Lynne Kiesling
I offer you my best holiday wishes. What I wish for you, indeed for all of us, in this holiday season and into 2012 and beyond, is a life rich in liberty, toleration, peace, and good will.
And, in the spirit of my friend Sarah’s wise invocation for us to light our candles to beat back the dark that surrounds us now, I offer you this candle. Happy holidays.
Lynne Kiesling
As a quick follow-up on my earlier post on music, harmony, and social cooperation, here’s a lovely video of Stile Antico singing Palestrina’s Assumpta est Maria:
And, since we attended the Chicago Symphony’s Welcome Yule concert last night and it was lovely, here’s a snippet of Handel’s Messiah, from the choir of New College, Oxford:
And here’s Cantata V from Bach’s Christmas Oratorio to round out the Renaissance-Baroque experience:
I hope music brings you joy this season, and in all seasons!
Lynne Kiesling
I am a big fan of English renaissance choral music, particularly sacred polyphony from Tallis and Byrd (and stretching back to Taverner, but he’s not as distinctively polyphonic). One of the best ensembles performing such music is Stile Antico, a group of 13 British singers who do an outstanding job with this music, and whose recordings I have recommended here before. Especially at this time of year, their music really resonates and adds joy and beauty to life.
A couple of weeks ago we got to hear Stile Antico perform live in Milwaukee: Thomas Tallis’ Puer Natus Est mass interspersed with pieces from Byrd, White, and Taverner. The music was gorgeous, the voices delightful, and the artists charming and gracious.
But what really struck me was their method of decentralized coordination. Typically when we think of musical performance beyond, say, a chamber quintet, coordination involves hierarchy in the form of a conductor, to “keep everyone on the same page”. The larger the number of performers doing different things, the harder to coordinate, and therefore the greater need for a conductor … right?
Not so in this case. 13 singers, each with a particular part, bringing a distinctive element to the work. But in some ways the music is simultaneously so lush and yet so spare that if their timing is off, the beauty of the result is diminished. 13 singers with no conductor, and they coordinate by taking their visual and verbal cues from each other in a dynamic and evolutionary manner. This is a vivid example of decentralized coordination.
Of course the goal is harmony (in the general sense). If each individual acts and reacts to the actions of the other individuals in a way that produces a harmonious outcome, that’s beauty. And it’s an emergent outcome; each has his or her own score and acts accordingly, adapting to the actions of the others in a way that creates emergent harmony.
The music metaphor illustrates achieving emergent order through decentralized coordination, and it’s a metaphor for social cooperation too. Adam Smith employs the harmony metaphor for social cooperation in The Theory of Moral Sentiments, in which he invokes harmony as a desirable outcome of social interaction repeatedly (and refers to the music metaphor directly in the last reference). Note the emphasis on harmony as distinct from uniformity — each individual brings personal, private, heterogeneous features to social interaction (whether musical or economic), and they are not the same, not uniform. Each has an incentive, a desire to coordinate, to harmonize; in music it’s finding the complementary notes, in social systems it’s grounded in our innate desire for sympathy and mutual sympathy, according to Smith. Each individual brings something different to the party/performance/market. The most beautiful and sublime outcomes emerge when each acts on its individual traits with a view toward creating harmony and sympathy. And it does not necessarily require the top-down imposition of control or system-wide hierarchy, but can be achieved through decentralized coordination.
Of course there are limits to applying the music metaphor to institutional design and social cooperation, such as the scale/number of actors. But it reminds us of the possibility of cooperation and harmony through decentralized coordination, without the need for imposed system-level control.
Lynne Kiesling
An excellent holiday present for us all, from my friend Sarah: a free-market take on the classic Grinch tale. A taste of its poetic deliciousness to entice you to click through and read the whole poem:
Then he walked right inside. Didn’t ring, didn’t knock.
(Property rights are respected by folks who read Locke.)
Then he slithered and slunk, that legislation-mad demon,
Around the whole room, and he took every freedom!
Cigars! Motorcycles! The schools! And their guns!
Freedom to travel! He took every one
And he made regulations
to stop them all. (Grinches adore legislation.)Then he slunk to the icebox. He took the trans-fat!
He took the raw milk! And the sauerkraut vat!
He cleaned out the fridge; took their bathtub-brewed booze.
Why, that Grinch even took their last freedom to choose!
Love, love, love.
