Author Archives: rdmyers75@hotmail.com

Robert Gordon Revisited

In Robert Gordon’s chapter in the e-book Secular Stagnation: Facts, Causes and Cures, which I reviewed recently, he claims that he never said technological progress is slowing down, but only that future progress will be similar to the rate of the 1970s to now, not the faster rate that happened before the 1970s.

His main argument is that technology will not grow fast enough to offset economic “headwinds”, including population aging, inequality, government debt, and poor education. I don’t deny that these are all problems that we should be trying to address with better policy, and that addressing them would yield benefits. Gordon gives a policy presciption for the U.S. to address them:

My standard list of policy recommendations includes raising the retirement age in line with life expectancy, drastically raising the quotas for legal immigration, legalising drugs and emptying the prisons of non-violent offenders, and learning from Canada how to finance higher education. The US would be a much better place with a medical system as a right of citizenship, a value-added tax to pay for it, a massive tax reform to eliminate the omnipresent loopholes, and an increase in the tax rate on dividends and capital gains back to the 1993-97 Clinton levels.

However, where he doesn’t convince me is his argument that a constant rate of technological progress can’t lead to big gains. If the rate of increase in technology is constant in percentage terms, that means the level of technology is growing exponentially. We are constantly building on the advances of the past. There may be long periods when it seems like nothing is happening, but progress is actually happening behind the scenes, and then it suddenly seems to burst onto the commercial scene. Gordon actually talks about how the technologies that led to very fast productivity growth in the mid-20th century were actually inventions of the late 19th century (electricity, the telephone, etc.). It took a few decades for the technology to kick into everyday life. The 1970s to the present have been a time of huge advance in computer technology, so even if the lag times are not decreasing it should be about time for that to kick in. Biotechnology would be another couple decades behind, since the big advances in genomics started to happen in the 1990s. But there are reasons to be hopeful that the lag time between advances tends to decrease over time. So technology may be increasing not only at a constant percentage rate, which means exponential growth, but the rate of exponential growth itself may be accelerating. Ultimately, this lag time determines whether we are in for a lost decade or two as Gordon’s “headwinds” kick in before the next wave of technology-driven improvement. Of course, Gordon like most economists leaves out some other possible headwinds such as climate change, energy, and food, not to mention the really bad stuff like wars and pandemics.

Donella Meadows

Here is Donella Meadows explaining how your bathtub is like your bank account.

If you’re about to take a bath, you have a desired water level in mind. You plug the drain, turn on the faucet and watch until the water rises to your chosen level (until the discrepancy between the desired and the actual state of the system is zero). Then you turn the water off.

If you start to get in the bath and discover that you’ve underestimated your volume and are about to produce an overflow, you can open the drain for awhile, until the water goes down to your desired level.

Those are two negative feedback loops, or correcting loops, one controlling the inflow, one controlling the outflow, either or both of which you can use to bring the water level to your goal. Notice that the goal and the feedback connections are not visible in the system. If you were an extraterrestrial trying to figure out why the tub fills and empties, it would take awhile to figure out that there’s an invisible goal and a discrepancy-measuring process going on in the head of the creature manipulating the faucets. But if you watched long enough, you could figure that out.

Very simple so far. Now let’s take into account that you have two taps, a hot and a cold, and that you’re also adjusting for another system state — temperature. Suppose the hot inflow is connected to a boiler way down in the basement, four floors below, so it doesn’t respond quickly. And you’re making faces at yourself in the mirror and not paying close attention to the water level. And, of course, the inflow pipe is connected to a reservoir somewhere, which is connected to the whole planetary hydrological cycle. The system begins to get complex, and realistic, and interesting.

Mentally change the bathtub into your checking account. Write checks, make deposits, add a faucet that keeps dribbling in a little interest and a special drain that sucks your balance even drier if it ever goes dry. Attach your account to a thousand others and let the bank create loans as a function of your combined and fluctuating deposits, link a thousand of those banks into a federal reserve system — and you begin to see how simple stocks and flows, plumbed together, make up systems way too complex to figure out.

mandatory urban water restrictions in California

According to NPR, the drought in California is leading to mandatory water restrictions in urban areas.

  • A reduction in water use by 25 percent for California cities and towns.
  • New pricing structures by local water agencies to encourage conservation.
  • Replacement of 50 million square feet of lawns throughout California with “drought tolerant landscaping.”
  • Rebates for water-efficient appliances.
  • New reporting guidelines for agricultural water users.

