Posts by Tim Worstal

Doing the maths on Copenhagen

Ah, no, not quite

"The article says about the "cost of polution" and puts a currency value to it. What this value is, and how it is worked out is beyond the article, and I'm OK with that, but for there to be any cost, someone must have worked out where that cost needs to be spent to offset the polution (e.g. the cost to plant enough trees to counter the 1 tonne of CO2)."

No, we're not estimating the cost of the pollution at the cost of cleaning it up. We're estimating it by the damage it does. Entirely different approach.

Imagine that there's some pollution that "costs" a million quid. That's around the statistical value of a life (right ballpark anyway). Sticking, for example, the radioactive cobalt from a hospital scanner into landfill will kill one person (this is a deliberately absurd example BTW). The cost of not having that pollution is say £35. The cost of sending the cobalt off to be reprocessed at the radioactive metals reprocessing plant.

Another deliberately silly example, not putting some slightly harmful chemical into landfill will cost us tens of billions and putting the same chemical into landfill will kill one person. So we're spending tens of billions to avoid 1 million in costs (and we do in fact have regulations like this, which cost tens, even hundreds, of billions for each statistical life saved).

You can see that there are two entirely different concepts of "cost" here then? What does it cost if we do pollute and what does it cost not to pollute?

What we want is some method of getting people to stop doing the polluting when not polluting is cheaper than polluting. We also want people to carry on polluting when polluting is cheaper than not polluting. (Third entirely absurd example: we could stop climate change simply by killing everyone on Thursday lunchtime. This most would think is a higher cost than the costs of carrying on polluting). So, what do we do? We impose a tax of the costs caused by polluting. This is not the cost of cleaning up the pollution, it is the cost that is caused by the pollution.

People will then naturally stop doing the polluting we want to get rid of, the polluting which is more expensive than not polluting, because it is cheaper for them to stop polluting.

Just as an example of how mainstream this idea is (no, really, it is mainstream) it's the basis of a lot of the Stern Review. It's the idea behind petrol taxes, APD, landfill tax and a whole series of others. As the piece above points out, it gets distorted in the political process, but it is the intellectual justification for almost all "green taxes".

How the Dunning-Kruger effect will stop techies buying houses

My bio isn't here

"would you be prepared to tell us which Economics think tank you are a Fellow of? It might save some time in the future."

My short bio usually turns up at the bottom of pieces here. This time it didn't, sorry, I don't know why.

Adam Smith Institute.

Erm...

"To start, assume everyone is solely motivated by money. I know plenty of highly motivated PhD's working for charities and in academia on not big salaries."

Well, I don't know which school of economics you're trying to describe there. The general assumptions of all such schools is that people are motivated by utility. Money is part of that, sure, but then so is feeling useful, changing the world, having shorter hours, the length of the commute and whether you get home to see the baby's smile.

Quite seriously, I don't know of any economist who tries to insist on the crazed idea that people are only motivated by money....not even solely by physical rewards.

Well, sorta....

"And of course, the ultimate proof of Dunning-Kruger, the author of this article, no doubt someone involved in I.T."

Erm, actually I'm a Fellow at an economics think tank.....but then that probably means your point still stands.

How I rebuilt Europe after the Berlin Wall collapsed

Sure

"The brute force method of throwing more hardware at the problem may be the less expensive (and even quicker) way to get the job done in a particular economic situation, but I feel the ability to do more with less exhibited by the Eastern European programmers is something to be proud of."

Oh, agreed. Sorry, that comment was just my inner economist screaming to be let out.

Err, no

"So basically you took advantage of people who had no knowledge of how much their stuff was worth."

No. I added value to what they were doing by being there to add that value. The labour of the salesman is, after all, labour, which in itself has value.

Well, no....

"So in other words, it WAS better, no qualifiers or evasion necessary."

Well, no, not really.

For you want to minimise your use of the scarce resource. What you want is the best "system" at the lowest price. So if hardware is expensive/unavailable then effort into the software makes sense. If hardware is cheaper than the effort required to make the software better, then it's entirely rational to not optimise the software but just buy more memory and processors.

What on earth do you think you are doing, Darling?

Following up.....

