Tag Archives: economics

They Forgot the Bread

The Roman poet Juvenal is generally credited with having created the phrase “bread and circuses” to illustrate Roman emperors desire for the superficial appeasement of lower classes at the expense of wider concerns.

In the modern context, it has generally been applied to organizations—political, social, commercial, etc.—that provide some level of material comfort and superficial entertainment to mask shifts in the underlying foundations of civil society.

Think about large land grant universities in the United States.  These institutions have generally raised tuition at levels much higher than the corresponding rates of inflation, increased class sizes to levels that would make most concerned educators blush, and allowed departments—athletic, academic, or administrative—to become nearly autonomous fiefdoms free from any sort of oversight.  Do the students these institutions purport to serve revolt?  Nope.  As long as the revenue sports keep them entertained and the cheap beer flows from lukewarm kegs no one raises a single cry of outrage.  It’s not bread and circus.  Rather it’s Beer and Circus.

However, in recent years the primary mother fuckers behind this cynical strategy seem to have forgotten that you need to at least provide some comfort to people in order to keep them mollified.  In an excellent piece of angry opinion writing Daily Kos community member Haricot Blue wrote:

Yes, you were sitting pretty.   And all you had to do to keep it that way was to not wage a racist, scorched-earth war against the first Black President of the United States.  That’s all!  That is the only thing you dumb, stupid idiots had to do:  swallow your pride, smile, shake hands, and play nice with one of the most charismatic, inspiring, intelligent and genuinely moral politicians in American history. 

Barack Obama didn’t want to ruin you, you dumbasses!  He wasn’t out to confiscate your estates, kill your grandmas, and force you into re-education camps!   All he wanted was a more humane, less cruel, less racist version of the system that made you rich.  You should have wanted that too!  Not because you care about other people — for your own good!   But you were too stupid.

What would it have cost you?  A moderate tax hike?  More oversight from nosy bureaucrats?  Some limits on your environmental depredations and exploitation of workers?  Maybe a few more women and people of color showing up at the Executive Retreat?   And in return, millions of your fellow citizens would have health coverage, a living wage, affordable education and child care, clean air and water, some disposable income and free time – in short, a stake in the system.  

Instead, these mother fuckers—yes, I use the term lovingly—took everything that they possibly could and supported the election of the worst president in the history of the United States.  Now they are surprised that people are pissed and want change.

A little bread would have gone a long way, but Mitch McConnell has never been one to concede an iota if it means that the same iota has to come from his pocket.

Now the chickens are coming home to roost, so to speak, and with an election coming up in a little over four months things are looking increasingly worse for the Republican Party.  Not that it could happen to a better bunch of mother fuckers.  These are the people who spent eight years of Barack Obama’s presidency obstructing every idea, no matter how aligned with their priorities, because…um…that’s right, he was the black guy.  Then they stood behind the racist troll as he laid bare the reality of American politics.  That is to say, there is a large percentage of people who will vote based on nothing more than racial animas and perceived lack of standing.  Never mind that it has been Republican policies since the 1980s that have destroyed what little standing those same people had in the first place.  It is just easier to blame someone with darker skin, drink a Natty Light, and complain about Colin Kaepernick.

I can hope, dear god I can hope, that come November enough people are sick of this carnival barker’s sideshow and his Republican freak show to usher the mother fuckers out into the cold D.C. air in January.  The think tank jobs and Fox News gigs will be cushy, but at least we will not have to hear them lecture the nation on…whatever, I stopped listening at about the same time as that Tea Party bullshit.

First Order Effects are Only the Beginning

Do you want to spot someone who has zero understanding of an issue?  Ask them about second order effects.

What are second order effects?  These are the impacts of an action that occur because of the aforementioned action but are not the direct intent of the aforementioned action.

What is a good example of a second order effect?  Suppose for a minute that you decide to commute to work via bicycle several days a week.  The first order effect is that you have replaced a certain amount of miles driven with a similar amount of miles ridden.  Attendant to this first order effect is a reduction in greenhouse gas emissions, less income directed toward fueling an automobile, increase in physical activity, and just a general sense of doing good.

