly commercial charging.

In addition, AEG finds that the direct cost of EV fueling is far more variable than ICE fueling. This is due to widely varying rates for commercial and residential power, including time-of-day variation, differences in charger efficiency, and the varied structure of pricing at different commercial charging stations.

Implicit Time Cost

It should be obvious that the time costs of refueling EVs are more significant than for ICE vehicles. However, I believe AEG’s report might over-estimate the difference. They say:

“… it takes substantially longer to fuel EVs than for comparable ICE cars. Real world conditions often impose additional burdens, including these two:

Driving and charging time: … it often takes about 20 minutes to drive to a reliable DC fast charger. It often takes another 20 to 30 minutes for the charging process to complete. Of course, this is for fast DC chargers. Slower L2 chargers are much more common …
Recurrent reliability problems: EV drivers face recurring problems at chargers such as breakdowns, software bugs, delays in syncing the mobile application with the charger, charger output being significantly lower than advertised, and outright failures. This is in addition to the problem of vehicles blocking (or “icing”) EV charging spots.

Online forums are full of comments from drivers expressing frustration about these problems.”

All true, as far as it goes. The implicit value of this time depends on the driver’s opportunity cost. Whether valued at the minimum wage or at a much higher opportunity cost, AEG’s straightforward valuation of the time cost is five to six times as high for EV drivers than for ICE drivers, depending on the vehicle class. For EVs, the time cost AEG calculates can be more than $200 a month, or about $20 per 100 miles for a someone who drives 1,000 miles a month, versus about $4 for a similar ICE driver. Adding those values to the direct monetary costs (which AEG does not do) yields a total cost per 100 miles of $33 for a mid-priced EV versus about $13 for an ICE vehicle in that class. That’s 2.5 times more to fuel an EV than a comparable ICE vehicle!

However, I would discount the cost of EV fueling time, because many drivers can use this waiting time productively, whether performing certain work tasks remotely or simply enjoying it as an extension of their leisure time, reading or viewing/listening to content on their mobile devices, for example.

Other Qualifications

AEG acknowledges that their cost comparisons use commercial power rates to account for “free” chargers offered by some stores to shoppers and by some employers to workers as benefits. That’s because stores and employers compensate for that kind of service along pricing and other margins.

AEG does not account for “phantom drain” (the loss of EV battery power while not in use) and the costs of battery degradation over time. Nor do they attempt to quantify the use of battery power while charging takes place (which inflates charging time but also increases direct costs per mile).

I would also note that many of the EV cost disadvantages described by AEG are likely to diminish going forward. More charging stations are being added as the fleet of EVs grows. Battery technology is improving as well, and chargers will become faster on average. In addition, EV “engines” have far less complexity and fewer parts than ICEs, which undoubtedly confers maintenance cost advantages over a period of time.

The Green Itch

Finally, while some consumers might find that EVs scratch a certain green itch, these vehicles are not carbon neutral, as noted above. The vast bulk of the power they use comes from fossil fuels. Higher energy prices in general might or might not work to their advantage, but electric power availability is becoming less reliable as the push toward renewable power generation continues. As we have seen repeatedly, reliance on intermittent power sources has drastic consequences for users in the absence of adequate, dispatchable baseload capacity.

To put a somewhat finer point on the difficulties posed by the intermittency of renewable power, a great deal of EV charging is done at night, when solar panels are not harvesting energy. Wind turbines can harvest a greater proportion of their power at night, but they must be fairly tall to do so (the minimum height ranges from 30 to 100 meters, depending on local conditions). That requirement means that the manufacture and construction of these turbines and their towers is all the more carbon intensive. Furthermore, disposal of both solar panels and wind turbines at the end of their useful lives creates serious environmental issues that green energy advocates have been all too willing to ignore.

Ultimately, until our ability to store power at scale advances dramatically, the issue of renewable intermittency can only be dealt with via adequate baseload power. Growth in the number of EVs will require growth in the dispatchable capacity of the power grid, which means either more plants burning fossil fuels, nuclear power, hydroelectric, biomass, or thermal energy. The alternative is an increasing frequency of blackouts, which would drastically reduce the utility of EVs.

Stagflation and the Supply of Bad Public Policy

20 Wednesday Oct 2021

Posted by pnoetx in Inflation

≈ 2 Comments

Tags

Anthony B. Kim, Breakeven Inflation Rate, Brian Dunn, Consumer Price Index, Core CPI, corporate taxes, Cost-Push Inflation, Dunkin’ Donuts, Energy Policy, Federal Reserve, Jen Psaki, Joe Biden, Labor Force Participation, Mark Theisen, Median CPI, Non-Pharmaceutical interventions, Overton Window, Patrick Tyrell, Semiconductors, Stagflation, Supply Chains, Trimmed CPI, Unemployment By State, Vaccine Mandate, Work Disincentives

Price inflation is getting more attention now than it has in many years, but not everyone is convinced it will persist, most conspicuously bond investors. The Biden Administration’s initial narrative was plausible even if there were seeds of doubt: a price spike was to be expected relative to the low-ebb of price changes during the pandemic. However, the inflation data has come in strong since the spring, and events point to continuing price pressures and the potential for expected inflation to drive escalations in contract pricing. Once embedded like that, the phenomenon broadens and gets harder to squeeze out.

