October 05, 2009

Speaking truth to (gasoline) power

A recent story on NPR about a bio-diesel project tries its best to sell the eco-utopian vision promulgated by "activist-turned-entrepreneur" Jeff Berman, but points out in the last paragraph that at best they're kinda, sorta breaking even on the investment, and then only because they've been selling food-grade sunflower oil instead.

You can almost imagine the investors listening to the first half of this report with economist Jeff Rubin and skipping out on the second.

Rubin says that when the economy recovers, oil prices will go up and stay up, and in the process restructure our economy and lifestyles. This is a rather obvious point (in other words, the future will look like Japan, where energy already costs a fortune). But with one important exception, I wouldn't bet the farm on the accuracy of the rest his particular vision.

In any case, even higher energy prices would be just as disruptive to society as the scary effects of climate change, not to mention the even scarier means being proposed to prevent it. The consequences of our "good intentions" on developing countries, observes Shikha Dalmia, would be "more awful than climate change's implications--even if one accepts all the alarmist predictions."

In the NPR interview, Rubin seems to be basing his arguments on the price of crude oil, assuming that every other factor in his model will remain static. Because technological trends seem obvious in hindsight, we forget how difficult the economic impact of technology is to predict, especially when it comes to the development of substitute goods and markets.

Reading early Asimov, I'm struck by how very smart people couldn't foresee the transistor--let alone the integrated circuit--even when it was only a few years over the horizon. AT&T had a hard time figuring out what to do with the transistor after its own scientists invented it (Sony did), just as Xerox didn't know what to do with the graphical user interface (Steve Jobs did).

We haven't become any smarter at predicting the future. We just like to pretend we are.

It's equally difficult to predict what technological innovations will fail after absorbing billions in private or public spending (other than "most of them"). We should be cautious about attempting to square the circle just because it hasn't been done before. It probably hasn't been done before for a good reason, like the second law of thermodynamics.

Believing that the government need only throw a few billion at a bunch of designated Really Smart People is a political act of faith masquerading as science. There's no guarantee that your chosen Smart People will be the right Smart People, or that they have the proper goals in mind (other than pocketing more of our money).

The Manhattan Project and the Apollo Program didn't have anything to do with creating economic efficiencies. And while we're at it, the Apollo Program did not create a demand for integrated circuits. The credit for that (in the space industry, at least) goes mostly to the U.S. military, specifically avionics and air-to-air missiles (quantity matters, and there was a war going on).

When building extremely expensive, one-off, manned rockets, robustness is preferred over "new," which is why the Space Shuttle used prehistoric (but hardy) magnetic core memory cells well into the 1980s.

Yes, there's a lot you can do when money is no object. But as Margaret Thatcher put it, "Eventually you run out of other people's money." (Oh, I forgot, we'll just borrow it.) Nor is the government very good at stopping spending on bad ideas. Thanks to the fallacy of sunk costs, every failure is promised by its backers to succeed if only we spend a few billion more.

This has prompted Seth Roberts to coin what he calls "Pashler-Roberts Law": "The more expensive the research, the less likely the researchers will be honest about it." My corollary is that the more expensive the research, the less likely it is that the researchers will ever arrive at a definitive conclusion. Why turn off the spigot on your own gravy train?

Ten years ago the government set out to test herbal and other alternative health remedies to find the ones that work. After spending $2.5 billion, the disappointing answer seems to be that almost none of them do.

Ten freaking years and $2.5 billion--hey, that's cheap for government work. Where there is government, there will be rent-seeking by people who are a lot smarter and craftier than the average politician. This corruption can only be minimized by keeping the government's involvement in commercial activities as small as possible.

Now we face the absurdity of supposedly "private" enterprises threatening to go bankrupt unless the government pays them off. Like a little kid threatening to hold his breath—and it works!

When I was in high school decades ago, two of the "big money" government science projects were the Space Shuttle and fusion energy. Billions later, fusion remains in the research stage. The Space Shuttle made it off the drawing boards, but was far more dangerous and expensive than projected, and never came close to achieving the promised launch schedules or economies of scale.

