Category Archives: Economics

NASA’s Drift

A $350M monument to it.

I talked to Farenthold about this a few months ago, but I actually see SLS/Orion as a bigger and more dangerous waste of funds, because unlike a test stand that will almost certainly never be used, they have the vague appearance of utility to those who don’t understand the program, and will be harder to kill.

The Fatal Conceit

of Jonathan Gruber:

The Times reassuringly described Gruber as “the numbers wizard at MIT,” who has “spent decades modeling the intricacies of the health care ecosystem.” Gruber has “brought a level of science to an issue that would otherwise be just opinion.”

I might note that the Soviets used the term “science” for their own “scientific” planning commission. I drew little comfort from Professor Gruber’s scientific-planning credentials, especially when I learned “he’s the only person you can go to for that kind of thing.” Gruber, aided by his brilliant MIT graduate student assistants, is a one-man Gosplan, the name given to the Soviet Union’s state planning committee. That is not much of a recommendation. Science is better served by competing ideas not by a one-person monopoly.

Both Gruber and the USSR’s Gosplan planners believe their planning is “scientific” and executed by “the best of the best.” Both types of planning commissars suffer from F. A. Hayek’s “fatal conceit”—the belief that we can plan incredibly complex economic systems. As Hayek pointed out in his writings, such “scientific” plans inevitably fall apart under the weight of unintended consequences.

Actually, I’m not sure they’re all unintended.

Putin’s Kremlin And Oil

He’s losing the price war:

Well before Crimea, European nations resented Russian natural gas price gouging. The Kremlin used pricing threats to bully Ukraine, Poland and even Germany into political concessions.

After the Crimean travesty, the Baltic States and Poland demanded alternative gas supplies. The Obama administration quietly agreed to permit U.S. gas exports and the development of a liquefied natural gas exporting facility.

American LNG supplies might reach Poland in three years. That’s good news. Here’s the bad news: Putin has three years to exploit E.U. divisions and politically split NATO.

Or he had three years. Enter Saudi Arabia. America’s “fracking” success challenges Saudi global oil dominance. What’s the price point where fracking becomes unprofitable? Estimates run from $55 to $70 a barrel for oil. The Saudi oil ministry intends to find out and says it will not cut production. The market will determine price.

Though Russia can strangle Ukraine by denying gas supplies, the stunted and corrupt Russian economy survives on energy sales. Without its cash crop of oil, and gas, Russia is a big cabbage farm with a second-rate armaments industry. Cabbage, tanks, ICBMS and nuclear weapons mean Russian is not quite a petro-emirate writ large, but the cruel analogy has instructive utility.

If Russian nukes mean open war with Moscow is too risky, then attacking the Kremlin’s cash generator is war by appropriate means.

The question is, how long will the Saudis be able and/or willing to try to break the US energy industry? Regardless, OPEC is dead. Which is bad news not just for Russia, but Venezuela and Iran. It’s a shame that the administration has been doing almost everything it can to hamstring us.

Seattle’s $15 Minimum Wage Law

…is having exactly the effect that anyone who understands economics or how a business works would predict:

In Seattle, 42 percent of surveyed employers were “very likely” to reduce the number of employees per shift or overall staffing levels as a direct consequence of the law. Similarly, 44 percent reported that they were “very likely” to scale back on employees’ hours to help offset the increased cost of the law. That’s particularly bad news for the Seattle metro area, where the unemployment rate for 16- to 19-year-olds is already more than 30 percent — due in part to Washington state’s already-high minimum wage.

Perhaps most concerning about the $15 proposal is that some businesses anticipated going beyond an increase in prices or a reduction in staffing levels. More than 43 percent of respondents said it was “very likely” they would limit future expansion in Seattle in response to the law. One in seven respondents is even “very likely” to close a current location in the city limits.

You don’t say.

Orion

Eric Berger has the latest installment of his series on NASA’s drift (which is likely to become a book, I think):

NASA’s rank-and-file believe America wants a space program pushing outward, and upward.

“We don’t think of our jobs here as white-collar welfare,” Kramer said. “We have a real passion for what we do.”

Of course you don’t. You have to motivate yourself to go to work. But that doesn’t make it untrue.

I weep to think what that billion dollars per year could be doing if applied to something useful.

[Update a while later]

I should note that I have worked on many projects that I considered a pointless waste of money, because it was my job assignment. While I’m probably more cynical than most, I did eventually tire of helping Congress waste the taxpayers’ money, which is why I quit the mainstream industry two decades ago.

Gruber The Grifter

Why you don’t want to let “intellectuals” anywhere near power:

Unfortunately, contemporary Washington is calibrated to defer to experts who defer to politicians, providing an intellectual Praetorian Guard for the constant growth of a leviathan. As Denver University professor David Ciepley noted, “Starting in the First World War, and much more so during the New Deal and World War II, American social scientists became part of the autonomous state themselves, helping staff the mushrooming government agencies.” The closer that intellectuals get to politicians, the more weaselly they usually become.

