Category Archives: Economics

The Missing Word

With a computer mouse, you can precisely position the cursor wherever you want. The motion of the cursor exactly mimics the motion of the mouse in your hand. It is a positional controller.

But in many computer games, you have no direct control over position. The joystick controller only controls the rate of motion. You have to provide a direction, and speed, and hope that it will get to the desired location at the desired time. As anyone who has played such games knows, position control using a rate controller is much less precise, and often not even accurate if you’re not a good judge of such things.

In last night’s political debate (as in almost all discussions of this topic), there was a lot of talk about “cutting taxes,” and “raising taxes.” Not to pick on him in particular, but as an example, here’s the reporting by Jim Geraghty:

Hillary laughs heartily at McCain’s comment about “they’re going to raise your taxes, and they have the aud-ic-i-ty, the audacity, to hope you don’t mind!”

With her laugh, she triggered a thousand primal screams on liberal blogs.

Steph asks if she’ll make a pledge to never raise taxes for those making under $200,000 per year. She says she’s “absolutely committed to not raising taxes on those making less than $200,000.”

Obama echoes the pledge, and says he’ll cut taxes for those folks.

I don’t trust either, but I’m rather surprised that they both were willing to be pinned down in the equivalent of “read my lips, no new taxes.”

Wow. Charlie Gibson notes that when the capital gains taxes were cut under both Clinton and Bush, revenues went up.


Wow. Hillary: “I would not raise the capital gains tax above 20 percent, if I would raise it at all… I don’t want to raise taxes on everyone.” She rips Obama’s plan to raise payroll taxes.

Emphasis mine, in all cases. Every one of these statements is absurd. No one, not the mighty Hillary, not the saintly Obama, has the power to raise or cut taxes. They don’t have a tax revenue controller. All they can do is increase or decrease tax rates. And they can’t predict with certainty whether or not this will increase, or decrease “taxes” (that is, tax revenues). The absurdity of leaving out this key word is demonstrated starkly in Charlie Gibson’s statement: “when the capital gains taxes were cut, revenues went up.” How can that be? If taxes are cut, by definition, revenues have to go down. But if he had said that when capital gains tax rates are cut, revenues go up, this is perfectly sensible (though counterintuitive to people who don’t understand that tax rates modify behavior).

I expect Democrats (and journalists, who are generally Democrats) to play such word games, but I’m always disappointed when Republicans and so-called conservatives go along with it. People who want lower tax rates (and a more vibrant economy) have to demand them, and stop talking about lower taxes. Yes, it would be nice to cut off funding to the federal government (at least if we could get spending under control), but that’s a separate issue. By conflating tax revenues with tax rates, we grant far too much power to the big government types, when we should instead be pointing out their powerlessness. There are many unintended consequences of government action, and it is always useful to point out that this is just one more–that the federal government cannot directly control how much it taxes people (that is, how much money it actually confiscates)–it can only control the the rate at which it does so.

This is just one more example of how we small-government types have to start taking back the language.

Long Term Space Budgeting

In Monday’s part 1 of “VSE and the Retirement of Baby Boomers,” Charles Miller and Jeff Foust port the conventional wisdom about budgeting to the space discussion. These are two of the most well-read, connected and smart people on space topics. I’d like to give folks addressing this issue some more texture to add some items that are not part of the conventional intergenerational budget debate which can be summarized perennially as “vote for me or things will all go to hell pretty soon if they aren’t already there”, but every year real personal income rises and real government spending minus interest payments rise; life expectancy goes up and almost all the Cassandras are proven wrong, but by then they’ve long since moved on to the next pending calamity. Here are the unconventional texture points:

