Friday Music Fun: Radar vs. Wolf

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Lynne Kiesling

Some Friday fun listening from Nashville-based Radar vs. Wolf, a video from their debut album!

Radar vs. Wolf singer/songwriter James Bratton recently wrote a post on Bleeding Heart Libertarians articulating his particular take on political philosophy, and it’s a take I find congenial. Especially this part:

Why would I give them the legal power to regulate my whole life? And why would I claim for myself the power to regulate anyone else’s life?

… F.A. Hayek referred to such a mindset as “the pretense of knowledge.”

It is insanity for one person to put this kind of trust in another man or group of men, especially men who believe we exist solely in order to serve the “greater good.” Public choice theory and history have shown that “benevolent” men set above others are subject to the same faults and selfishness as the rest of us, regardless of the good intentions with which their offices were created.

That’s a pretty succinct articulation of my belief.

Happy Friday!

Course video 3: David Ricardo on rent and on trade

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Lynne Kiesling

David Ricardo: Principles of Political Economy & Taxation from Lynne Kiesling on Vimeo.

You may know David Ricardo for his pioneering analysis of comparative advantage as the foundation of mutually beneficial specialization and trade. Ricardo’s work goes farther and deeper than that, exploring (among other things) the determinants of rent accruing to fixed inputs like land, the distribution of income among landowners and labor, and the effects of taxation. Ricardo’s excellent analyses arise from his economic context of trade blockades during the Napoleonic Wars, and the ensuing Corn Laws that Parliament passed to block the importation of inexpensive grain to compete against those politically powerful landowners.

Course video 2: Adam Smith’s Wealth of Nations

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Lynne Kiesling

Here’s the second video for my history of economic thought course: a synopsis of Adam Smith’s Inquiry Concerning the Nature and Causes of the Wealth of Nations. The video gives an overview of the entire work (except for Book III, his stage theory of history), and I hope it entices you to read some or all of it for yourself!

Adam Smith: An Inquiry Concerning the Nature and Causes of the Wealth of Nations from Lynne Kiesling on Vimeo.

How cool WAS that? Not that cool, it turns out.

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Michael Giberson

While digging through the KP archives looking for another old story, I can across a 10-year old post titled “How cool is this?“

(Let me warn you now that there isn’t much more to this 2013 post other than to observe that not every cool-sounding technology in 2002 turned out to work. You already know that; you can stop reading now. -MG)

What seemed pretty cool at the time was a new bladeless turbine that the inventor said would drastically reduce costs in a number of applications. The Hydrogen Renewable Energy Enterprise, LLC in Hawaii was reportedly very excited about the possibilities and signed up to be the exclusive seller of the technology.

Since I hadn’t noticed bladeless turbines taking over the world, I wondered what became of the technology. Unfortunately, other than a bunch of press release inspired news reports from about 10 years ago, not a lot of information is findable online about Hawaii-based The Hydrogen Renewable Energy Enterprise, LLC.

Utah-based International Automated Systems, Inc. (IAUS), developer of the bladeless turbine technology appears to be still around. In addition to the bladeless turbine, the company has developed products including a automated self-checkout retail system and a fingerprint identification system. The newest technology seems to be a solar energy thermal system which can be used with the bladeless turbine. The company website lauds its solar technology as “Years Ahead of Schedule” and costing less than “the World Government’s goal for solar power cost per kilowatt by the year 2020.”

In June 2009 Renewable Energy Development Corporation contracted with Needles, California to supply the town with solar power based on the IAUS technology. In an interview published in November of 2009, REDCO owner Ryan Davies touted the IAUS technology, saying, “All of our engineering reports and research data indicate that this technology will be significantly more efficient than PV. We’re quite excited about it.” A year later REDCO was pleading with Needles to boost the $128 per MW price in the contract after REDCO “discovered … fatal flaws in the technology they were going to use. Those flaws included cost and efficiency issues.” In 2012 REDCO filed for bankruptcy.