A second order effect, if the number of people replacing car trips with bicycle trips reaches a critical mass, is the reduced need for infrastructure maintenance, repair, or construction.  Another second order effect, again dependent upon the number of people making the switch, is a reduced need for outlets dispensing gasoline so perhaps the number of gas stations decline.  A further second order effect is that workplaces and housing would not need to devote so much space to the transient storage of automobiles.  This would open up a more diverse array of development opportunities since less space would be covered in striped concrete. And so on down the line…

The thing with moving beyond first order effects is that it widens the potential impact of any decision.

Take organic produce as an example.  Most arguments about organic produce fall into a cost benefit analysis vis a vis its potentially greater health benefits, whether from reduced pesticide exposure on the part of the consumer or increased nutrition.  However, there are a myriad of second order effects that may impact the decision to choose organic produce.  By buying organic produce you reduce the potential for synthetic fertilizers, pesticides, and herbicides to pollute the ground, water, and air.  By buying organic produce you reduce the chance that farmworkers are exposed to the same synthetic fertilizers, pesticides, and herbicides.  All of a sudden the argument that organic produce is “just not worth it” takes on a whole new dimension.

There is an element of nuance to this approach and nuance is somewhat out of favor in a world dominated by people like Donald Trump and Fox News.  It falls into the same category as externalities, which are economic costs borne by society at large as opposed to the entity that is directly responsible for them.  Think about carbon pollution.  Coal fired power plants do not pay anything for the cost of carbon pollution yet we all bear the costs.  It’s another concept that makes most dotards heads explode.

We need to move the discussion of most issues past just the first order effects.  If we capable of enumerating all of the ways a choice can be beneficial down the line through even the most minor of second order effects the impact might be transformative.

So, the next time your Uncle Carl has one too many wine coolers at Thanksgiving dinner and wants to debate the merits of bicycle commuting, organic food, solar panels, or whatever is on his Fox News hit list spend a minute to explain first and second order effects.

We Have More than Enough Money to Decarbonize Our Energy System

If I ever hear another American politician say that we cannot afford the transition to clean energy I will scream.  Why you ask?

In 2012 it was estimated that consumers in the U.S spent approximately $65 billion on soda.  In that same year it was estimated that consumers in the U.S. spent approximately $11 billion on bottled water.  [1] That is to say that American consumers spent over $75 billion on unnecessary drinks and, in the case of soda, a product that is generally regarded to be detrimental to your health.  Not to mention the environmental impact of disposable, single use containers.

Okay, why is that relevant in the terms of this discussion?  In 2016, the most recent year for which full year data is available, the U.S. invested $44 billion in clean energy including both private investing and government expenditure.  [2]

Therefore, we spend more than 50% more on soda and bottled water per year than we invest in clean energy.  If we just directed the money from soda and bottled water to clean energy investment it would represent an increase of 172%.  That is a lot of solar panels and wind turbines.

Someone may argue that this scenario is impractical, but I would challenge such an argument on several fronts.  One, spending on soda and bottled water—for the most part—is totally discretionary.  No one needs a Diet Coke to survive and other than emergency situations no one needs bottled water.  It could be argued that it would be better if no one consumed bottled water given the economic and environmental impact of a product that can also be obtained from municipal water supplies.  Two, by and large individuals now have the power to redirect their discretionary spending toward renewable energy.  As long as you have the capital or alternative financing arrangements are available you can put solar panels directly on your roof.  Thus, your Diet Coke and Evian habit can be turned into clean energy.  A direct substitution, so to speak.

My point is to illuminate that when we discuss the level of investment necessary to decarbonize our energy system it needs to be placed in direct comparison to some broader economic choices.  Is the future our planet worth skipping that Dr. Pepper?

  1. http://classroom.synonym.com/how-much-do-americans-spend-on-soft-drinks-12081634.html
  2. http://www.businessinsider.com/us-2015-renewable-energy-investments-2016-5

Refocusing on a Home Based Economy

2009 seems like a long away.  It’s has been “just” eight years, but as Donald Trump continues to be an international embarrassment on a daily basis it makes me wonder about those halcyon days when we waited for Barack Obama to take the oath of office.