  • Personal income is continuing to rise ahead of inflation such that every generation earns about twice as much per capita as the one before
  • That is, a falling percent of the federal budget should still buy more robotics, rockets, science, human spaceflight, exploration (and settlement?!) even as it buys fewer staffers and is a lower share of GDP
  • Bracket creep, estate tax and alternative minimum tax are going to increase receipts above historical revenues and changes that fix these are likely to fix macro spending issues at the same time
  • The boomers are likely to work part time or full time during retirement years
  • The boomers are more comfortable with the stock market and are likely to earn higher returns there than previous generations of pensioners
  • The boomer echo will put more workers in the worker to retiree ratio again as the boomers die off before the boomer echo generation retires
  • Between Federal, State, County and Local taxes, we are taxed together at above the monopoly rate; if there were a coordinated decrease, revenues would increase for each
  • Private spending on human spaceflight will rise and is already about 0.3% of NASA spending; depending on how you count capital spending by people like Bigelow, it’s in the single digit percent
  • First-party State, County and Local spending and incentives for space flight will increase as more states cross the income threshold of the US and USSR economies in the late 1950s which was about 1/8 what it is now for the US. California has already crossed this. Texas and New York will in the next 20 years. If space gets cheaper, Florida may enter the ranks of states that could have their own space programs. Initiative by a vocal minority may rocket this issue into the fore. Oklahoma and New Mexico are more like the USSR in the space race looking at space as a way to look far bigger than their economies suggest and to leap frog other states in an emerging industry. The Soyuz is still flying and is now profitable even as Russia has an economy 1/6 the size of the US (USSR had 1/2 the US economy in 1960) so the space portion of their strategy is validated. And may even work for New Mexico which has about 1/12 the size of the 1960 USSR economy now
  • Boomers dying will likely dry up support for a cargo-cult do-nothing NASA as memories of Apollo die with them; Obama can be seen as a coming attraction of how the next generation will treat NASA
  • Support for ITAR and missile counter proliferation will wane, but existing techniques will ossify as civilian launches start to dwarf military ones as long as there is no space 9/11 which has a mixed effect on cost of flight
  • Competition and achievement from the private sector will put pressure on budgets to achieve more value for the dollar, but at the same time make obtaining that value easier

What Fresh Hell Is This?

ATK is making noises about commercializing Ares 1. Unsurprisingly, it’s full of bovine excrement right off the bat:

Ron Dittemore, president of ATK Launch Systems, said the human-rating that led NASA to build the Ares I first stage around the shuttle booster should also be attractive to other customers with “high-value” payloads, including the Defense Dept. and the National Reconnaissance Office (NRO).

“Ares I can deliver humans, can deliver payload to low Earth orbit; it can deliver payload to geosynchronous Earth orbit and beyond – planetary missions – it’s got that much capability,” Dittemore said at the 24th National Space Symposium here. “And what’s unique is that since we’re designing this vehicle with human reliability, proven demonstrated systems, high-value payload customers may see a real attractiveness to putting either DOD or NRO payloads on this launch system.”

First of all, the Shuttle booster is not “human rated.” The Shuttle itself is not, and never has been, human-rated (I’ve said it before, and I’ll say it again: I wish that we could expunge the phrase “human rating” from our vocabulary–very few phrases in the space business are as misunderstood and misused by so many as this one). What he means is that the fact that they have been willing to use the SRB for the Shuttle (despite the fact that in the case of Challenger, it destroyed the vehicle and killed the crew) led them to decide that it was reliable enough to use for Ares.

One of the things that people don’t understand about “human rating” is that it is not (just) about reliability, which is the probability of mission success. Human rating is about safety, which is a different thing. It is about the ability to know when the mission is about to go sour, and the ability to safely get away from the vehicle before it does. So while reliability is nice, what’s much more important is warning time and escapability, from the launch pad all the way to orbit (something that the Shuttle has never had, which is why it’s not human rated).

But satellites aren’t going to have a launch escape system, so they don’t care about human rating. What they care about is reliability, and I have seen zero evidence that Ares is going to be more reliable than either Delta IV or Atlas V. Human rating the latter two vehicles will not involve making them more reliable–it will involve putting in the systems needed for adequate failure onset detection (FOSD) and ensuring that they have adequate performance to eliminate abort blackout zones throughout their trajectory (something much more difficult for the Delta than the Atlas, due to to its underpowered second stage). So from a mission assurance standpoint, Ares has nothing to offer to a satellite owner over the current commercial vehicles.