Broadening Price Hikes

The evidence at hand is never enough to take much comfort in predictions, and the uncertainties now are similar to those I discussed in June. At the time, the price moves had been pronounced only in the prior month or so, and there was no evidence of any breadth. Now, it’s at least clear that increases in the so-called “core” Consumer Price Index (CPI), which excludes food and energy prices, have escalated. In addition, the growth in the median component of the CPI basket reported by the Federal Reserve Bank of Cleveland has begun to jump. So has the “trimmed CPI”, which excludes the most extreme 8% of prices changes in both directions within the index. The chart below shows one-month changes in these gauges:

So the recent upward price trends have expanded in breadth, and their persistence is making it a little harder to argue that the changes are transitory rebounds from pandemic weakness.

Bond Investors Still Nonchalant

Investors are by no means convinced that the recent price pressures will persist. They have an incentive to bid-up bond yields to compensate for expected inflation, so these yields can be used to infer inflation expectations. The chart below from the Federal Reserve Bank of St. Louis shows the five-year “breakeven” inflation rate, which is derived from inflation-indexed versus unindexed Treasury securities.

The pattern does not suggest that a meaningful change in inflation expectations has taken place. In fact, the implied five-year inflation forecast has edged down a bit. Of course, we’re still worrying about a fairly short period of high month-to-month changes in prices, and five years is a long time in that context.

This “casual” reaction of interest rates to the inflation spike undoubtedly reflects investors’ belief that the Federal Reserve will tighten policy in an effort to contain inflation. Some of us have strong doubts about the Fed’s inflation-fighting resolve, however. There is little the Fed can do to relieve supply-side problems, and many would argue that the Fed should take an accommodative stance in an attempt to minimize output and job losses, but that would reinforce the inflationary effects. There is no easy way out. Risks loom in both directions, and though I might regret it, at recent yields, I’m not buying Treasury bonds.

Sources of Price Pressure

Economists have tended to divide price pressures into those driven by demand and those driven by supply. Sometimes the terms “demand-pull” and “cost-push” inflation are used for shorthand. The former is usually associated with economic growth, where rising prices indicate that demand is outpacing gains in capacity. With cost-push inflation, however, rising prices indicate that production snd supply is somehow impeded. You get higher prices and lower output. This is so-called “stagflation”. Today we seem to have a combination of those inflationary forces in play: demand has rebounded from the pandemic lows of 2020, while breakdowns in the supply chain have choked production, with a consequent need for more severe price rationing. If the latter forces win out, we will have entered a stagflationary episode.

Unfortunately, administration policies are exacerbating supply-side inflationary pressures. Officials first insisted that the jump in inflation measures would be transitory. More recently they’ve said that it really only hurts “the rich”, an assertion that is decidedly false. Biden flaks are doing their level best to put lipstick on a pig. “Peppermint” Psaki says it shows that people just want to buy things! On the other hand, the Washington Post encourages us to “lower our expectations”. Um, yeah… I think we’re there!

Burning Energy Producers and Consumers

Energy policy is an obvious case: while a hurricane moving through the Gulf of Mexico took a big bite out of domestic oil production, Biden took several steps to hamstring the domestic fossil fuel industry at a time when the economy was still recovering from the pandemic. This included revoking permits for the Keystone pipeline, a ban on drilling on federal lands and federally-controlled waters in the Gulf, shutting down production on some private lands on the pretext of enforcing the Endsngered Species Act, and capping methane emissions by oil and gas producers. And all that was apparently just a start.

As Mark Theisen notes, when you promise to destroy a particular industry, as Joe Biden has, by taxing and regulating it to death, who wants to invest in or even maintain production facilities? Some leftists with apparent influence on the administration are threatening penalties against the industry up to and including prosecution for “crimes against humanity”! This is moronic, of course, but perhaps these extremists are just trying to move the Overton Window. Fossil fuels have been and still are a miracle in terms of human well-being, and renewable (but intermittent) energy sources are simply not capable of replacing the lost power, as Germans, Californians, and Texans are learning. Furthermore, the effort to kill fossil fuels amounts to a war on the poor. Americans are facing steep increases in their utility bills and blackouts during the times when power is needed most. Now, Biden is actively trying to wheedle more oil production out of OPEC, as if it’s okay for those nations to extract it, but not for us to do so!