Neldon Johnson, President and CEO of IAUS, is quoted as saying he thinks the technology would have worked, had Davies and REDCO attracted enough investment. Maybe, but IAUS has apparently attracted a detractor online who has collected information about the company: See http://www.iausenergy.com, particularly the page http://iausenergy.com/NewsHistory/index.html, and don’t miss the website’s collection of photos from the IAUS solar pilot plant west of Delta, UT.

That’s about it. No real surprises.

 

Course video 1: Smith’s Theory of Moral Sentiments

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Lynne Kiesling

For the past few months I’ve been working with some talented and creative folks at Northwestern University Academic Technologies to produce some videos for use in my History of Economic Thought course. Over the next few weeks I’ll be releasing them here, and they will be available on my Vimeo page. Please distribute them widely (they have Creative Commons attribution + non-commercial licensing)! Please also leave comments, questions, suggestions, related readings, etc. so we can extend the learning environment far and wide.

Adam Smith: Theory of Moral Sentiments from Lynne Kiesling on Vimeo.

In The Theory of Moral Sentiments, Adam Smith asserts that humans have an innate interest in the fortunes of other people and desire for sympathy with others. Humans are complex individuals in Smith’s theory – rightly motivated by self-interest, but also by the innate sociability and desire for sympathy from and with others that he observed empirically. Sympathy, which Smith defined broadly as fellow-feeling with the situations (not just the emotions) of others, forms the foundation of our moral judgment.

I’m intrigued by Smith’s concept of sympathy. Smith’s model of sympathy is a process of coordination between the self and others. The Smithian sympathetic process has three essential characteristics: sympathy as a synthesis of empathy with judgment based on reason, a spectatorial/external perspective on one’s own behavior and the behavior of others, and an innate capacity for imagination that enables individuals to place themselves in the situations of others. This sympathetic process leads to coordination of expressions and actions across individuals, resulting in harmony and social order. That’s an important sense in which TMS forms the philosophical and psychological foundations of Smith’s later works, especially the Wealth of Nations.

Another subject in TMS that undergirds WON and later work in economics is Smith’s discussion of justice and beneficence. Smith argues that (commutative, or negative) justice is necessary in order to have a peaceable and productive society, while beneficence is nice but not essential. From this argument he concludes that provision for the enforcement of commutative justice is a proper role of government, an argument he will pick up in Book V of WON.

I discuss both of these subjects in the video.

Some natural gas posts worth reading

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Lynne Kiesling

Last week the EPA released a report on the extent of methane release during shale gas drilling; the results indicate that methane release is substantially smaller than previously thought. According to an article in Fuel Fix summarizing the report,

The scope of the EPA’s revision was vast. In a mid-April report on greenhouse emissions, the agency now says that tighter pollution controls instituted by the industry resulted in an average annual decrease of 41.6 million metric tons of methane emissions from 1990 through 2010, or more than 850 million metric tons overall. That’s about a 20 percent reduction from previous estimates. The agency converts the methane emissions into their equivalent in carbon dioxide, following standard scientific practice.

The EPA revisions came even though natural gas production has grown by nearly 40 percent since 1990. The industry has boomed in recent years, thanks to a stunning expansion of drilling in previously untapped areas because of the use of hydraulic fracturing, or fracking, which injects sand, water and chemicals to break apart rock and free the gas inside.

Experts on both sides of the debate say the leaks can be controlled by fixes such as better gaskets, maintenance and monitoring. Such fixes are also thought to be cost-effective, since the industry ends up with more product to sell.

This excerpt reflects my thinking on the leaks — since methane is the product they are extracting to sell and the cost of managing leaks is relatively low (but not zero), the firm has a self-disciplining incentive to reduce leaks (although not eliminate them, since the cost is not zero).

In a post on the EPA report, Walter Russell Mead remarks that

Companies are developing more sophisticated leak detection systems, and unlike many other environmental problems (like, say, power plants’ greenhouse gas emissions), there is a market incentive to prevent these leaks without any sort of green interventionist policy. Every unit of methane released into the atmosphere during drilling is lost profit.