Playing off Mr. Gruber’s derision of average Americans, one wag suggested a new acronym — L.I.E. — for Low Information Experts. Mr. Gruber and many other professors have gotten rich by pretending that government is far more competent than it actually is. Economist Robert Skidelsky, writing about the history of modern socialism, observed that “the collectivist belief system existed independently of the facts of modern life.” The same is true of the academic cadre who profit by vindicating endless government interventions that breed chaos and dependency.

I’d like to think that people will take a lesson from this (particularly with regard to climate models), but history doesn’t make me hopeful.

SLS Engines

They still have no idea what they’re going to do after thye run out of SSMEs.

As I noted on Twitter:

[Afternoon update]

The Grubergate Insider Problem

A long but useful essay from Megan McArdle.

We have a similar issue in the space industry. I see all the hype about the upcoming Orion flight, and as an industry analyst (though not quite an insider) I know that it’s nonsense, but it’s hard to get people to realize that NASA officials are often forced to dish nonsense to placate rent-seeking congresspeople; as outsiders, they are still in awe of the government agency that put men on the moon four-and-a-half decades ago.

There is also this:

…when I see journalists saying that Gruber’s revelations don’t matter because he’s just kind of awkwardly saying something that everyone knew, I get a little jittery. I am not “everyone,” and neither are any of those journalists. We’re a tiny group of people with strange preoccupations who get paid to spend our time understanding and explaining this stuff. The fact that we may have mentioned it once to our readers, in the 18th paragraph, does not mean that readers read it and understood what it meant. (In fact, if you actually interact with your readers, you’ll be astonished at how little they remember of what you told them, especially if you didn’t go out of your way to headline it. Their minds are already crammed full of information that they need to, you know, live their lives. So they tend to take away a few big bullet points, not the piddling details.)

I see the same thing when I argue with people on Twitter, or in comments — we often go around in circles because they seem to have forgotten some previous point I’d already made, or read what they wanted to read instead of what I actually wrote. The dismaying thing is that these are often people who love space, but they end up being cheerleaders for things (like SLS/Orion) that are roadblocks rather than enablers.

NASA’s Mission To Nowhere

Francis seems to suffer from a lack of imagination:

Space analysts said planning and executing a manned mission to Mars would take years and cost hundreds of billions of dollars.

French wants NASA to head in that direction, and he sees next month’s Orion launch as the inaugural milestone in a long journey.

Still, he’s circumspect.

“Unless we build the rockets and test the spacecraft needed to get into deep space, sending humans to Mars will remain a dream for centuries to come,” French said. “Whether Orion will be the vehicle, and whether it will survive the brutal budgetary cycles of Washington politics for the many years ahead that it will need to be funded, is impossible to say. It’s hard to imagine any other method succeeding.

Space historians often suffer from this malady.

Gruber

Dear Democrats, don’t even think about trying to run away from him.

[Afternoon update]

The epic search of Diogenes for an honest man is over.

[Update a few minutes later]

It gets worse:

I think we’d probably like to get rid of the tax exempt status for health care benefits.

Note that McCain proposed doing just that in the 2008 election. His idea was that we would get rid of this exemption and instead give people an additional tax credit valued at the average cost of health insurance. Thus, people would be held harmless by the change, but we’d get rid of this government-made distortion in how employers pay their employees.

Barack Obama, get this, demagogued that plan and accused McCain of wanting to increase taxes on people.

And meanwhile, he schemed to achieve the same thing, except without that part about giving people an additional tax credit which would offset increased taxes, and, get this, without telling people he was getting rid of the tax exemption.

Once again — subverting democracy by completely destroying the concept of Consent of the Governed.

All in a day’s work.

[Update a while later]

Obama himself was leading the discussion of how to take away the tax benefits.

A Simpler Cheaper Health-Care Policy

It would be a huge improvement over the current mess:

I think that from the libertarian perspective, either of these proposals should be preferable to Obamacare. I’d even argue that they should both be more appealing to progressives. But the administration didn’t want simple, modest and stable; it wanted a massive, transformational legacy. Which is why, four years later, we’re still fighting about it.

Yup.

Changing Junkyards

It’s not the way it used to be.

Longer ago than I care to think about (OK, four decades or so), I regularly visited a place out in Holly, MI to scrounge parts for my British sports cars. Every other time or so, when I’d go out, and come back with the part I needed, the owner (or manager) would ask me if I wanted a job. The last time I did it was in the nineties, when I went to a place on Hawthorne Blvd in Hawthorne to get a distributor for my Honda Accord, whose shaft had sheared off on the 405 in Orange County.

Another Green “Stimulus” Fail

Google and others want a taxpayer bail out for their desert bird roaster.

That looks like a nice bill for the new Congress to make Obama have to sign.

More at (appropriately) Powerline:

The sheer temerity of the request is almost outweighed by the unintended humor of their explanation for the failure of their project: the Sun isn’t shining as much as they thought it would. But I think they’re barking up the wrong tree: rather than ask for your money so they don’t have to use their money, they should ask the guy who said he would make the oceans recede, to order the Sun to stop slacking — rudely continuing to shine as it has for five billion years — and brighten up for Google, NRG, and Obama’s legacy.

What fools these mortals who support this insanity be.