Lynne Kiesling
As is the vernacular these days, your response to the title of this post is probably “I know, right?” Or, if you prefer sarcasm, you may say “no, really?” This is the conclusion of an all-too-rare piece of investigative journalism from Dan Garino at the Columbus Dispatch:
Ohio’s unique system for setting electricity rates has created a quagmire of regulations that have benefited industry over consumers. …
The rate increases stem from a complex regulatory approach unlike any other in the country, one that combines elements of both regulated and free-market systems.
Beyond that, The Dispatch found during a yearlong investigation that the state’s regulatory structure misses what many observers see as the underlying problem: Utility companies have tremendous political power that tends to overshadow consumers’ needs in the process.
This lengthy article goes into detail on the legislative history of electricity restructuring in Ohio and the political economy of utility lobbying of legislators, as well as the role of the Public Utility Commission as regulator in this hybrid restructured state. If you are interested in electricity or the political economy of regulation, it’s a worthwhile read — a case study in public choice theory.
In its early years of restructuring, Ohio was held out as a leader with strong potential for consumer-oriented retail competition, but over time that competition has not emerged. One of Ohio’s institutional innovations was “aggregation”, or allowing municipalities to act as a retail aggregator on behalf of a set of customers, in that case its residents. But Ohio’s legislators and regulators did not pay adequate attention to the unintended consequences of the political compromises they made that would continue to serve as entry barriers to potential retail competitors, including aggregation.
In terms of the PUCO regulatory procedures and the processes through which debate and discussion are supposed to happen, the article makes a lot out of the unanimity of the Commission’s decisions, but does not dig into the very formal (and formulaic, I think) procedures for filing comments on cases. That process, and its positive and negative consequences, is in and of itself worthy of a lengthy analysis; because of that process, most issues that the commissioners have are likely to be resolved before the ultimate vote, so unanimity is not that surprising. It’s not unique to Ohio, though.
I don’t want to comment on the particulars of Ohio, but I think that most of the states that have implemented regulatory restructuring have a similarly tortured legislative and regulatory story to tell. This Franken-restructured status arises out of a politically-motivated desire to “ring-fence” competition, to capture the benefits of utilities being able to purchase power in competitive wholesale markets, but to control and manage the retail market in ways that create the (realistic, IMO) impression that retail customers are still subject to the regulated monopoly. Ohio’s record on that front is not good, but Ohio is not alone in that camp.
Lynne Kiesling
Happy holidays! If you are traveling by air this week to share the holidays with family, you have my sympathy … on the TSA front, not on the family front (but some of you may be dreading that too …). Whether you are subjecting yourself to the TSA’s invasiveness this holiday season or not, you’ll laugh wryly at this Reason.tv/Remy collaboration:
“In seasons past, Grandma only had to worry about getting run over by a reindeer. With “Grandma Got Run Over by TSA,” web sensation Remy gets us in the holiday mood with a song about Christmas, Homeland Security, and the joys of civil rights abuses.”
Lynne Kiesling
When I read Gina Kolata’s New York Times article on the inaccuracy of GPS watches, I was not impressed with her journalism and her analysis. Her main theme was that we spend all of this money on GPS watches to record our training, and they aren’t even accurate. Her example:
On Sunday, I tried a little experiment with friends who also have GPS watches. I started from my house, and Jen Davis and Martin Strauss started from her house; we met up along the way.
My route was 15.96 miles, according to Google Maps. My watch said it was 15.54. Jen’s watch, an older model, did much better. Her route was 19.1 miles. Her watch said 19.02.
First, it’s impossible to interpret her two data points because she indicates nothing about the age of the devices, the brand, the software version, and so on. All GPS devices are different, and she does her readers a disservice by glossing over those details and by not informing them of the changes in GPS accuracy as the hardware and software have advanced over the past decade. Second, her device performed at 97.38% accuracy and her friend’s at 99.58% accuracy. What do they expect, 100%? You don’t have to be a statistically-literate scientist or social scientist to have a realistic expectation that anything north of 95% accuracy is acceptable. Even a Type A data-centric recreational athlete should not have expectations of 100% accuracy!
You may have read this same article because Glenn Reynolds linked to it at Instapundit. Unfortunately, I don’t think he reflected critically enough on the article.