NASA eventually concluded that spending more money on the program wasn't ever going to improve it, and so it is scheduled to live on only in the Smithsonian.

The "Constellation" program slated to replace it resurrects Saturn/Apollo engine and capsule designs from the 1960s, and couples them with the solid boosters developed for the Space Shuttle in the 1970s and then reengineered after the Challenger disaster. The big selling point of the competing DIRECT architecture is that it would reuse all of the Shuttle booster technology.

So much for going where no one has gone before. Either way, it's going to cost about $40 billion to find out, and the science will be left paddling around in circles for decades. But it's not as bad as the $100 billion International Space Station, so useless that NASA is already discussing "de-orbiting" it by the end of the next decade.

That means burning it up in the atmosphere. Granted, the "international" part appears to work quite nicely. The State Department should pay for it.

Nobody advocating "bet the house" scientific strategies can predict what will happen when we double down, lose big time, and end up with no solution and a few more trillion dollars in debt. Does anybody remember the U.S. Synfuels fiasco? (Yes, I know, it really, really, really will work next time, cross my heart and let the taxpayers pick up the tab.)

Rubin does get one thing exactly right:

Efficiency does not lead to conservation. It is probably the biggest head-fake out there.

In a growing economy, efficiency gains are eaten up by greater use of the resource in question. Increasing automobile efficiency has the same economic impact as lowering the cost of gasoline, which promotes more driving and more highways, which promotes more sprawl and more McMansions in more exurbs, which promotes more fossil fuel consumption.

Houses today are much better insulated, heaters and air conditions are much more efficient than they were a generation ago. Families are smaller. The result? We build bigger houses that are less efficient (vaulted ceilings, large, unified kitchen/dining room/living room/family room areas with central air conditioning). Plus a heated swimming pool in the back yard.

It the behavior, stupid, not the technology. Just because you bought a Prius doesn't mean you're doing anything to save the planet. Popular Mechanics concludes:

Driven hard and recklessly, even a Prius will suck down dead dinosaurs at a furious rate. Driven carefully and with precision, you will find that a Hummer H2 can return something approaching reasonable mileage.

The Japanese don't live in "rabbit hutches" because of "climate change" or drive fuel-efficient cars because of CAFE standards. But because of the sky-high cost of energy and expensive, limited land resources. Japan builds (largely in the private sector) efficient mass-transit systems because of sky-high population densities and mass-transit friendly population distributions.

Size really does matter.

Nevertheless, Japanese who can prove they have a place to park them (a legal requirement) love them their gasoline-powered cars. So do Europeans. The automobile accounts for over 80 percent of passenger miles in western European countries (except for Austria and Ireland at 75 percent). It's a "do as we say, not as we do" world.

And even those sky-high taxes and energy prices have to keep pace with a growing GDP, which makes energy continually cheaper on a per-capita basis. When I was living in Japan thirty years ago, most home lighting was the 1970's version of the not-so-compact CFL. Nobody cared about "climate change" back then. The reason was the cost of electricity relative to personal income.

Now with people wealthier, the Japanese government must talk about "incentivizing" demand for CFLs.

If we believe it's up to the government to "engineer" a solution, then we'd better think about what we're asking our politicians to do. The answer is probably a synonym for "when pigs fly." And when Congress dutifully passes legislation forcing those pigs into the air (say, subsidizing hot-air balloons to carry them), think about what will coming raining down on our heads.

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# posted by Anonymous Dan
10/06/2009 7:08 PM   
I share your perspective, Eugene. Geologists say it took the forces of nature 5.4 MILLION years to carve the Grand Canyon. Now politicians and scientists with research to fund want the rest of us to believe they can forecast major climatic shifts with a margin of error of a decade or two. Which brings me to my first rule of modern societal behavior: Never underestimate the ability of mankind to be full of himself.