According to Slate, urban areas and industry together make up about 20% if water use in California. Agriculture makes up the other 80%.

Secular Stagnation

The “secular stagnation hypothesis” has now been around long enough that it has a nickname – SecStag. The basic idea is that the world may have entered a period of low economic growth that is going to persist for a long time, and governments need to start responding to it. This long ebook has chapters from a number of famous economists, including Larry Summers, Barry Eichengreen, Robert Gordon, Paul Krugman, and Edward Glaeser.

It’s hard for the non-economist to summarize, but I’ll try. Some of the ideas are:

  • The real interest rate is essentially the price of borrowing money. When people want to save (loan it out) more than other people want to borrow (invest it in new capital, infrastructure, inventions, business activity), it suggests that the rate of innovation, or profitable new investment possibilities, might have slowed down.
  • One way the rate of new profitable investments would slow down is if the rate of technological progress has slowed down compared to what it was over the past 50 years or so. Some are suggesting that.
  • Another possibility is that the type of technological progress that is occurring is harder to turn into profits than in the past, meaning it is not showing up in the traditional tracking numbers.
  • Another way is if governments are investing too little in infrastructure, and companies are investing too little in research and development because they are uncertain whether it will pay off.
  • Another way is if people are saving more for a rainy day, because there are more people nearing retirement as a fraction of the population than there used to be, and/or people and firms are saving because they are uncertain about the future, for example because they fear losing their jobs or having to may large health care bills.
  • Another possibility is that innovation is occurring, but only benefiting a few rich people and corporations at the top of the income scale, so that the average person is not benefiting.
  • A final possibility is that workers’ skills became obsolete because they were idle for too long after the recession hit. The idea that education is inadequate is also similar to this.

I think the explanation for the recent low GDP growth could be some combination of all of these, although I have a lot of trouble buying the lack of innovation hypothesis. Corporate profits and stock markets seem to be up, suggesting to me that profitable innovation is occurring but benefiting only a chosen few.

The automation vs. employment debate isn’t mentioned very much here, and climate change is mentioned only once in the 179 page book.

Lee Kuan Yew

Lee Kuan Yew, the founder and long-time leader of modern Singapore, passed away on March 23. I regret I never saw him in person, but I did live in Singapore from 2010-13 and read his memoir From Third World to First. His accomplishments are extraordinary whatever you think of him. The western press is a little unfair in constantly calling him an “autocrat”. It’s true that he outlawed short skirts and long hair for a time, censored foreign publications, and locked up a few Communists for decades without a proper trial. But that was the Cold War, and before you judge, you have to consider the utter chaos and climate of fear that was going on all around Singapore in Indonesia, Malaysia, Vietnam, Korea, China, and pretty much the rest of Asia at the time. Singapore stayed relatively calm, peaceful, safe, and eventually became prosperous on his watch. Singapore has a parliament with regular elections. They are dominated by one party that only considers a narrow range of policies, partly because that party is popular and has served the people well, and partly because there are strong barriers to entry built into the system for opposition parties that might consider a wider range of policies. But replace that one party with two parties that are only slightly apart on the narrow range of policies they consider, keep the barriers to entry, and you have the U.S. system.

Economically, Singapore took full advantage of its critical location in the global shipping network. They focused on foreign direct investment to build industry first in low wage manufacturing, and gradually built up to advanced industries today such as refining, chemicals, drugs, technology, finance, etc. They have something called the “central provident fund” – this is a personal social security account that people save their money in (it’s not optional) for retirement, housing, and medical care. This money gets invested in the local and global economies and earns a good rate of return. Almost all housing is developed by the government and subsidized – but it is not exactly “public housing” as we think of it in the U.S., because it is owned rather than rented. So it’s more like a condo where the government is your condo association. You can buy your first unit at a discount to the market price, then resell it later at the market price, although the government puts some limits on who can buy where and when. So the combination of this housing scheme and savings scheme has built a fairly broad base of wealth for the population without resorting to a large income redistribution or social insurance scheme like we see in Europe and the Anglo-American countries. Lee famously believed that this would be counter to “Asian values”, part of which is maintaining very tight family units that take care of each other in times of need.