"The ASI were one of the early advocates in the UK of the very daft (and extremely regressive) flat-tax system,"

Just a technical correction here. A flat tax "can" be regressive. It can also be progressive (defining that as tax as a percentage of total income rising as income rises). It depends upon what the basic allowance is. Which is why the ASI advocates a high one, to make the tax system more progressive than the current one. Umm, OK; I haven't seen the figures for whether it's more progressive now, with the 50p band, but certainly as compared to the earlier one it was.

If you define progressive as ever rising marginal tax rates then of course it isn't progressive but then that's not what progressive actually means.

Me and UKIP? I'm a candidate in the London Region for the coming euro elections. I'm also a press officer for them. So, no, I'm not resident in Portugal either. And as to tax, Portugal would be a strange place to be a tax exile. Depends on exactly the income level but taxes can be higher there than in the UK.

Spinning the war on the UK's sex trade

Helloo?

"Selling human organs is a crime. It still happens; criminalising it hasn't stopped it happening. But nobody's ranting about this, even though allowing the sale of human organs could undoubtedly save lives.

Prostitution is, effectively, the sale of a human organ. The business structure surrounding it is absolutely irrelevant, as it is in the case of kidneys. It is the thing itself which should be regarded as unsaleable, for moral reasons. (People can be injured and/or die.)"

Err, I have and do argue for a paid market in human kidneys. On the grounds that the one country in the world that has one, Iran, doesn't have a shortage of human kidneys for transplant, nor people dying while on dialysis while waiting for that thing of which there is no shortage. Yes, it's a controlled market, but a paid one all the same.

Heck, even did a Comment page piece for The Times on it.

Bindell, not Burchill

". Jacqui "I think all men should be in jail" Smith wanted a result on the "research" and got burchill to do it"

Just to stave off any libel suit, it was Julie Bindell that did that research into brothels, not Julie Birchill.....

Well....

"Well, it's well said, but... where's the IT angle? I mean, just about everyone I know in IT is either married or a complete wanker, and doesn't need to buy the stuff."

Didn't Microsoft run an ad in New Zealand pointing out that that was why Linux was invented? So that geeks too could get la....? :-)

"Now, how do you think we are going to manage it? It seems to me that there is no man in a white suit waiting to come to our rescue, and more and more of our rules come from Europe, where we effectively have no voice anyway. Are you suggesting a revolution?"

Well, I am a member of UKIP....even standing for them....:-)

101 uses for a former merchant banker

Well, sorta

"So, according to Tim modern apaitalism does not "immiserate" the workers, indeed it's moderns capitalism/capitalists that ensure we have a '1.8-2 per cent increase in the average per capita income each year'. But whn I left the UK I thought that the retail prices index was measuring effective infation at around 5%. Which surely means that each year your actual buying power reduces by around 3%. Innit?"

The 1.8-2 % number of a post inflation one. Yes, certainly, there are years when it doesn't happen but you can pretty much draw a straight line (even the Depression comes out as a little wobble if you do it year by year) for real incomes from 1800 or so to today, roughly that period of something approaching liberal capitalism (in a wide sense here), at that gradient and you won't be far out.

Of course, it's not so much "capitalism" per se that causes this growth in real incomes. It's the onward march of technology. We get more efficient at making things all the time, thus we have resources to do other things as well: having two things instead of one is a useful definition of increased material wealth. The influence of capitalism is that, at least in relation to any other system we've tried, capitalism provides more incentive to try to create those new technologies and more incentives to use them when they've been invented/developed.

Climate Bill scores a fail in economics

Disagreements

AC.

I accept the criticisms.....which is why, having mentioned the various issues (the costs of externalities, the value of Lake Baikal, Stern and discount rates etc) I then took the value that the government is using. Values are as the IPCC or Stern Review, discounting is as Stern etc.

However, "That means setting a value that actually achieves your goal." That is what we get here. We're trying to balance the benefits of emitting now against the costs of those emissions in the future.

We're "not" trying to stop all global warming: we're trying to balance the rights and desires of those alive now against those to come in the future. Stern deliberately uses very low discount rates which means that we have a high tax. But that tax does, all on its own, balance out those rights now against rights in hte future....very much precisely because he's used a very low discount rate.

New Scientist goes innumerate in 'save the planet' special

Well....