Labor Shortage

Have you heard it’s hard to get help these days? You’ll notice it pretty fast if you have regular occasion to deal with service establishments. Goods are getting scarce on the shelves as well. Food and paper goods are getting pricier. The semiconductor shortage has been prominent, impacting production and pricing of electronics, computers, and new cars, with a big cross-effect on the used car and rental car markets. Everywhere you look, sellers seem short of inventory. This year it might be tough to fill the space under the Christmas tree for lack of availability.

This isn’t just about cargo ships unable to unload at the ports, although that’s significant. Patrick Tyrell and Anthony B. Kim note the difficulty of overcoming the supply chain breakdowns even with 24/7 operations at the ports. Tyrell snd Kim offer this quite from the Financial Times:

“The US is facing a shortage of warehouse space and truck drivers, and shifting to 24/7 operation will require enormous co-ordination between the publicly operated ports and private sector groups, including large retailers and freight companies.”

There are several reasons for the labor shortage: a few workers and businesses might still be living in fear of COVID, especially in “blue” states and urban areas where the fear factor seems to have been more palpable. That’s where the high unemployment is. There has also been an apparent wave of retirements among late baby-boomers who were already on the cusp of hanging up their skates. However, the Biden Administration has instigated a set of ill-advised policies that blunt work incentives, leading to reduced labor force participation: the repeated extensions of pandemic-related unemployment benefits; increased child and dependent care tax benefits; the moratorium on evictions from rental property; the elimination of work requirements for expanded Medicaid coverage; and increased EBT and SNAP benefits. This is not hard to understand: if you pay people to stay home, they will stay home, even as you suffer through an interminable wait for your fast food. But there might not be a wait at Dunkin’ Donuts, because they’ve been running short on donuts due to “supply chain issues”!

Destructive Public Policy

COVID policy contributed to the early plunge in demand in 2020. Economic output declined, and ramping-up production is not always a simple thing. In this case, it was hindered by repeated non-pharmaceutical interventions and confused messaging from public health authorities. These are issues I’ve felt compelled to address too many times on my blog over the past 18 months. The negative economic effects of these policies continue to linger, and it should surprise no one.

The Democrats’ so-called “social infrastructure” bill, which looks mercifully unlikely to pass without major curtailments in scale and scope, would exacerbate many of the problems cited above. As I’ve noted recently, it’s more of an “infra-shackle” bill for the private economy than an infrastructure bill. For $3.5 trillion (an understatement based on budget gimmickry), we get heavy regulation and taxes, particularly on fossil fuels, subsidies for uneconomic technologies, assorted entitlements with no means testing, wage- and job-killing (and inflationary) hikes in corporate taxes, and other tax disincentives to private investment. The bill would represent a huge reallocation from the private to the public sector via coercion and public competition for scarce resources.

As if that wasn’t bad enough, now Biden has issued his legally dubious vaccine mandate, which has been met with outrage among many workers, from Chicago cops and other public servants, health care workers, truckers and workers at such corporate giants as Boeing, Southwest Airlines, and many others. Unions are furious. People are walking out. This represents a negative “supply shock”, an unexpected event that hinders production and boosts prices. Joe Biden looks to be well on his way to earning the title of “The Stagflation President”.

I’ll leave you with this gem from Brian Dunn:

Inflation: The Leftist “Tax the Poor” Policy

23 Thursday Sep 2021

Posted by pnoetx in Deficits, Inflation, Redistribution

≈ 2 Comments

Tags

Asymmetric Information, Bank of International Settlements, Biden Administration, budget deficits, Budget Reconcilation Bill, Claudio Bario, Confiscation, dependency, Federal Reserve, Fixed-Rate Debt, Inflation, infrastructure, Joe Biden, John Maynard Keynes, MMT, Moderm Monetary Theory, Money Illusion, Money Printing, Noah Smith, Patrick Horan, Redistribution, Regressive Tax, Scott Sumner, Social Infrastructure, Unexpected Inflation

Recent years have seen explosive growth in federal deficits along with growth rates in the money supply that would have made John Maynard Keynes blush. It’s no coincidence that a new school of thought has developed among certain “monetary economists”. But as someone trained in monetary economics, I wish I could make those quote marks larger. This new school of thought is known as Modern Monetary Theory (MMT), and it asserts that the money spigot is a perfectly legitimate means of financing government spending and, furthermore, that it is not necessarily inflationary. Here is how Scott Sumner and Patrick Horan describe MMT:

“A central idea of MMT is that a government that issues its own fiat currency can pay its bills in that same currency. These governments need not worry about budget deficits when contemplating additional spending. Thus because the US government has a monopoly on money creation, our federal government does not need to raise all its revenue through tax or bond finance. A government with its own currency cannot go bankrupt because it can always issue more currency to cover any budget deficit. … MMT advocates argue that this why the US government can afford expensive programs such as a jobs guarantee and universal healthcare.”