For a more thorough analysis of GPS devices, and a thorough debunking of Kolata’s article, I recommend the DC Rainmaker blog. Ray is famous in multisport athlete circles for his thorough, detailed reviews of training devices and their performance. He argues that Kolata missed the boat in her conclusion that GPS devices are unreliable training partners. His critique focuses on two essential facts to remember when using a GPS device. First, as I alluded to above, not all hardware/software are the same, and software updates can improve accuracy:
In the world of GPS watches, the reality is that not all devices are created equal. As I’ve shown before in four posts of accuracy tests, some units do simply perform better than others. Sometimes that is correlated to price, and other times it’s tied to the GPS chipset used and/or the firmware. To base the entire article (and all GPS watches in general) on what appears to be a single watch on a single run being off seems a bit of a stretch. For example, when the Timex Global Trainer first came out, there were indeed accuracy issues with it. On average, it was 2.5% off (short) – was her watch a Global Trainer? Or perhaps, it was an original Garmin FR610 – which also had issues early on with some routes showing about 2% short. Yet, both have been fixed by their respective companies (June for the FR610, August for the Global Trainer).
I found it strange that the author didn’t note the brand, nor contact them for an official reason, explanation, or PR response. Isn’t that the most basic journalistic thing to do?
In my mind, this is no different than saying “cars are unreliable”, because your particular car is in the mechanics shop. As in fact the author noted, her friends route was just about spot on, within .08 miles after 19 miles – or 99.58% accurate.
Second, and this is interesting, the Kolata article focuses on complaints that race directors get after races from runners when their GPS distances do not match the stated distance of the race. But Ray points out that you can get mismatch if you take corners wide in the race:
As I’ve gone into in (probably painful) detail in the past, when you’re running a big race with lots of folks, you usually end up running quite a few corners wide. And those corners add up. Remember that races are measured according to USATF standards and certified non-GPS devices, which require that the measuring person take the absolute shortest possible route during the measurement, right up to the edge of the curb. That’s not how the vast majority of folks run their races though. Instead, most folks are forced into much wider paths, often with swerving around other runners. Every time you swerve around a runner – you’ve probably added 5-10 feet to your path.
He also looks at some race results that suggest that faster runners end up running more accurate distances, in large part because they are running with fewer people and less congestion, and thus do not have to take corners wide to avoid other runners as much.
In my own experience, GPS accuracy has gotten better over the 5 years that I’ve trained with a GPS device. I currently use a Garmin Forerunner 610, and for reasons I won’t bore you with, when I ride my road bike I use it as well as a CycleOps non-GPS computer that is paired with my PowerTap. Both devices generally yield distance estimates within 2% of each other.
Thus, if you are considering a GPS device and the Kolata article made you think again, I would not give her article much credence, because I don’t think she really understands the technology space or the importance of the details involved — an example of very superficial journalism. Instead, bookmark DC Rainmaker and use his detailed reviews to guide your purchases.
Lynne Kiesling
Pale Rider is one of my favorite Clint Eastwood movies. One of its central themes revolves around classic property rights concepts in a community of miners that includes a number of small pan miners and a family that has built a larger, hydraulic mining operation that essentially uses pressurized water to blast rock hillsides apart and release the valuable gold therein. This hydraulic mining harms the mining potential of the downstream pan miners, reducing the value of their property. It’s a vivid example of property rights and Coase’s point about the reciprocal nature of costs when the actions of community members are interdependent. Of course, as director Eastwood heightened the dramatic conflict by making the hydraulic mining family greedy and mendacious, but that’s not necessary for there to be an underlying property rights conflict.
Pale Rider came to my mind yesterday afternoon, when I happened on an interview with Daniel Yergin on Fox Business. The interviewer asked him about fracking as a “new” technology and the US prospects for energy independence (oh, how I wish people would just get over that), and he pointed out that fracking is being used both for natural gas and for “tight oil” (which all KP readers know thanks to Mike, but I think a lot of people don’t). But Yergin also corrected her assertion that fracking is a new technology, mentioning very briefly that this technique in one form or another has existed for a long time. Fracking as we know it has been around for decades, but almost as soon as Evangelista Torricelli discovered atmospheric pressure and the vacuum in 1643, people started exploring using pressurized fluids to do work that they and their animals could not. In the 19th century that included hydraulic mining to get at subsurface mineral deposits.
Yergin’s remark triggered my Pale Rider memory, and the economic parallels between the issues in using hydraulic mining in Pale Rider and hydraulic fracturing today are strong — conflicts over the use of resources with ill-defined property rights, environmental impact, changes in potential profitability of using resources in different ways, etc. In particular, conflicts arise about the quantity of water used and water quality post-fracking. Again, thanks to Mike I think we understand those issues well.