"However the political animals who line up with the Adam Smith Institute are not known for supporting massive funding on non-carbon alternative energy sources. Instead its pork-barrel for the oil industry and invading countries where the oil is."

I try not to tell other people how they should spend their own money....but I've spent some of mine subsidising research into solid oxide fuel cells. Does that help at all?

No, not what I'm saying.

"You are saying that the earth's resources are NOT limited?"

Certainly not. There's obviously a certain number of copper atoms on the planet.

I'm saying that economnic growth is not necessarily limited by resource availability.

Note the "necessarily" there. The NS argument is that growth is necessarily limited by resource availability. Mine is that it isn't.

Emails show journalist rigged Wikipedia's naked shorts

Shorting

The really crazy thing is that, while I've no doubt that the shenanigans detailed went on, the original claim that there's something wrong with shorting stocks (whether nakedly or not) is wrong in itself.

You're allowed to buy stocks on margin so why shouldn't you be able to sell them on margin, that's all that shorting is.

A very recent example, HBOS and Lloyd's. Everyone was worried that, because the HBOS price was so far below the Lloyd's offer, that the deal wouldn't go through. Panic in the markets.

The traditional response to this situation, a large price difference between an offer for a company's shares and the market price of those shares is as follows. Buy HBOS shares and go short Lloyd's. This locks in that profit. But as you can't short financials in London at the moment you can't make that trade.

Which is a pity, because if those speculators were making that trade then HBOS shares would rise, Lloyd's would fall, thus there's more chance that the deal will in fact go through.

Blaming short selling for all sorts of things is really only done by those who don't understand why people might go short. Another example...banning short selling of financials has closed the convertible bond market to financial companies. Really not what we want at the time that we want all those financials to be raising more capital.

Windfall taxing big oil: how to make the gas crisis worse

Ummm

"Bloody hell chap, do you know what margins most businesses run on? That's a very decent margin right there compared to most."

Perhaps you should have read further then. I do actually link to industry sector by profit margin. Oil and gas is 60 th in the list.

"All of this is pretty much sewn up by 4/5 huge extraction/supply companies with a number of small exploration companies prospecting. Its not an industry you can just go out and buy an oil field with no experience or track record. Its an oligopoly and we're stuck with it."

Umm, no, it's not an oligopoly.

http://www.thehindubusinessline.com/2006/09/06/stories/2006090603850100.htm

The FDRs of Green explain the gentle art of planet saving

Sadly

"perhaps you'd like to show me the market-generated cure for MRSA or AIDS?"

There is no cure for any viral disease, neither publically nor privately funded. (MRSA isn't such a viral disease, of course...but what cures we have for it are indeed privately created, new antibiotics).

We have vaccines which can stop you from getting some viral diseases, all of which have been private sector created. We also have a number of drugs, anti-retrovirals, which are useful in stopping the advancement of certain viral diseases: all of which are, again, from the private sector.

Or , well, mebbe, I'm entirely wrong. Could be. Can you point me to the non-market generated cure for MRSA or AIDS?

There is a cure for AIDS, right? One which the public sector has created? Or not?

umm

"These strange, right-wing, free market, reliously anti-environmentalism articles"

I'm not wholly convinced that pointing out that *certain* environmentalists are talking through their hat is the same thing as being anti-environmental.....anti-certain environmentalists, yes, clearly, but not anti- the environment.

"The Markets will solve all our problems"...erm, no, markets are very good at solving certain problems, like the allocation of scarce resources, the price system as information as to what are scarce resources and so on. There are many things which markets unaided will not solve: the most obvious being things like CO2 emissions which are currently external to market processes. But *what* we do about those things is still up for debate. I prefer to slap on a carbon tax and bring those costs into market price calculations: the writers of the report discussed above seem to have different ideas which I take issue with.

As to The Guardian, well, they did make rather a blunder there, didn't they? Allowable to sneer at them for that, surely? There are times when I fully support the G (over free trade and the abolition of farm subsidies for example: after all, one of the paper's founders was Cobden).

As to 2008 and 500 years: apologies.

Research: Wind power pricier, emits more CO₂ than thought

Not Quite the Answer

"It would be interesting to know how much energy, raw materials and CO2 emissions go into creating, shipping and installing a wind turbine before it is switched on."