2008 was a bear for a lot of people.  The economy literally seemed like it was going off the rails completely and no one had any idea how to fix things.  It turns out the “masters of the universe” in the high finance world had figured out a way to spread the risk and damage from low-grade securitized mortgage loans to almost every aspect of the American economy.  Amazingly, this contagion also spread to the global economy because as much as closed minded right wingers would like to believe the world is not interconnected globalization is a fact of life.

The buzzwords in the winter of 2008 and into 2009 were things like urban homesteading, frugality, DIY, canning, etc.  You get the idea.  We were collectively abandoning a consumer lifestyle focused on buying a plasma television a few inches bigger than the perfectly fine working plasma television in the basement of our home that was half again as big as we needed.  We were all wondering if maybe we had lost something in the pursuit of more square footage, solid surface countertops, nine foot ceilings, and crown molding.  Well, how times have changed.

Or has it?

After eight decent years of economic recovery, which has been uneven and much slower than prior economic recoveries, experts are beginning to wonder if the new era of Trump will also coincide with a recession.  Despite the major stock indices hitting new highs on a seemingly daily basis there is ample evidence that maybe there is just a little gas left in the tank and recession is waiting on the doorstep.

What to do?

My solution is to turn inward and focus on a home based economy.  It’s sort of in line with my theory that the most subversive thing that we can do is nothing.  [LINK]  By focusing our efforts inside of our homes the emphasis is no longer necessarily on the things we buy to consume.  It is inward facing and not concerned with external judgment.

Maybe it is about mindfulness.  Maybe it is about frugality.  Maybe it is about all of those things that we pay lip service to in conversation but forget to act upon the minute we get an email touting the latest sale at REI.  I am as guilty of this behavior as anyone else and it is the single thing that I am trying to break myself from over the course of the next few months.  It is my hope that by focusing on the economy of the home that I will slowly begin to break my own cycle of consumerism.  In the process I hope to solidify household finances and achieve some measure of greater satisfaction.

That sounds great, but what does it mean in practice?

Take a look at the image below:


This is for the average “consumer unit,” so in reality you will spend more or less on items as your personal circumstances dictate, e.g. I do not smoke so I do not spend $323 per year on tobacco.  However, as a thought exercise it gets you to think about where you spend your money.

It’s easy to key in on the largest single unit related to “housing.”  Yet, for most of us our housing situation is somewhat inflexible because we have a mortgage, lease, etc.  It is easy for some blogger to scream “downsize” but the costs associated with that may actually make the option prohibitive.

Now, look at some of the other categories.  Transportation eats up the next largest portion.  Well, if you start basing your life around your home you will probably drive a lot less.  Trust me, once I started thinking about every mile driven being $0.50 tossed out the window I began to think about every trip I took by car and how I could reduce those miles.  Stay at home and you do not spend the money on transportation.  Yes, you will still spend money on insurance and tags for your vehicle but every mile not driven is less you spend on fuel and maintenance.

Food is the third largest contributor and another place where a home based philosophy can really make a difference.  Modern Americans spend a smaller share of their income on food than at any other time in the country’s history yet we still spend a lot of money both in and out of the home.  Plus, we throw away a lot of food.

The common thread throughout is by focusing on living a frugal life at home the expenses in a lot of these categories can be ameliorated.  If you are buying less stuff you are spending less money and producing fewer carbon emissions.  Like I said earlier the greenest thing you can do is nothing.

The Most Subversive Thing You Can Do Is…


Wait, what?  Nothing?

Yes, that is right, do nothing.  I do not mean do nothing in a political or activist sense.  Good lord no, please make sure that your elected representatives know very clearly what you think of their behavior in office and how that is going to make you vote in 2018.  Make their lives unpleasant by actually showing up to their town hall meetings—assuming they actually schedule town halls in their districts unlike Rod Blum—and let them know how displeased you are with their proposed legislation and Donald Trump.

When I say do nothing I mean stop participating in the consumer driven shell game.  Our consumption of stuff just feeds the beast.  We can rail against the political machine in Washington D.C. as much as we want but as long as we are filling our shopping carts the wheel will keep on spinning.