But that’s not stopping misguided greens like Bill McKibben from bemoaning the news. McKibben took this opportunity to stress the need to transition away from fossil-fuels altogether, rather than appreciating the fact that we’re extracting one of the cleanest fossil-fuels more efficiently and with much less environmental impact than ever before. McKibben’s blinders are firmly in place; we’re unlikely to see a revision to a post of his earlier this month in which he suggested that methane leakage might make natural gas worse for the environment than coal.

I’ve never found McKibben’s arguments compelling, and now I realize why: his advocacy for dramatic, fast changes does not reflect how real people in real-world, complex decisions make changes in their behavior. McKibben fails to think at the margin. He does not acknowledge that the long transition to cleaner fuels is already in process. Long transitions are typical in technological change; think about how long it took to transition from water power to steam power — 60 years! McKibben’s argument for sudden, dramatic change does not reflect economic thinking.

Happy birthday Hayek!

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Lynne Kiesling

Today’s Hayek’s birthday, a worthwhile landmark for reflection on his work and why it’s important to read. I assign “The Use of Knowledge in Society” in every class I teach, and I recommend it if you haven’t yet read it. Here Hayek argues that the fundamental economic problem societies face is not the allocation of a given set of resources based on a given set of preferences and technical capabilities; instead, the coordination of decisions and actions among interacting individual agents with diffuse private knowledge and plans forms the basis of economic activity. The diffuse and private nature of knowledge hampers such plan coordination, but out of human interaction, institutions emerge that enable decentralized coordination. Prices and market processes compose an institution for coordination in the face of the knowledge problem. Moreover, Hayek argued, knowledge transcends “scientific” information, there is no given and uniform set or distribution of data, and such information fails to capture all knowledge relevant to both static and dynamic decision-making and coordination.

Hayek’s substantial insight in this work, one that has become largely incorporated into mainstream economics, is that the price system operating through market processes is an effective, parsimonious (but not perfect) means of generating, signaling, and aggregating such knowledge. Prices cannot convey all individual knowledge pertinent to a particular economic decision, but they do serve as knowledge surrogates by communicating some private knowledge (Horwitz 2004). Coordination of individual actions and plans emerges as a beneficial consequence of the price system; thus the price system and market processes enable emergent, or unplanned, order.

Hayek characterized the fundamental economic problem not as the static allocation of scarce resources among uses by omniscient agents, but rather as the coordination of actions and plans among dispersed agents with diffuse private knowledge. In his statement that “… the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess” (p. 519), Hayek draws on the earlier arguments of the socialist calculation debate and of his (1937) work. The “man on the spot” (p. 524) has subjective, private knowledge of “the particular circumstances of time and place” (p. 522), and that knowledge is among the decision-relevant data that cannot be aggregated except through a decentralized system of prices and a market process of exchange to determine those prices. Prices economize on the communication and interpretation of knowledge among dispersed agents.

How do individuals learn the plans of others? How do we learn when we are wrong and take action accordingly? Prices and market processes provide feedback channels. Feedback loops, learning, adaptation to a changing environment and changing actions and plans of others, interdependence of agents and their actions in a complex system, and how prices and markets serve as feedback loops making a complex system adaptive – all are important implications of Hayek’s argument. Prices provide profit opportunities and realized profits, and those realized profits serve as feedback that can spur the discovery of new products, services, business models, or other ways to create value through economic activity. Alert entrepreneurs see these opportunities, learn from observed and realized feedback, and adapt their plans accordingly. Prices enable “error detection and correction within the market” (Boettke 1998, p. 135). Markets are processes for social learning and provide feedback channels for entrepreneurial alertness.

This post is drawn from my article, “Knowledge Problem” (SSRN link), which is included in the forthcoming Oxford Handbook of Austrian Economics (Peter Boettke and Chris Coyne, eds.).