I’ve been wondering about the next step in the chain of Coasian logic: if property rights and legal liability are defined so that energy companies are liable for harms they create (water scarcity or contamination), does that induce harm-reducing innovation? In the abstract, theory suggests that such innovations would fall into the two categories, waterless fracking and water remediation and purification.
And it is happening, although in its infancy and still more expensive than using water. Consider this Forbes article from Erica Gies about innovations in waterless fracking. The relative value of such innovations is going to be highest in places like Texas, as she observes:
Water shortages and conflicts are on the rise due to increasing population and climate change–caused fluctuations in precipitation that are making drought more frequent and severe in some places.
One of those places is Texas, where this summer’s mega-drought invoked comparisons with the 1930s Dust Bowl, as ranchers sold their emaciated animals for a song and agricultural losses soared to more than $5 billion.
As a result, gas industry projects in Texas had to scale back, as energy producers scrambled to find sufficient water.
She then points to a couple of different approaches being developed — liquified (again note the role of atmospheric pressure!) propane gel injected instead of water and which may be reusable, and a vapor “foam” that may reduce water use by 95 percent. I think her conclusion accurately captures the tradeoffs involved, and the role that innovation can play in reducing harms from fracking:
These technologies are in their infancy, and many questions about efficacy, impacts, and cost remain to be answered before they could move into widespread use. And of course, reducing water consumption does not mitigate concerns about prolonging our reliance on fossil fuels or the inherently ugly nature of extractive industry, especially for local neighbors.
But for the gas companies, although such technologies are currently more expensive than water, they offer the promise of reducing myriad headaches and expenses, including costs for hauling water and sand, repairing roads damaged by heavy truck use, and managing water pollution, including “produced” water disposal.
Gies wrote earlier in the year about innovations in water cleaning and business opportunities for wastewater treatment companies, providing concise background on the use of water in fracking. I also read an article last week (that I can’t locate now) about the potential to use technologies developed for oil spill cleanup to clean fracking water. Innovation changes some of the tradeoffs involved in fracking.
Michael Giberson
Yesterday I disputed the analysis by which the Breakthough Institute wanted to claim credit on behalf of the federal government for the shale gas boom; today I dispute their claimed broader implications for federal energy R&D policy.
Late in their op-ed, the Breakthrough folks shift emphasis from a narrow drilling technology story to a broader examination of energy R&D policy:
Giving the federal government credit where it is due takes nothing away from Mitchell, who was determined and tenacious. But the lesson of the shale gas revolution is that we should not be so quick to judge government investments in energy technology. Between 1978 and 2007, the Energy Department spent $24 billion on fossil energy research. Billions more were spent through the Gas Research Institute and non-conventional gas tax credits. Those investments were widely panned as a failure during the ’80s and early ’90s, when gas was plentiful and cheap.
Whatever one thinks about shale gas today — we worry about its environmental consequences — there’s no denying the extraordinary economic return on taxpayer investments.
This last point is interesting, but undeveloped in the article. If one were to calculate the “economic return on taxpayer investments,” would one have to conclude they were extraordinary?
The essay ultimately wants to argue against claims that the Solyndra episode proves governments can’t pick winners and the shale gas boom proves private enterprise can. Defenders of subsidies for solar power projects claim critics are too focused on a single failure, Solyndra, when reasonably critics should be assessing the overall portfolio of projects supported. It is a fair observation, but it may turn against their conclusion. If we are to consider the return on “taxpayer investments” in energy R&D, we’d reasonably need to survey the full portfolio of energy technology concepts funded by the federal government. We’d have to count the winners and losers both, based on the best current understanding, and again (as yesterday) we’d want to work out some idea of what would have happened in the energy technology space without federal government intervention. Further, we wouldn’t just worry about the environmental consequences, we’d have to compute some estimate of the costs and include it in the analysis.
The article goes nowhere close to presenting the relevant case. Near the end of the article they claim federal credit for “nuclear power, natural gas turbines, solar panels, and wind turbines — pretty much every significant energy technology since World War II.” Hmmm, notice they don’t mention the other big selectively-cited-by-critics failure: the Carter-era launch of an$88 billion effort to make oil from coal. Like the Solyndra and Synfuels Corp. complainers, the Breakthrough Institute wants to draw policy implications for an uncertain future based on a selective invocation of history.