Do you think Exxon Mobil really cares about protests?  Not really.  They would care however if a measurable percentage of their customers stopped buying gasoline because they were commuting by bike.  How many?  Enough to flatten their growth curve and cause investors to panic.  Looking at the current state of oil markets a drop in demand of 5-10% is enough to cause major perturbations in price.  Could you reduce your personal consumption of gasoline by 5-10%?  Heck, all of us could probably do that without thinking.  No one is saying that you need to stop driving entirely, just reduce it by 5-10%.  The upside is that it costs nothing to do less driving.

Do you think WalMart really cares about anything other than its quarter versus quarter results?  Not really.  However, given that the counties that supported Hillary Clinton account for ~64% of the nation’s GDP if those voters were to stop patronizing WalMart the results would be staggering.  Remember, the game is now about growth and if companies cannot show a path toward growth the market will punish them.  Look at coal companies.  Once these companies could no longer show a clear path to growth, never mind declines in demand, the market punished the companies by withholding capital and the coal companies began declaring bankruptcy.  It costs nothing to not shop at WalMart.

Political activists constantly harp on us to “vote with our wallets,” but it is much more effective to vote by not opening our wallets.  Just shifting our spending from one faceless corporation to another is not going to create any kind of meaningful change.  If over a short period of time there was a measurable decline in consumer demand for stuff you would see some real change.  Granted, Republicans would probably start trying to pass legislation that guaranteed WalMart a certain amount of income because they love welfare when it is for corporations.

Doing nothing when it comes to consumerism is subversive because it goes against the dominant paradigm in modern America.  Heck, when we were facing the greatest existential threat to the United States in a generation George W. Bush implored us to go out and shop.  A stirring call to action this was not, but it does represent what passes for action in the minds of modern politicians.

Step back from the cash register and do nothing.  Put that book down and check out something from your public library.  Avoid that trip to the mall and see what unused items lurk in your closet that would be better served as a donation to the Salvation Army.  Resist the urge to go out for dinner and be truly revolutionary by cooking dinner for a group of people.  Heck, that may be the most revolutionary thing you could do because nothing smacks of “commie socialism” like sharing a meal with a group of people and expecting nothing return save for good conversation.  I can read the tweets from Donald Trump already “Sad.  Dinner without tableside service so un-American.  Mar-a-Lago will always be tremendous.”

Friday Linkage 9/19/2014

It’s a little light on the links this week. Life has a way of getting in the way of research and blogging on my hobbies. Damn.

On to the links…

Duke Energy Invests Heavily in Solar—Duke Energy is a big player in energy. Now the company is making a $500 million investment in solar. A total of eight projects will deliver 278 megawatts of clean solar power to the grid in North Carolina.

There’s a Place in the World that is Fighting Poverty with Solar Power—Solar power can be big improvement for the lives of people who live in countries with limited or no grid infrastructure.

A New Government Report Shows More Coal Plants Are Retiring Than Previously Thought—There is not a war on coal, per se, because the economic argument for burning coal is a losing proposition. Take a look at the map and see just how much coal generating capacity is going offline.

U.S. Moves to Reduce Global Warming Emissions—This is one of those “boring but important” announcements. The Obama administration may not be able to make any progress through Congress, but at least they can try and make progress other ways.

New Hydrogen Production Method Could Help Store Renewable Energy—The storage of renewable energy is a big deal because of the need for stable power and renewables inherent lumpiness relative to demand peaks. Maybe this is a way to “store” energy for future use.

Jatropha Biofuel Around the World: A 13-country Tour of Development Activity—Jatropha is an interesting feedstock for biofuels because the plant has some attractive qualities compared with more traditional feedstock like corn, soy, or palm oil.

California Drought: Dramatic Before-and-After Photos—If you do not believe in the severity of the drought gripping California spend a few minutes looking at these photos. If you are still not a believer, you are probably a Republican funded by the Koch brothers.

Zoos Weigh Pp the Costs of China’s ‘Pandanomics’—I am going to say it. Pandas suck. These obstinate little vegans are the absolute worst animals at the zoo. At least naked mole rats run around cool habitats. Pandas just sit there munching on bamboo and looking out with disinterested eyes. At least someone is questioning the value of playing into China’s hands when it comes to pandas.