Not quite the number you're looking for but absent the emissions from the back up plants (as discussed in this paper) the CO2 output over the whole cycle from wind power is roughly equal to that from nuclear or hydro and somewhere between 1/3 and 2/5 of solar PV.

It's low carbon but not no carbon.

MEP tries to ban lightbulbs with mercury amendment

Well, no.....

"It maybe more expensive, but given that it's currently imported from either the US or Japan at the moment, they aren't exactly low cost economies either so the price should be similar produced here."

Because you've got the capital cost of the factory as well....

JonB

Well, maybe, it's just that top usage for a bulb is, if I recall correctly, 100 mg. So, 1,000x1,000x10, ie 10 million can be made from one tonne. And mercury is pretty cheap stuff, a few thousand $ a tonne maybe?

I think the cost of the new factory would be rather thigher than the savings from using the mercury?

Tee CEe...the exemption is that less than 5% of the weight of the bulb is Hg. And that defeated amendment was the only one to do with imports anyway.

The economy: A big Arab did it and ran away, claims PM

Simon Ball

Giffen goods finally identified:

http://www.economist.com/blogs/freeexchange/2007/07/as_price_goes_up_so_does_deman.cfm

Jensen and Miller look at poor Chinese consumers and demonstrate that they consume more rice or noodles, their staples, as prices go up. The idea is the same as with the proverbial poor Irish. People need a certain amount of calories to survive—let’s say 1600 per day. You can either get that by consuming rice and perhaps some vegetables alone, or by eating rice, vegetables and a few bites of meat.

But meat is expensive. As the price of rice goes up, these poor Chinese can no longer afford the luxury of cooking meat, yet they still need to get to their 1600 calories. So they eat rice instead, which is still relatively cheap compared to meat. Voila!: Giffen behaviour in action.

What does this mean for the real world? Prices of certain food crops have increased by as much as twofold over the last 18 months, which has lots of negative consequences for the world’s poor. One such consequence might be that demand for staples has gone up even further.

Home Secretary goes crazy on drugs... policy

Well,

"Regardless of what the report says, do whatever the headlines in the Murdoch press are currently screaming about."

It's really The Mail, Rothermere press we're talking about here. No, this comment not prompted by the fact that I sometimes write for The Times.

Sarah Bee

Umm, could you email me privately those very interesting things that they are suggesting for the Home Secretary? One blog has already argued for the use of especially sharpened cockroaches (!?) and I'm just wondering if readers here are even more inventive?

Al Gore's green job bonanza - can we afford it?

Yes

Has anyone at the Adam Smith Insitute read Adam Smith?

Yes, next?

"The only way to "create" wealth is through the exploitation of natural resources"

Umm, no. It's by adding value to resources.

No

"Seriously, would you claim that the car industry was an economically bad thing because it put an end to widespread jobs working with horses?"

Of course not. Only that the end of those widespread jobs with horses was a cost of the auto industry. As I say in the piece, it may be that it's a cost we're happy to pay, it may be that the benefits of the new technology outweigh those costs.

The point isn't even that a green economy itself is a bad idea. Only that shouting about how many jobs you're going to create is a cost, not a benefit, of such schemes.

A small update

This is a rather funny litte ad that Wecansolveit has just issued.

http://ollysonions.blogspot.com/2008/04/america-fought-them-on-beaches_04.html

Oh No....

"Look Mr. Worstall, your opinion that all the tree hugging is a waste of effort and we should just consume oil and coal like there is no tomorrow"

Certainly not. I want everyone to be using solid oxide fuel cells because they use the metals that I sell in my day job in their manufacture. I will be much better off personally if lots lots more money is put into alternative and hydrogen cycle energy systems. Vastly so.

Why, I've even used my very own personal money to subsidise research in the field.

But then I try not to let what benefits me personally colour my view of the larger elements of the picture.

Pork and politics energise the biofuel delusion

Well, in my case....

"But it's not just you, why don't these 'researchers' spend their time researching ways to improve the process of producing biofeuls rather than wasting time and effort telling us how inefficient it is currently? Maybe because they can be influenced/paid/pressured by anti green interest groups just like governments can."

It's because I am indeed a fully paid up capitalist bastard. I've even spent some of my own money on subsidising research into fuel cells. Purely so that I can make money out of supplying the metals they will need in the future, you understand.