Although I enjoyed my personal time in Singapore, it was a little too cold and corporate for my taste. Too many people seemed to view accumulating wealth and designer handbags as the primary objective of everyday life. Although I agree that people were tolerant of religious and ethnic diversity, I perceived a coldness between strangers on the street, and even between neighbors, that I found disturbing compared to the way people treat each other in the U.S. and elsewhere in Southeast Asia. People sometimes expressed petty racial and class-based attitudes that would at least engender some guilt in other places. Sometimes I felt that Singaporeans have allowed themselves to become the perfect example of the new Homo economicus species described in the economics textbooks. The country also has some demographic challenges – fertility rates are low partly because women have so many more career and life options available to them than in the past. This is great, but because Singapore is so small it is going to mean a dramatic drop in the native-born population. Immigration can compensate in terms of numbers, but the culture and sense of nationhood will somehow have to adjust to this. A shared love of designer handbags is not a good cultural foundation for a nation.

Singapore has an unbelievable PR machine. You should assume that things there are never quite as rosy as the propaganda they put out, nor as bad as the western press sometimes accuses. Regardless, it is pretty amazing to think how far it has come since the ashes of World War II, and hard to point to another figure who has created a prosperous modern country through sheer force of will like Lee Kuan Yew.

groundwater

This paper in Water Resources Research is about global groundwater depletion and pollution, and how groundwater can be managed better.

With rivers in critical regions already exploited to capacity throughout the world and groundwater overdraft as well as large-scale contamination occurring in many areas, we have entered an era in which multiple simultaneous stresses will drive water management. Increasingly, groundwater resources are taking a more prominent role in providing freshwater supplies. We discuss the competing fresh groundwater needs for human consumption, food production, energy, and the environment, as well as physical hazards, and conflicts due to transboundary overexploitation. During the past 50 years, groundwater management modeling has focused on combining simulation with optimization methods to inspect important problems ranging from contaminant remediation to agricultural irrigation management. The compound challenges now faced by water planners require a new generation of aquifer management models that address the broad impacts of global change on aquifer storage and depletion trajectory management, land subsidence, groundwater-dependent ecosystems, seawater intrusion, anthropogenic and geogenic contamination, supply vulnerability, and long-term sustainability. The scope of research efforts is only beginning to address complex interactions using multi-agent system models that are not readily formulated as optimization problems and that consider a suite of human behavioral responses.

They get something important right here, which is that if you are formulating a question in a way that the answer can be “optimized”, you have probably defined the question much too narrowly. Water resources are one part of much larger complex natural and social systems. Modeling and technical analysis is important to pare the universe of all possible decisions down to a smaller set where each possible decision is close to “optimal” or efficient in the technical and economic senses. But then this information needs to be fed into a stakeholder or political process where a much wider range of factors can be considered and decisions made.

I am concerned that the current laser focus on “science, technology, engineering, and math” in education is pushing people too far down the path of expecting clear-cut technocratic answers to questions that have messy political and cultural dimensions in reality. All these subjects are good to study, but they need to pared with solid education in planning processes and tools, and an appreciation of systems in general.

Donald Shoup retirement

Here is a nice tribute to Donald Shoup, who is retiring from the University of California.

Shoup’s most notable contribution to America’s planning landscape is in highlighting the consequences of underpricing parking. In The High Cost of Free Parking, he demonstrated that minimum parking requirements artificially inflate building costs by adding the costs of accommodating parked cars to new development and then giving away those benefits to drivers who park for free. These costs can be substantial: As Shoup has pointed out repeatedly, free parking at work is often worth more than if employers filled up their workers’ gas tanks. Shoup highlighted the true price of this invisible subsidy and unveiled new ways for city planners to encourage public transit use and address environmental concerns.

As technology evolved, Shoup folded new innovations into his ideas. In April 2011 San Francisco launched SFpark, a system based on Shoup’s work that adapts the price of street parking spaces to match demand. Adjustments according to time of day, location and day of the week allow smart parking meters to change their prices, with a target of keeping 15% of spaces vacant on any block. Drivers searching for parking can use their smartphones to find a space at a distance from their destination at a price they’re willing to pay. By more closely matching the price of a space with demand, drivers waste less time and fuel circling the block looking for a spot to park. The system has helped the city manage meter occupancy effectively and has reduced circling for parking by 50%, according to a 2014 study, and “smart parking” programs are appearing in Los Angeles and other cities. “His ideas have largely defined what is considered best practice for much of the field of parking management, ideas that increasingly are being put in place in cities around the world,” SFpark program director Jay Primus says.