Spend and Print

Joe Biden’s $3.5 trillion “social infrastructure” package would be just a start, but that’s likely to be more like $5.5T once the budget gimmicks are stripped out. We can be somewhat hopeful, because that initiative looks increasingly likely to fail in Congress, at least this time around. But the tax side of that bill was already $2.6T short of the latter spending figure, and the tax provisions keep shrinking. Now, it’s looking more like a shortfall of $3.5T would require financing. Moderate Democrats may not support this crazy bill in the end, but Dems from deep blue states want to reinstate state and local tax deductibility, which would cut the tax component still more. Well who cares? Print the money, say the brave MMT advocates.

Sumner gets to the heart of the problem in this piece. Progressives, with false assurance from MMT, want loose monetary policy to make their expansive programs “affordable”. As he explains, if this happens while the economy is near its production potential, inflation is a sure thing. These lessons were learned long ago, but have been conveniently forgotten by the political class (or they simply prefer to ignore them), instead jumping onto the MMT bandwagon.

Inflation Is Taxation

No conscientious observer of government finance should ever forget that inflation is a form of taxation. Assets whose values are either fixed or subject to some inertia are devalued by inflation in terms of purchasing power, or in real terms, as economists put it. Strictly speaking, this is true when inflation is unexpected… if it is expected, then lenders and borrowers can negotiate terms that will compensate for these changes in real value. But when inflation is unexpected, the losses to lenders are offset by gains to borrowers. Of course the federal government is a gigantic borrower, so inflation can represent a confiscation of wealth from the public.

It’s not small potatoes. Currently, about $22T of U.S. Treasury debt is held by the public, and its average maturity is more than 5 years. If the Federal Reserve engineers an unexpected 1% jump in the rate of inflation, it shaves over $1T off the real value of that debt before it’s repaid, and it reduces the real interest cost of that debt as well. Of course, the holders of that debt will suffer an immediate loss if they are forced to sell prior to maturity for any reason, since new buyers will be demanding higher yields to compensate for higher inflation if it is expected to persist.

The Poor Losers

Inflation causes redistributions to take place, especially when it is unexpected inflation. We’ve already discussed lenders and borrowers, but similar considerations apply to anyone entering into fixed price contracts for goods or labor. Here’s what Claudio Bario of the Bank of International Settlements (BIS) has to say about these shifts:

“Inflation shifts income and wealth away from those who are least aware of it, or least able to protect against it. These segments of the population often coincide with lower-income groups, which explains why inflation has often been portrayed as a most regressive form of tax. The ‘inflation tax’ takes its toll through the erosion of the value of financial assets and contracts fixed in nominal terms.”

Inflation is a regressive tax! In this respect, economist Noah Smith echos Bario in a recent op-ed in which he discusses “money illusion”, or the confusion of real and nominal income:

“Workers … who are slow to perceive the rise in prices they pay for goods like cars and groceries, won’t realize this, and will be happy with their unusually large raises. But companies, whose accountants and managers certainly know the true inflation rate, will also be happy, because they know they’re not actually paying more for labor.

That information asymmetry between workers and employers may be exactly what keeps wages from rising faster than inflation. If workers take a year to realize how much prices have gone up, they may be satisfied with the raises they got during the time of high inflation — even if that inflation ultimately turns out to be transitory. By then, it might be too late to negotiate for a real, inflation-adjusted raise.”

Inflation taxes and redistributions become more acute at higher rates of inflation, but any unexpected escalation in the rate of inflation will take a toll on the poor. Bario elaborates on the mechanisms by which inflation inflicts budgetary pain on the those at the lower end of the socioeconomic spectrum.

“As regards wealth distribution, the financial assets that are most vulnerable to inflation are cash and bank accounts – the typical savings vehicles held by the poorest segments of the population. This is mostly because the poorest have access only to limited investment options to protect their savings. …

… wages and pensions – the main sources of income for a large majority of households and even more so for the poorest half of the population – are typically fixed in nominal terms and hence vulnerable to inflation. Indexation mechanisms, such as those adopted in many [advanced economies] in the 1970s, are no panacea: they may fail to keep pace as inflation accelerates; …”

In addition to the inflationary gains reaped by government, it’s clear that inflation gives rise to redistributions between private parties: generally from those with lower incomes and wealth to their employers, producers, financial institutions, and pension payers (businesses, state and local governments). An exception is some low income debtors might benefit if they owe long term obligations at fixed interest rates, but low income individuals are often constrained from obtaining this form of credit.

Causing, Then Exploiting, Inequality

Another especially galling aspect of the Left’s focus on money finance is how its consequences fly in the face of their concerns about income and wealth inequality. Inflation is typically manifested in rising equity prices: nominal stock values tend to escalate in an inflationary environment, protecting their owners from losses to the real value of their investments. Stocks are generally a good inflation hedge. Yet we know that stocks are disproportionately owned by those in the highest strata of the income and wealth distributions. Later, of course, the Left will seek to level the burgeoning inequality wrought by their own policies by “taxing the rich”! Apparently, for the Left, consistency is never considered a virtue. This is not unlike another trick, which is to blame “greedy corporations” for the inflation wrought by Leftist policies.