The 'green' car tax grabs that don't add up

Sigh

"So please, stop trying to put a dollar value on a life, you can't."

Please, try to understand what the nice people have been trying to explain to you above. This happens all the time. Even Polly Toynbee understands it so it should be within the ken of someone intelligent enought to read this journal. I paraphrase a recent Polly T article.

The National Institute for Clinical Excellence (NICE) looks at the costs of new drugs and treatments and at their effectiveness. Effectiveness is measured by Quality Adjusted Life Years (QALY). If the price is below some £30 k or so per QALY (roughly speaking, you understand) then the new drug or treatment gets approved. By measuring in life years we're able to balance the difference in value between, say, a drug that treats childhood cancer and one that treats a disease of senescence. By adjusting for quality we account for some treatments keeping you alive but in a coma, as against others that provide a good quality of life.

Now, if that drug or treatment costs above about £60 k per year it is extraordinarily unlikely that it will be approved for use by the NHS. So, although there is a drug that could be used to treat someone, because of the cost, they don't get it and they die.

Now note, this isn't evil bastard economists doing this (nor is it think tank wonks). This is the medical profession rationing treatment to the population on the basis that the taxes raised from you and me have to be spent in the most cost effective manner.

And to do that they do, every day, week in and week out, exactly what you say is impossible: they put a value upon human life, a cash value to boot.

And there's nothing strange or extraordinary about this: the same method is used to decide upon road plans, upon safety improvements on the railways.

More

"Hmm Interesting, wonder why the author chose Weymouth as his example."

Just came to mind....wave to my sister next time you pass by.

"before they nailed their flag solely to the denial industry pole"

When an article says that climate change is happening, that we're causing it and that it's going to a lot of damage in the future, pretty difficult to describe it as "denialist" isn't it?

"OOOps but ther's the rub. I'm not "allowed" to grow hash, because it isn't just the 'market' operating here"

I'm sure you'll be very happy to learn that the ASI fully supports your right to ingest any and every substance you should wish to. Yes, we argue very strongly (as I do individually) for the full legalisation of all narcotics. 'Coz we're liberals, see?

True, But

"Its not - there was already fuel tax before anyone had ever heard of climate change for issues to do with attempting to ration road use to prevent detrimaental effects on the real environment due to car use"

True, but, the other costs, road building, noise, particularates, congestion, are more than adequately covered in the other 30-35 p a litre that is paid in fuel duty.

I'm talking solely about the marginal taxation imposed, so we are told, to cover CO2-e emissions.

"They're using their environmental goals to achieve tax increases."

Well, yes, but then everyone who reads this site is intelligent enough to make that connection without my needing to state it explicitly.

Die for Gaia, save the planet?

Really?

"Yer man Worstall is a wonk who's never done an honest day's toil in his life, "

Interesting that you know my background so well: what with the early years in the catering trade, then marketing, then 7 years in Russia both distributing newspapers and setting up a business dealing in the rare earths, the last decade as the wholesaler of 50% of the world's consumption of one specific metal. The last couple of years of freelance writing and the ascent to policy wonkdom come after 25 years of "real jobs".

A short addition

"Also the statement that nuclear power has little or no CO2 output is also a fallacy. Sure, the actual generation stage is fairly emission-free, but you have to consider all the related industry behind the scenes. Uranium strip-mining for starters has a huge environmental impact."

The number I gave, about the same as hydro, less than half solar, is the total cycle emissions from nuclear. Yes, including mining, purification etc. The much higher estimates you see bandied about (30% of gas fired for example) come from predictions (which as someone whose day job is in mining, although not of uranium, I do not take seriously for one moment) about the purity of U ore etc in 40-50 years time.

Dr. Jones: I'm with you one 1) for sure, as is the ASI.

"But I see no sensible notes from either author on the effects of population on Water, Biodiversity, Biomass, Biosegmentation, Habitat destruction, Pollution, (land, sea, air), Power generation...I could go on."

Indeed, so could I, at the cost of going rather beyond the 1,000 words or so that the editor asked for.