Moreover, there is no discussion of cost. Even if they can get away with not having to amortize development, because the government paid for it and it’s sunk, how much of an army will a NASA-developed/operated vehicle require? History would indicate a pretty large one, particularly given the politics of the situation. So will a commercial launch have to pay its share of the annual fixed operating costs, or will ATK (unfairly) be able to subsidize and undercut the ULA by only paying marginal costs for the launch, and having NASA pay the freight for the rest? And it will have to use the VAB for processing, and the NASA pad for launch. Will NASA be reimbursed for the use of its facilities? How much?

This seems like a huge potential bucket of worms, and all because NASA decided that it had to develop its own launch vehicle.

Is ATK serious? I doubt it. I suspect that this is just a PR move to maintain political support for it among the rubes inside the Beltway who don’t understand these issues, to show that it has applications beyond the NASA lunar (and ISS) missions. Unfortunately, it may work.

[Update a couple minutes later]

Oh, and how could I forget this? How thrilled will the satellite owners be to put their bird on the paint mixer that is the Ares 1, on top of that five-segment solid, when they can get a smooth ride on a Delta or Atlas?

How Would They Tell?

Robert Bidinotto wants me to boycott Starbucks. It’s a worthy cause, I guess, but I’ve been boycotting Starbucks ever since they opened their first store. I’ve never purchased anything there for my own personal consumption, with the possible exception of a bottle of water once.

The simple reason is that they have never offered anything for sale in which I have an interest in consuming. It’s nothing but various forms of coffee, which I don’t drink, and high-glycemic carbs, which I tend to avoid, particularly since there is no protein on offer to go with them (in my limited experience–I suppose it’s possible that that’s changed). And I’m not that into the “coffee house” experience.

So I can’t really help make a dent in reducing their sales, because it’s not possible for me to purchase less from them than I already do. If everyone were like me, they wouldn’t exist at all to denigrate the capitalism that has made them so successful. But maybe some of my pro-free-market readers can reduce their consumption.

It occurs to me, while I’m on the subject, to write about a topic on which I’ve often mused, but never posted–what the world would be like if everyone were like me. Well, obviously, it would be a lot more boring place. With no s3x, other than self congress, because there’s no way that I would get it on with me.

Just off the top of my head, there would be no rap music. In fact, most popular music wouldn’t be popular at all. No dance clubs. There would be college football, assuming that some of me were willing and able to play (not obvious, as my athletic ability is marginal), but probably not pro. There would be baseball (again, my skills permitting), but no hockey or basketball. Or boxing or wrestling, or martial arts. There would be Formula 1, but no NASCAR. Lots of hiking trails in the mountains. No one would live in south Florida.

No coffee houses, as noted above, or coffee production, period. Same thing with tea. No tree nuts would be grown or harvested, because I’m allergic. The Asian restaurants would be much better, as would Mexican ones (they’d all be Sonoran style). No wraps or vegetarian places.

It would also be a much messier place, because I’m kind of a slob.

On the up side, though, traffic would move much faster, and much more smoothly. And we’d all get on and off airplanes extremely expeditiously. And there would be no wars, both because (I know that this will surprise some of the trolls here) I’m not that into them, and I’m not sure what we’d fight about. Oh, and we’d have a sensible space program.

So, what would the world be like if it consisted of only you?

This Would Be A Disaster

Academia has already been greatly damaged by post-modernists and an extreme leftist bias over the past few decades, but fortunately math and science have been spared, to date. Those days may be coming to an end, though, as Christina Hoff Sommers warns about the potential Title IXing of science, based (ironically) on shoddy science (similar to the “comparable worth” myth).

