Nocera on Solyndra

I get Joe Nocera’s point in his latest column that there is less scandal in the Solyndra loan affair than meets the eye, but I’m still stuck on this paragraph here, which seems key:

But if we could just stop playing gotcha for a second, we might realize that federal loan programs — especially loans for innovative energy technologies — virtually require the government to take risks the private sector won’t take. Indeed, risk-taking is what these programs are all about. Sometimes, the risks pay off. Other times, they don’t.

What does this mean? It seems to imply that federal loan programs exist to take risks that the private sector won’t, which is superficially plausible, but troubling if taken very far down that road. There are, after all, good reasons why the private sector won’t take certain commercialization risks, and it’s not obvious that the Federal government is better equipped to do so. The argument changes in basic research, of course.

Smil on Yergin: Coal Over Oil?

Good point by Vaclav Smil in his review of Dan Yergin’s latest:

The book, which is sliced into more than 400 short sections, covers policy and economics more than science and technology. Its analysis of energy sources is uneven. Coal, for example, warrants a single page. Yet during the twentieth century, coal supplied the world with more energy than did oil. In 2010, coal combustion accounted for 30% of all global commercial energy (compared with nearly 34% for oil) and 40% of electricity generation.

via Energy: Burning desires : Nature : Nature Publishing Group.

Gold, Technology and the Death of Currencies

Interesting insight from a guest writer at Baseline Scenario:

But I do know that in the year 2160 (give or take a century) gold will no longer be viewed as money.  Why?  For the same reason that all commodity based money systems have collapsed—technology made their production too cheap. Gold bugs like to talk about how every paper based money has failed (or will fail), but they ignore the equally miserable track record of commodity based money systems.  For example, the cowry shell, which was used in ancient China and India, a weight of barley (the shekel), copper, cigarettes, or that most insidious of monopolistic money systems—salt.

So how did these money systems fail?  Did their cultures implode?  Did their governments fail?  Quite the contrary, all commodity based money systems were destroyed by one simple factor—technology.  At some point, technology enabled low cost production of the commodity, and the currency collapsed.

via The Price of Gold in the Year 2160 « The Baseline Scenario.

Francois Trahan on the Death of Economics

Good Consuelo Mack interview with top strategist Francois Trahan. Some unusual & practical perspectives on how the economic world is twisted in circles.

Today in Safety Warnings

Maybe my favorite warning ever:


A New Look at Food Crises & Prices

New paper on recent food price changes. It isn’t/wasn’t just supply & demand.

The Food Crises: A quantitative model of food prices including speculators and ethanol conversion

Recent increases in basic food prices are severely impacting vulnerable populations worldwide. Proposed causes such as shortages of grain due to adverse weather, increasing meat consumption in China and India, conversion of corn to ethanol in the US, and investor speculation on commodity markets lead to widely differing implications for policy. A lack of clarity about which factors are responsible reinforces policy inaction. Here, for the first time, we construct a dynamic model that quantitatively agrees with food prices. The results show that the dominant causes of price increases are investor speculation and ethanol conversion. Models that just treat supply and demand are not consistent with the actual price dynamics. The two sharp peaks in 2007/2008 and 2010/2011 are specifically due to investor speculation, while an underlying upward trend is due to increasing demand from ethanol conversion. The model includes investor trend following as well as shifting between commodities, equities and bonds to take advantage of increased expected returns. Claims that speculators cannot influence grain prices are shown to be invalid by direct analysis of price setting practices of granaries. Both causes of price increase, speculative investment and ethanol conversion, are promoted by recent regulatory changes—deregulation of the commodity markets, and policies promoting the conversion of corn to ethanol. Rapid action is needed to reduce the impacts of the price increases on global hunger.

via [1109.4859] The Food Crises: A quantitative model of food prices including speculators and ethanol conversion.

Today in Energy History: The Age of Ghawar Began

Today in 1933: The Age of Ghawar oil began.

On September 23, 1933, a party of American geologists lands at the Persian Gulf port of Jubail in Saudi Arabia and begins its journey into the desert. That July, with the discovery of a massive oil field at Ghawar, Saudi King Abdel Aziz had granted the Standard Oil Company of California a concession to “explore and search for and drill and extract and manufacture and transport” petroleum and “kindred bituminous matter” in the country’s vast Eastern Province; in turn, Standard Oil immediately dispatched the team of scientists to locate the most profitable spot for the company to begin its drilling.

via Standard Oil geologists arrive in Saudi Arabia — This Day in History — 9/23/1933.

David Eagleman on Choice & Time

David Eagleman on choice and time form the recent FQXi conference on time. Hang in because it’s good stuff, even if not professional audio & video.

Base Jumping Castleton Tower

Base jumping Castleton Tower — be sure to take it to full-screen and HD resolution.

The Old Equity Rules No Longer Apply

Given the recent performance of global equities, this quote from Business Week seems on point:

At least 7 million shareholders have defected from the stock market. And now the institutions have been given the go-ahead to shift more of their money from stocks and bonds into other investments. Further, this “death of equity” can no longer be seen as something a stock market rally, however strong, will check. It has persisted for more than 10 years through market rallies, business cycles, recession, recoveries, and booms.

“It will take two or three years of confidence building, of testing, before the market can seriously act like it did earlier,” says William J. Fellner, a professor of Economics Advisers.

The problem is not merely that there are 7 million fewer shareholders. Younger investors, in particular, are avoiding stocks. Even if the economic climate could be made right again for equity investment, it would take another massive promotional campaign to bring people back into the market.

Says Alan B. Coleman, Dean of Southern Methodist University’s business school: “We have entered a new financial age. The old rules no longer apply.”

via The Compelling Case Against Stocks

Convinced? Well, then know that the above quote comes from the famous Business Week “Death of Equities” cover piece in 1979 that turned out to be so spectacularly wrong. While I”m not arguing the current circumstances are similar, it’s a good reminder that a little historical and epistemological humility isn’t a bad idea at times like this.