The Truth about the Peer-Reviewed Science Produced by Japan’s Whaling—Regardless of the official numbers, the reality is that Japan’s whaling program has produced little if any scientific knowledge because it is a program designed to kill whales for consumption. It’s like asking the makers of “pink slime” about their scientific research of the sustainability of naturally occurring cow herds. It’s incongruous.

The Potential Impact of Local Food

Yesterday I wrote about the pending opening of the NewBo City Market and it got me thinking about the potential impact of local food.

“Shop local” is a mantra for a lot of people and it is a great way to help ensure that we have vibrant communities of businesses tied to the local economy.  Otherwise, everything will just be abandoned on the drive to WalMart.  Joy.

However, the next step is to not just “shop local” but to actually “buy locally made products.”  Why does this matter?  Even if you purchase goods from a local merchant, it is likely that those goods came from somewhere else not necessarily tied to your local economy.  In economic terms this is called leakage, as in your dollars are leaking from the local economy.  Granted, dollars are probably leaking from a lot of other local economies into your own but there are no guarantees.

Farmers markets and public markets, like the NewBo City Market, represent an opportunity to bypass to possibility of leakage because you are buying goods directly from local producers.  This puts the dollars in the hands of local producers without the loss of what a “middleman” would charge for distribution, etc.  But, really, how much of an impact can spending locally produce?

In Linn County there are ~214K people living in ~85K households with a median household income of ~$54K.  If each household could direct $10 of their food spend to local food merchants it would equal more than $44 MILLION dollars injected into the local economy.  At the median household income that level of spending could directly support over 818 households or just under 1% of the county’s households.

The local multiplier effect compounds the impact of this spending even more.  Depending upon the study a local merchant usually returns $52-58 to the local economy while the larger national merchants usually return $17-33.  At the low end, you are getting a three times return on the money in the local economy if it is spent with local merchants.  So, as the dollars you spent stay in the local economy the impact can be multiplied if those dollars continue to be spent with other local merchants.  Check out this study from the Idie Impact Study Series for a tidy summation of the impacts of local purchasing.

I don’t want to sound like some clown on late night television telling you to feed the children for the price of a cup of coffee, but $10 a week does not sound like too much to have such a great impact.  Plus, you can avoid shopping at WalMart where your soul is likely to get stolen or, at the very least, crushed by the depression that oozes from the bare concrete floor.

NewBo City Market and Local Food

On October 27th the NewBo City Market in Cedar Rapids, Iowa will open to the public.  I have watched the construction of the market with a lot of anticipation because I think it represents a golden opportunity to develop local food options.

Public markets have a long history in much of Europe—spend a morning wandering the Boqueria in Barcelona and you will understand the appeal—but the history in the United States is somewhat more checkered.  Our food culture is centered around the grocery store for better and for worse.  However, the growth of interest in food has pushed public markets to the forefront as a venue for local merchants and producers to have an outlet for sale to the general public without the overhead of a single owner occupied storefront.

Local food’s primary challenge is access to customers.  Large grocery store chains have standardized supply chains that require large volumes of products on very consistent schedules.  A local producer cannot meet the volume requirements or, depending upon the climate, the consistency requirements.  One solution is to form a co-op that aggregates producers’ products.  Five Acre Farm in New York is doing just that with a whole host of farm fresh goods.

The other solution is to have stalls and storefronts that can sell direct to the consumer.  In the summer, in Iowa at any rate, the solution is the farmers market.  Any day of the week in my part of this great state I can go to a farmers market and have access to the most delectable of seasonal delights.  After Labor Day, however, the choices of markets begin to dwindle.  This is not a major concern for the purveyors of fruits and vegetables, but what about the suppliers of products like meat or baked goods that do not have the seasonal constraints?

This is where the NewBo City Market will come in.  Local vendors—including florists, meat sellers, bakers, wine merchants, etc.—will have permanent stalls inside the renovated warehouse, which is quite a stunning transformation to witness if you take the time to look at the pictures on the Facebook page.  There will also be temporary stalls in the warmer months for markets and events.  It is going to be great.