It’s a great irony that the Left, which purports to support the poor and working people, would propose a form of government finance that is so regressive in its effects. To be generous, perhaps it’s just another case of “progressives” unknowingly hurting the ones they love. The expansive programs they advocate will confer government benefits to many individuals in higher income brackets, not just the poor, but those government alms will help to compensate for higher inflation. But this too takes advantage of money illusion, because those benefits might well buy progressives the loyalty of beneficiaries unable to recognize the ongoing erosion in their standard of living, and who are unwilling to come to grips with their increasing dependency.

But Tut, Tut, They Say

Advocates of MMT, in combination with expansive government, also have a tendency to deny that inflation has ever been a consequence of such policies. As Sumner points out, they have forgotten historical episodes that run contrary to the theory, and most “popular” advocates of MMT fail to recognize the important role played by limits on the economy’s production potential. When money growth outruns the economy’s ability to produce real goods and services, the prices of goods will rise.

CDC Makes a Bum Lead Steer: Alternate Reality vs. The Herd

16 Sunday May 2021

Posted by pnoetx in Herd Immunity, Pandemic

≈ 2 Comments

Tags

Adam Kucharski, Andy Slovitt, Anthony Fauci, CDC, Degrees of Separation, Herd Immunity, Herd Immunity Threshold, Joe Biden, Jordan Schachtel, Nathan D. Grawe, Obesity, Phil Kerpen, Pre-existing Immunity, Precautionary Principle, Reproduction Rate, Seroprevalence, Sub-Herds, Super-Spreader Events, Vaccinations, Vitamin D, Zero COVID

Jordan Schachtel enjoyed some schadenfreude last week when he tweeted:

“I am thoroughly enjoying the White House declaring COVID over and seeing the confused cultists having a nervous breakdown and demanding the continuation of COVID Mania.”

It’s quite an exaggeration to say the Biden Administration is “declaring COVID over”, however. They’re backpedaling, and while last week’s CDC announcement on masking is somewhat welcome, it reveals more idiotic thinking about almost everything COVID: the grotesquely excessive application of the precautionary principle (typical of the regulatory mindset) and the mentality of “zero COVID”. And just listen to Joe Biden’s tyrannical bluster following the CDC announcement:

“The rule is now simple: get vaccinated or wear a mask until you do.

The choice is yours.”

Is anyone really listening to this buffoon?Unfortunately, yes. But there’s no federal “rule”, unless your on federal property; it constitutes “guidance” everywhere else. I’m thankful our federalist system still receives a modicum of respect in the whole matter, and some states have chosen their own approaches (“Hooray for Florida”). Meanwhile, the state of the pandemic looks like this, courtesy of Andy Slavitt:

False Assertions

The CDC still operates under the misapprehension that kids need to wear masks, despite mountains of evidence showing children are at negligible risk and tend not to be spreaders. Here’s some evidence shared by Phil Kerpen on the risk to children:

The chart shows the fatality risk by age (deaths per 100,000), and then under the assumption of a 97% reduction in that risk due to vaccination, which is quite conservative. Given that kind of improvement, an unvaccinated 9 year-old child has about the same risk as a fully vaccinated 30 year-old!

The CDC still believes the unvaccinated must wear masks outdoors, but unless you’re packed in a tight crowd, catching the virus outdoors has about the same odds as a piano falling on your head. And the CDC insists that two shots of mRNA vaccine (Pfizer or Moderna) are necessary before going maskless, but only one shot of the Johnson and Johnson vaccine, even though J&J’s is less effective than a single mRNA jab!

Other details in the CDC announcement are worthy of ridicule, but for me the most aggravating are the agency’s implicit position that herd immunity can only be achieved through vaccination, and its “guidance” that the unvaccinated should be dealt with coercively, even if they have naturally-acquired immunity from an infection!

Tallying Immunity

Vaccination is only one of several routes to herd immunity, as I’ve noted in the past. For starters, consider that a significant share of the population has a degree of pre-existing immunity brought on by previous exposure to coronaviruses, including the common cold. That doesn’t mean they won’t catch the virus, but it does mean they’re unlikely to suffer severe symptoms or transmit a high viral load to anyone else. Others, while not strictly immune, are nevertheless unlikely to be sickened due to protections afforded by healthy vitamin D levels or because they are not obese. Children, of course, tend to be fairly impervious. Anyone who’s had a bout with the virus and survived is likely to have gained strong and long-lasting immunity, even if they were asymptomatic. And finally, there are those who’ve been vaccinated. All of these groups have little or no susceptibility to the virus for some time to come.

It’s not necessary to vaccinate everyone to achieve herd immunity, nor is it necessary to reach something like an 85% vax rate, as the fumbling Dr. Fauci has claimed. Today, almost 47% of the U.S. population has received at least one dose, or about 155 million adults. Here’s Kerpen’s vax update for May 14.