It is further a kind of mistake to invoke Solyndra in an essay all about energy R&D policy. Much recent taxpayer-extracted support for energy shows up in the production tax credit, the investment tax credits, the Section 1603 Treasury grants and miscellaneous other subsidies that are directed to help promote the fortunes of companies building renewable power components or producing power via renewable sources. While some of these companies are pursuing technological developments, these subsidies are not tied to research in any substantial way and yield very little in the way of publicly available research results. Try gathering detailed data on production from a wind farm or solar power plant benefiting from millions of dollars in taxpayer-supported subsidies – their lawyers will likely tell you it is commercially-sensitive information and not publicly available. And by the way it isn’t just renewable energy, the lawyers for subsidized production from low-output oil and gas wells will likely say the same thing.
There is a respectable public good argument that can be made in support of subsidizing at least some research. The “extraordinary economic return” that the Breakthrough Institute wants to claim on behalf of government subsidized research into oil and gas drilling technology is this kind of an argument. If Breakthrough wants to drag Solyndra and the full range of energy production subsidies into this argument, an economist looking for a respectable public good argument has got to ask: where is the public good in subsidizing private energy production from projects that hide publicly useful information from public review?
Michael Giberson
In the Washington Post the folks at the Breakthrough Institute try to learn us some history about the shale gas boom. Maybe you think the shale gas boom was some big surprise suddenly made real after the decades-long work of a hard-headed oil and gas guy – George Mitchell – willing to spend millions of dollars on the crazy idea that hydrocarbons stuck in a rock could be produced economically, once the right mix of technologies could be brought to bear.
Wrong, says the Breakthrough Institute, credit the shale gas boom to the federal government.
They have their reasons:
There are a few more similar points. The article pursues a larger goal – some statement concerning current energy policy support – but today I just want to consider how to assess the credit for technological advancement. (See tomorrow for part II.)
A fair analysis of credit and blame requires more than just a recounting of history, such as provided in the article, we need also to construct a counterfactual history for comparison. Should we reasonably believe that but-for the energy technology programs of the Department of Energy, we’d be unable to produce natural gas from shale? It would be difficult to do this analysis well, and the authors don’t attempt it here, but a full assessment calls for it.
A sketch of technology developments may be helpful. Note that fracturing as a well-stimulation technology started in Pennsylvania in the early 1860s. A few clever folk discovered dropping gunpowder down a well, later liquid nitroglycerin, often brought marvelous returns. Edward A. L. Roberts submitted a patent application for the process in 1864. Hydraulic fracturing technology was first developed by Standard Oil (Indiana) in the late 1940s. In the 1960s, Project Gasbuggy had the federal government collaborating with the oil and gas industry to test a nuclear-weapon based fracturing technology on federal land in New Mexico. The Breakthrough Institute’s story picks up in the 1970s, but what the backstory reveals is a history of efforts to develop fracturing technology, funded privately in some cases and publicly in others. Department of Energy involvement may have shaped the direction of research, but I suspect its pool of research funds was merely convenient to technological advancement and not necessary. (More recently, GasFrac Energy Services of Alberta has pioneered a propane-based fracturing technology.)
Directional drilling, a precursor to horizontal drilling, first became practiced in the industry in the 1920s – well before “two government engineers … patented an early-stage directional drilling technology” in 1976. (See “Slanted Oil Wells,” published in Popular Science magazine in 1931.) As with hydraulic fracturing, the industry found the technology quite useful in application and companies pursued technological advancements. Taxpayer funding may have been convenient support for the oil and gas industry, government research involvement may have shaped the direction of directional-drilling research, but the industry would have pursued the technology in any case.
So possibly the federal government’s involvement advanced by a few years the technologies that were finally blended in a sufficiently promising mix by George Mitchell. Even if we grant as much, it isn’t the whole of the shale gas boom that federal involvement gains credit for, just the added value that comes from shifting shale gas production forward by a few years. Of course possibly the whole of the federal government’s involvement in the industry – tax policies, regulatory policies, antitrust policies, federal lands policy, and so on – could reasonably be counted as delaying technological advancement when compared against what would have happened under some more rational regime.
Admittedly, they were just writing an op-ed and I’m complaining that they didn’t do a dissertation’s worth of work to support it. Maybe my complaints are a little unfair.
Okay, here is an offer: I’ll admit my complaints are unfair if they admit that their analysis was insufficient to justify their conclusions.
You are currently browsing the Knowledge Problem blog archives for December, 2011.