"Hm hm... given that the dollar:pound exchange rates have crashed in recent years (say -30%), and pollution hasn't significantly gone up or down (most people just sputter on as usual), then either equation (yours or the ehrlich-rubbish) concludes that technology has differentially (between US and UK) gone up or down with that same factor (say 30%), something we'd have noticed I say. For a good explanation you get a cookie."

I claim my cookie because economists don't use market exchange rates to look at such things. Rather, they use PPP exchange rates for cross-country comparisons and these have hardly moved.

"But to return to the point - I think you will find most Greenies advocate controlling population growth by better education of women and making condoms free in the third world..."

Another extremely ineffective plan. 90% of changes in actual fertility come from changes in desired fertlilty, not access to birth control. (Try googleing for "desired fertility", you'll find the paper). Desired fertility seems to change in correlation with wealth (real wealth, not just financial). That's why all of the industrialised nations (with the exception of the US which has issues over first generation immigrants) have birth rates below replacement.

When poor people pollute - the Tata Nano and eco-crime

Tom

"That all this environmental disaster theory is based on 4 sets of 2 numbers, (population and GDP) arbitrarily settled on by some supposedly qualified person.

I like to think of myself as fairly logical, and I can't see how the f**k they can get all those predictions from 2 variables! Someone please tell me that they use more intelligent methods than that!"

It's not quite arbitrary, no. But yes, those numbers are the basic inputs to the entire structure. Read the (short) chapter: "scenario storylines" here.

http://www.grida.no/climate/ipcc/emission/089.htm

Chapter 4.3

Garnt

Grant

"Not necessarily a correct assumption. Personal example - I recently paid tradesmen to paint my house. The cost was probably 10 times the amount it would have cost me to do the job myself. So why did I make an economically irrational decision? Because purchase decisions are not always economically rational. People factor in other values, such as the value of time with the family, the benefit of not tying up many, many weekends in doing the job myself."

As with Spleen above. "Opportunity Cost" is the phrase here. The cost to you of doing something is not just the financial cost, it's the economic cost. It's the financial cost plus the value of the other things you could have been doing instead. So playing with your kids while you pay people to paint your house might not be financially rational, but it's certainly economically. We are seeing that you value the time with your kids more highly than hte price you have to pay to getthe house painted.

Even More

Vikram: yes, sarcasm.

"Hell, one third of the world's population doesn't have *any* electricity at all. When the sun goes down, their lives just stop. So even getting them up to "poverty" level would take a huge amount of CO2 emission. Keeping them there, even more."

Quite, which is why the link to the SRES in the piece. Try reading the basic assumptions of the A1 family. in 2100 the average human being will live like the average American did in 2000. That's their *starting* point, the one that leads to the very estimates of global warming that the IPCC tells us about (more technically, to the higher end ones if we don't do something about it, like reduce carbon use).

Some more

A few answers:

"globalisation, which appears to inevitably produce vast amounts of carbon-fuel-based transport over large distances, reduces future golbal warming."

What we're interested in is total emissions, not just emissions from transport. Growing tomatoes in the sun in Spain and shipping them to the UK will have lower emissions that growing tomatoes in a hothouse in the UK. Raising lamb in New Zealand and shipping it to the UK has lower emissions than raising same in heated sheds in Northumberland. Both of those have recently been shown to be true BTW.

Of course, the very reason we have trade at all is because we use fewer resources that way: we measure the use of resources by how much something costs and none of us buys something which we can do ourselves more cheaply. With CO2 that isn't included in the price structure, which is where all hte problems are coming from.

"force the price of a barrel ever higher." Excellent, so we'll all use less, isn't that a good thing.

"Control the population numbers (and if any place in the world needs it, it's India), and everything else will follow.

Who gets the lethal injection though, is the trickier question."

No lethal injections needed. Birth rates go down as people get richer. Happened everywhere people have indeed got rich so far.

"I am not an economist by any means so the intuitive criticism that economics appears to depend on a constant increase in resource consumption looks logical to me but I would love to understand why it doesn't work like that."

Yes, more resources go into both than just the sand. It's an example of a point, that's all. GDP is the measure we use of economic growth. But it isn't a measure of the resources used. It's actually a measure of the value added in an economy.

To be formally accurate, it is possible that a growing economy will use more resources. But it is not necessary that a growing economy use more resources. An economy can grow by using the same resources more efficiently: we even have a word for that, productivity.