Another 33 million people have had positive diagnoses and survived, and estimates of seroprevalence would add perhaps another 30 million survivors. Some of those individuals have been vaccinated unnecessarily, however, and to avoid double counting, let’s say a total of 50 million people have survived the virus. Some 35 million children in the U.S. are under age 12. Therefore, even if we ignore pre-existing immunity, there are probably about 240 million effectively immune individuals without counting the remaining non-susceptibles. At the low end, based on a population of 330 million, U.S. immunity is now greater than 70%, and probably closer to 80%. That is more than sufficient for herd immunity, as traditionally understood.

The Herd Immunity Threshold

Here and in the following section I take a slightly deeper dive into herd immunity concepts.

Herd immunity was one of my favorite topics last year. I’m still drawn to it because it’s so misunderstood, even by public health officials with pretensions of expertise in the matter. My claim, about which I’m not alone, is that it’s unnecessary for a large majority of the population to be infected (or vaccinated) to limit the spread of a virus. That’s primarily because there is great variety in individuals’ degree of susceptibility, social connections, aerosol production, and viral load if exposed: call it heterogeneity or diversity if you like. Variation across individuals naturally limits a contagion relative to a homogeneous population.

Less than 1% of those who caught the virus died, while the others recovered and acquired immunity. The remaining subset of individuals most vulnerable to severe illness was thus reduced over time via acquired immunity or death. This is the natural dynamic that causes contagions to slow and ultimately peter out. In technical jargon, the virus reproduction rate “R” falls below a value of one. The point at which that happens is called the “herd immunity threshold” (HIT).

A population with lots of variation in susceptibility will have a lower HIT. Some have estimated a HIT in the U.S. as low as 15% -25%. Ultimately, total exposure will go much higher than the HIT, perhaps well more than doubling exposure, but the contagion recedes once the HIT is reached. So again, it’s unnecessary for anywhere near the full population to be immune to achieve herd immunity.

One wrinkle is that CIVID is now likely to have become endemic. Increased numbers of cases will re-emerge seasonally in still-susceptible individuals. That doesn’t contradict the discussion above regarding the HIT rate: subsequent waves will be quite mild by comparison with the past 14 months. But if the effectiveness of vaccines or acquired immunity wanes over time, or as healthy people age and become unhealthy, re-emergence becomes a greater risk.

Sub-Herd Immunity

A further qualification relates to so-called sub-herds. People are clustered by geographical, social, and cultural circles, so we should think of society not as a singular “herd”, but as a collection of sub-herds having limited cross-connectivity. The following charts are representations of different kinds of human networks, from Nathan D. Grawe’s review of “The Rules of Contagion, by Adam Kucharski:

Sub-herd members tend to have more degrees of separation from individuals in other sub-herds than within their own sub-herd. The most extreme example is the “broken network” (where contagions could not spread across sub-herds), but there are identifiable sub-herds in all of the examples shown above. Less average connectedness across sub-herds implies barriers to transmission and more isolated sub-herd contagions.

We’ve seen isolated spikes in cases in different geographies, and there have been spikes within geographies among sub-herds of individuals sharing commonalities such as race, religious affiliation, industry affiliation, school, or other cultural affiliation. Furthermore, transmission of COVID has been dominated by “super-spreader” events, which tend to occur within sub-herds. In fact, sub-herds are likely to be more homogeneous than the whole of society, and that means their HIT will be higher than we might naively calculate based on higher levels of aggregation.

We have seen local, state, or regional contagions peak and turn down when estimates of total incidence of infections reach the range of 15 – 25%. That appears to have been enough to reach the HIT in those geographically isolated cases. However, if those geographical contagions were also concentrated within social sub-herds, those sub-herds might have experienced much higher than 25% incidence by the time new infections peaked. Again, the HIT for sub-herds is likely to be greater than the aggregate population estimates implied, The upshot is that some sub-herds might have achieved herd immunity last year but others did not, which explains the spikes in new geographic areas and even the recurrence of spikes within geographic areas.

Conclusion

It’s unnecessary for 100% of the population to be vaccinated or to have pre-existing immunity. Likewise, herd immunity does not imply that no one catches the virus or that no one dies from the virus. There will be seasonal waves, though muted by the large immune share of the population. This is not something that government should try to stanch, as that would require the kind of coercion and scare tactics we’ve already seen overplayed during the pandemic. People face risks in almost everything they do, and they usually feel competent to evaluate those risks themselves. That is, until a large segment of the population allows themselves to be infantalized by public health authorities.

It’s Time to Make Woke Corporations Hurt!