Removing parking minimums from the zoning code seems like such an easy, obvious step. But what causes political opposition, at least where I live, is the perception that if new developments are built without parking, then people will just buy cars anyway and crowd out on-street spaces for people who already live there. I don’t necessarily buy this. If parking is truly valuable to people, they should be willing to pay more for a development that includes a parking space. If they are not doing this, it tells us that the demand for parking is not actually there. If they can walk safely to work, school, and shopping, and parking is expensive, many people will make the choice not to own cars, especially with options like car share and Uber becoming more accessible every day. Where I live, this is definitely happening.

There is something else happening where I live though. On-street parking is incredibly cheap, and as a result there is more demand for it than supply. People feel incredibly indignant about this, which makes it politically very difficult to limit parking or raise parking prices. There is a legitimate argument that if you raise parking prices, the rich will be able to have cars and the poor will not. If the city provided excellent walking, biking, and public transportation in all neighborhoods though, this would not be a problem.

So here is my solution, right out of an economics textbook: completely deregulate parking prices so it is all market all the time, including street spaces. You might want to do this gradually and limit the fluctuations that can occur, just so it doesn’t get too crazy. Then take the public revenues, tax the private revenues, and invest the proceeds dollar for dollar in pedestrian infrastructure, bike infrastructure, and public transportation, making sure the benefits are highly visible in neighborhoods that need them most. To do this you probably need a single unified agency or authority in charge of parking and all modes of transportation, and under the control of local leaders with some guts. There are a few more policies that might nudge the system even more, like property taxes and stormwater fees that discourage land speculators from turning vacant lots into parking and holding onto them for decades.

photosynthesis

From the journal Cell, here is a long, technical but interesting open source article on photosynthesis. First, it concludes that the current rate of increase in grain yields will not be sufficient to keep up with population and demand growth through 2050. Then they go through a range of biotechnology research avenues that hold promise to boost photosynthetic efficiency by up to 60%. They argue that the pipeline from beginning the research to seeing it pay off could be 20-30 years. With a lag this long, we can’t just wait until scarcity develops and drives up food prices enough to make the investments obviously profitable. Instead, the research needs to start now.

Two questions come to mind. First, is it the right approach to rely on biotechnology to increase yields so that demand can keep growing forever? Or should we be finding smarter ways to reduce waste, modify lifestyles and make do with what we are producing now? If we remove sunlight as a limiting factor, something else may become the limiting factor, such as water or phosphorus.

Second, if we create super-efficient crops is there a chance they will escape into native ecosystems and choke out all our native plants? Maybe the kinds of modifications that help annual crops produce more edible biomass under industrial field conditions won’t help them compete in the wild at all – you don’t hear about genetically modified corn or wheat straying far afield now. But it still seems like the ethics need to be considered.

 

Mr. Money Mustache Strikes Again

My last post on Mr. Money Mustache has proven to be popular. Now he’s back with everything you could want to know about home energy efficiency. For example, how to monitor you energy use:

The Efergy Elite Combo system comes with a very small wireless clamp that sits permanently around the main input wires in my circuit panel and measures power consumption right down to the watt with 10 second resolution. You set it and forget it. This power consumption is then displayed on a wireless unit in my kitchen and also logged permanently online, where I can review graphs from my phone or computer…

By watching the display, I can see how much power it takes it takes when the fridge kicks on, or when I run the dishwasher, or flip on a bank of lights in the kitchen. It also helps me find phantom loads: when you think everything is off, but your household consumption is still over 100 watts, something is wrong. I tracked down three faulty smoke detectors that were burning over 5 watts each and replaced them with units that use under 1 watt. Then I discovered that my Yamaha amplifiers burn 25 watts each if you leave them on, even when there is no music playing. This was bad, because I was often forgetting them overnight.

The benefit of the Efergy is its ability to measure even direct-wired devices: alarms, dishwashers, your central a/c system, or the unwanted pipe heater that the previous owner installed in your crawlspace to prevent frozen pipes.. but then left on for 12 months of the year regardless of temperature (which would cost you $1902 per decade, in case you were curious).

Stellarium

Stellarium is free, open source software that simulates the night sky as it would appear from anywhere anytime (no foolin’ I promise). It’s used by professional planetariums, but you can download it to your Windows, Apple, Linux or Ubuntu machine.

Here’s one more fun thing – a simulation where you can change the mass of the Sun, Earth, or Moon and see how it affects the orbits of all three. If you make the Sun too big, the Earth gets sucked into it, but if you make it too small, the Earth just flies out into space. It just reminds us that we are lucky to be here. There’s also a similar simulation where you can make up your own planets and see how they would orbit a star and each other.