Unfortunately, I am going to miss the opening of the NewBo City Market because I will be out of town on travel.  Walt Disney World calls…

What gets me the most excited is a chance to buy pork from Rustik Rooster Farms. Carl Blake at Rustik Rooster is breeding a new pig based on the prized Swabian Hall. A cross between a wild boar from an island off the coast of Georgia and the Chinese Meishan these pigs look nothing like the ones you think roam Old Macdonald’s farm.  Dare I say that they are cute?

Sure, it looks like someone grafted the face of a shar pei onto a black pig, but I digress.  Apparently the quality of the meat is second to none—even beating out the foodie favorite Mangalista breed in a competition in San Francsico.  The Des Moines Register did a nice write up of what is going on down at the farm.

Big Boy Meats will be one of the vendors in the market and they will be carrying pork from Rustik Rooster.  Check out their Facebook page for some photos of a visit to the Rustik Rooster farm.

If you thought U.S. unemployment was bad…

The unemployment situation in the U.S. is ugly right now.  The Bureau of Labor Statisics has a site that will show you the rate by state:

There are some truly bad unemployment numbers in states like Nevada (11.6%), Rhode Island (11.0%), and California (10.8%).  The national average stands at approximately 8.2%.

Compare that to Europe:

The EU27 unemployment rate stands at 10.3%, but there are some truly horrible pockets.  Spain (24.3%) and Greece (21.7%) are true basket cases.  Heck, there are 8 EU27 member states that have a higher unemployment rate than the worst U.S. state.

Germany, the paragon of modern industrial export oriented economies, has an unemployment rate of 5.4% which would put it on worse footing than Iowa (5.1%), New Hampshire (5.0%), Oklahome (4.8%), South Dakota (4.3%), Nebraska (3.9%), and others.

Why is this important?  In the coming months there is sure to be a debate about the forthcoming sequestration that Congress enacted a year ago to beat the debt ceiling deadline.  It’s a debate that is sure to include the concept of increasingly austere government budgets as an economic way forward.  Europe was on the leading edge of austerity in this recession and the economies of these countries look worse for wear because of it.

Never let evidence get in the way of a good sound bite though.

What Else Moves the Price of Oil

Assuming my correlation analysis was correct, the price of oil—a globally traded commodity—is the prime driver behind the price of a gallon of gasoline.  No stretch there.

What else besides demand moves the price of oil?  What do you mean?  Markets for commodities can be subject to several factors not the least of which are the relative value of currencies and traders taking positions that make markets. 

Relative value of currencies?  A dollar is a dollar right?  Just like a dollar today will not buy the same amount of goods that a dollar did twenty years ago, it may or may not buy the same level of goods in another country.  However, oil is a commodity that is commonly denominated in dollars.  The theory goes that as the value of the dollar decreases vis a vis other currencies traded freely internationally that the price will rise regardless of supply and demand to account for this weakness.  The counter is true that as the value of the dollar increases vis a vis other currencies traded freely internationally the price of oil will decline.

Does the data bear this out?  Without reinventing the wheel I will map the price of oil and the U.S. dollar index (DXY).  DXY is a measure of the U.S. dollar’s strength relative to a weighted basket of currencies.  Here is what the chart looks like:

Nothing to see here?  Not so fast.  Just as things can be positively correlated, as was the case with the price of gasoline and the price of oil, things can also be negatively correlated.  In this case the correlation coefficient is (0.77).  Which says that as the value of DXY increases the price of oil decreases.  It is not as strong as the correlation between the price of gasoline and the price of oil, but it is still strong.  Especially considering the size of the data set.  NOTE: As a rule, DXY trades in a much more narrow band than the price of oil, so the graphical representation is less than illuminating.

Getting at the concept of speculation’s impact on the price of oil is much more difficult.  There is no accepted metric that measures the level of speculation in a market in any concrete way.  Market watchers like to point to volatility as a measure of speculation or the level of trading, but those metrics fail to have a great level of correlation with the underlying price data.

Given that environment, the disconnect between the price of oil and the common levers of demand or dollar strength/weakness gives rise to the feeling that speculation is now one of the levers that impacts the market up and down.  I think that you see this in the massive decline in the price of oil in the second half of 2008 as speculators got out of positions and the price bottomed out.  Apparently, Bernie Sanders thinks there is a problem and I tend to agree with him.