12 Wednesday May 2021

Posted by pnoetx in Corporatism, Social Justice, Virtue Signaling

≈ Leave a comment

Tags

Amazon, Apple, Bank of America, Black Lives Matter, Coca Cola, Delta Airlines, Disney, Disney Plus, Disparate impact, Diversity, EEOC, ESG Scores, Fuzzy Logic Blog, Joe Biden, Price Discrimination, Race-Based Discounts, Stakeholder Capitalism, Whole Foods, Wokeness

It’s a BLM discount! You need only shout the magic words! Ah, but if “woke” corporations are sincere in their avowals to help end racial injustice, there is so much more they can do! In fact, let me describe an idea so good and rich that we really must partner with Black Lives Matter and Antifa to bring it on!

Yes, we know how much the social justice warriors of corporate America care about diversity, inclusion, and eliminating unconscious bias. Also, in their business practices, they are eager to avoid “disparate impacts” on “protected classes” of individuals. However, if they want to get serious, they need to put real money where their mouths are. The Fuzzy Logic blog (FLB) suggests that we dare corporations celebrating “wokeness” to offer free products and services to people of color (POC)!

There is a strong rationale under current law for a slightly less drastic version of this proposal. For example, in 2019, the median household income of African Americans was about 60% that of whites, but Disney charges blacks and whites the same admission price to their theme parks. That means it costs a black family proportionately more of their income than a white family to spend a day at the park in Orlando. That, my friends, is a disparate impact!

I’m not aware of any legal challenges along these lines, but it’s not as if “one price” is a business necessity, which would otherwise offer Disney a defense against such a claim. Disney already offers discounts to seniors and other groups. But why wait for the EEOC to take action when Disney can demonstrate its high-mindedness and good faith by offering race-based discounts right now?

It would be fun to see how the company reacts to pressure for that kind of action. Based on income disparities, the company could discount tickets by 40% to African Americans and by about 26% for Hispanics. Discounting should be extended to Disney Plus subscriptions as well. Those discounts can be revisited each year with appropriate adjustments until such time as income parity is achieved.

In reality, differential pricing is practiced broadly by American businesses. It’s called price discrimination, and it is generally legal. Higher prices tend to be charged to market segments with less elastic (price-sensitive) demand, and lower prices are offered to segments with more elastic demand. It is a rational and often profit-maximizing approach to pricing, but its practice tends to be more subtle than discriminating on price with respect to race or ethnicity. It’s safe to say that pressure to do so would be disruptive and unwelcome to these firms. So I still like the idea!

But again, FLB’s post goes much farther: given past injustices, why limit the reparations to a correction for the disparate impact of pricing? Something more radical is needed as this is a matter of conscience, not merely a legal hurdle to neutralize income disparities:

“These companies (and the many thousands more engaged in this woke crap) must put their own profits where their big, fat lying mouths are. There will be no government bailouts for them; they must pay for their part in condoning and pushing white supremacy for the past bazillion years, and they must pay with their own wealth, wealth they say they accumulated on the backs of black and brown people.”

Therefore, FLB insists that Disney should offer free admission and streaming on Disney Plus to certain racial and ethnic minorities for a period of several years…and free accommodations at Disney Hotels! What a tremendous show of good faith in wokeness that would be!

We’re picking on Disney, and it’s not alone in its professed racial consciousness and pursuit of equal outcomes. There are so many others! Coca-Cola could issue coupons redeemable at full price through a program of outreach in minority communities. Delta Airlines could institute a program of “Black Life Passports” to bona fide African Americans (meaning one must identify as such!) for discounted or free fares. Bank of America will probably want to exceed the minimum requirements under community banking law by offering free banking services and heavily discounted account management fees to African Americans. Amazon will no doubt want to offer free Prime memberships to certain minorities and perhaps throw in some freebies at Whole Foods as well. And Apple has plenty of merchandise to give away. Why wait for Joe Biden to offer free phones in the run-up to the 2024 election like his old boss did?

You probably won’t be happy about this proposal if you’re a corporate shareholder, but then you should not be happy to have witnessed increasing management preoccupation with social justice, and you should not have been happy as your “agents” lost sight of their fundamental missions as business organizations: to produce something well and thereby do well for customers and shareholders. The sad consequence of “stakeholder capitalism” is that everything a business is supposed to do gets done worse.

I recently discussed the assignment of “scores” to public companies for their focus and performance on environmental, social, and governance (ESG) factors. These ESG scores are used by “woke” fund managers and advisors to select or rate stocks. I personally have no wish to invest in companies seeking to boost their ESGs, but you can read all about that at the link. For our purposes here, ESGs might serve well as a tool for identifying entities most in need of pressure to offer discounts and freebies to POC.

It would be great to see agitation against the woke-most corporations for race-based discounts and free products. Perhaps a broad discussion of the idea would prompt social justice warriors to get on board. It might provide some laughs, but the real hope is to shake the corporate wokesters from their virtue-signaling stupor. Most shareholders wouldn’t like race-based discounts, of course, and that’s part of the idea. A conceivable defensive maneuver for our “target” entities would be a lobbying effort for government action such as tax-financed reparations. That won’t necessarily be cheap for them or their shareholders, however. Get woke, go broke!