Rockets For Sale

John Carmack mentioned this at the conference a week and a half ago, but I don’t think I reported it, at least not in any detail. Armadillo is willing to sell vehicles to anyone who wants to fly them (presumably subject to ITAR restrictions):

The way to look at it is as a “rocket trainer”, rather than a vehicle that can perform any kind of real lunar or suborbital mission. We don’t pretend that the vehicles could actually land on the moon, but if you want to hack on a real, flying system, there is a lot of value to be had.

The price is $500k. The experience of the Lunar Lander Challenge shows quite clearly that you aren’t likely to do it yourself for less, even if you spend a couple years at it. Several intelligent and competent people thought otherwise, and have been proven incorrect.

You can have either a module or a quad, at your choice. The quad has more hover duration, but it is more of a hassle to operate. A module could be fulfilled right now, a quad would take about three months to build, since we are still planning on using Pixel for LLC this year and other tasks. The engine will be one of our new film cooled stainless chambers, and we will warrant it for ten flights. If it blows up or burns through in that time frame, we will replace it. We will not replace the vehicle if it crashes, but historically our engine problems have been visible at startup, and you should have an opportunity to abort the flight. Ground support equipment is included, except for the lox dewar(s), which would be specific to your local lox vendor. We will test the vehicle ourselves, then train your crew to operate it. You get copies of our experimental permit applications and information about the insurance policies we use for permitted flights. Details on modifications to the flight control software are negotiable.

If he got a big order, or multiple customers who wanted delivery ASAP, I wonder how he’d respond? Would he ramp up production (with the intrinsic risks to quality), or keep supply constant and crank up the price? As I’ve said for a long time, at some point this is going to have to transition from a hobby to a business for him, and it seems to me that this has the potential to force that decision, if he has a significant number of takers.

I also wonder how much new engines will cost, assuming that they’re only good for ten flights (he doesn’t say that, but it’s all he’s willing to warrant them for). Let’s say that the engines are half the cost of the vehicle. That would mean a cost of $25K a flight to amortize the engines, which is a lot more than propellant costs. It seems to me that if he only thinks that he can get ten flights, engine life is where his emphasis needs to be for reducing operating costs. It’s also hard to see how he can charge the same amount for a module as a quad, since the latter has four engines in it. I’d really like to understand more about this proposition.

He follows up the offer with his assessment of the industry (and his competition), but I’ll save my thoughts on that for another post.

No Peak Oil?

If this is true, it’s a huge story. It certainly seems plausible. I’ve always claimed that oil reserves are driven much more by technology advances than by consumption rate:

n the next 30 days the USGS (U.S. Geological Survey) will release a new report giving an accurate resource assessment of the Bakken Oil Formation that covers North Dakota and portions of South Dakota and Montana. With new horizontal drilling technology it is believed that from 175 to 500 billion barrels of recoverable oil are held in this 200,000 square mile reserve that was initially discovered in 1951. The USGS did an initial study back in 1999 that estimated 400 billion recoverable barrels were present but with prices bottoming out at $10 a barrel back then the report was dismissed because of the higher cost of horizontal drilling techniques that would be needed, estimated at $20-$40 a barrel.

It was not until 2007, when EOG Resources of Texas started a frenzy when they drilled a single well in Parshal N.D. that is expected to yield 700,000 barrels of oil that real excitement and money started to flow in North Dakota. Marathon Oil is investing $1.5 billion and drilling 300 new wells in what is expected to be one of the greatest booms in Oil discovery since Oil was discovered in Saudi Arabia in 1938.

It’s also a story that will enrage those who want us to tighten up our hair shirts.

Another Strike Against Him

Why is Barack Obama against drug legalization?

I’m running through the issues, and I can’t find a single one on which I agree with him, other than that blacks should take more responsibility for their own lives.

That’s great but, sorry, it’s just not enough. Just another non-federalist fascist.

This comment probably explains his position:

The only black dude and admitted former drug experimenter in the race cannot afford to look soft on drugs.

Yup. New politics.

Can someone pass the Kool-Aid?