Teachers Unions and Educational Hostage-Taking

14 Sunday Feb 2021

Posted by pnoetx in Education, Pandemic, Unions

≈ 1 Comment

Tags

Achievement Gap, Anthony Fauci, CDC Guidelines, Class Sizes, COVID Testing, COVID Transmission, Darrell Bradford, Education Next, Female Labor Force Participation, Joe Biden, Matt Welch, Michael Watson, PPE, Rochelle Walensky, School Reopenings, Social Distancing, Stimulus Plan, Teachers Unions, Ventilation Systems, Working Women

Intelligent public policy is all too often undermined by policy makers incapable of properly assessing risks. The Biden Administration is setting new standards in this regard with its so-called “return to school” effort. It’s difficult to know how much of it is sheer stupidity and how much is pandering to teachers unions. Equal parts is probably a reasonable approximation.

The public teachers unions have consistently opposed reopening since remote learning began last spring, despite reams of data showing the safety of school environments. Even the CDC agrees! Oh, but wait: the CDC just issued new guidelines for reopening, which among other things require six feet of distancing rather than the three feet Director Rochelle Walensky claimed was adequate just a few months ago. Obviously, this reduces the number of students many existing school buildings can accommodate.

COVID transmission in schools is “extremely rare”. And in addition, remote education is sorely lacking in effectiveness. Teachers who truly care about educating their students should be giving the unions an earful. Not only has learning been compromised, but remote learning has increased the achievement gap between the best students and those in the lower part of the distribution.

Private schools have been open and as the map above shows, public schools in a number of states are largely open to in-person learning. Where that’s not the case, public school buildings are often still being used by children. They’re under the supervision of adults, but not teachers! As Matt Welch says:

“… many of the empty school buildings in largely closed districts are not in fact empty—they are filled with kids, being supervised by adults, just not adults who belong to teachers unions.”

Incidentally, many adults with children now at home, rather than in school, have been forced to leave the labor force, and many of them are women. As Michael Watson asks, why are advocates of working women so silent on this point? And this is to say nothing of the health care workers diverted, during a pandemic, from patient care by the need to manage children at home.

In December, Joe Biden promised to reopen “most” K – 12 schools within his first one-hundred days in office. Shortly after his inauguration, that promise became “most” K – 8 schools. As Welch notes, now the goal has been made a bit more precise, and it’s a complete sham: the Administration wants at least half of schools to be “open” for in-person learning at least one day a week! But we’re already well ahead of that! (And see here.)

On top of that, the federal government is playing the interloper here: reopening is not a federal decision. Ah, but Biden wants $130 billion in federal money earmarked to aid schools in their reopening efforts. Anthony Fauci has decided the stimulus is necessary for schools to reopen, his latest in a series of embarrassing policy flip-flops. The funds targeted at schools would be spent in a variety of ways, including PPE, COVID tests, new ventilation systems, and enhancement of remote learning to accommodate smaller (and distanced) in-person class sizes. Some of the funds are likely to make their way into teacher pay and to shore up pensions. One thing is certain: the unions want that money, and they will come back for more!

The unions also argue that teachers should be prioritized for vaccines, which would place them ahead of groups facing drastically higher risks. This is flat-out callous, insane, and evil. Again, the risk of COVID to teachers and children is low, while the elderly population faces staggeringly higher risks. Vaccinating teachers ahead of the elderly would cost many thousands of lives on balance.

This article from Education Next by Darrell Bradford describes the conditions for reopening demanded by teachers unions as the culmination of several years of activism. The unions contributed mightily to Joe Biden’s election campaign, of course. Their overwrought posture on teacher safety aside, the unions’ obstinance on the question of reopening is intended as leverage in the legislative push for Biden’s school aid package. Here’s Bradford:

“In other words, if you’ve wondered what a national teacher strike might look like and what might cause teachers across the country to arrest local economies and subject millions of students to instruction that may lock in deep learning losses, it’s just like this.”

The schools are safe, remote learning is substandard, and isolation is damaging to children’s’ emotional well being. Union demands for continuing limitations on in-person learning and requirements for reopening are not just unreasonable, but dastardly. That the Biden Administration is crafting its reopening policy and spending initiatives to appease the unions is motivated more by politics than the interests of children and their families. It’s time for parents and other true advocates to let their school administrators, elected representatives, and government officials know that the unions do not have their children’s interests at heart. And well-informed teachers should demand that their union representatives stop playing politics with the educational goals to which they’ve devoted their careers.

Sacred Cow Chips

Tag Archives: Joe Biden

Voting Rights Doublespeak

Price Controls: Political Gut Reaction, Gut Punch To Public

Break the Market, Blame It, Then Break It Some More

Electric Vehicle Fueling Costs in the Real World

Stagflation and the Supply of Bad Public Policy

CDC Makes a Bum Lead Steer: Alternate Reality vs. The Herd