What 94% of Americans don't know...

Obama has reduced the deficit.

There. You are now officially more informed than 94% of Americans.  Just to make it really clear, here is a simple chart of deficit by calender-year quarter, which resolves any questions as to who was President when the deficit exploded into the stratosphere during the economic collapse.

Cool stuff of the week

Who knew that leaves reflect near-infrared light like crazy?  Check out this amazing video of what our eyes can't see.

Cut spending.  Just don't cut anything.  Not one single item on the poll's long list had plurality support for spending cuts.  Two items - education and veterans' benefits - had majority support for spending increases.  16/19 items had more support for increases than cuts.

The Senate is a toss-up in 2014, as Democrats have to defend a large number of vulnerable seats they won in the 2008 landslide.  The 2016 election should again favor Democrats.

When 97% of experts and essentially every major scientific organization on earth disagrees with you, and 99.83% of published papers do not support your contention, you are either wrong or you are Galileo.  Hint:  You are not Galileo.

Awesome winning photos from the World Press Photography Awards. 

Japan - not so small a country

Two myths about Japan that are commonly repeated is that it is small and that it is very densely populated.  Take a look at the map below.  Does Japan look small to you?  It is actually about the size of America's eastern seaboard.  Note that the latitudes were kept intact in this image.

Japan is physically about the same size and shape as the portion of the US east of the Appalachian mountains.  It also has similar weather:  Okinawa (Naha on the map) is little different than Key West.  Hokkaido, the northern-most island, is like New England with lake effect snows blowing in from the back side.  Also note that while the population of Japan is about 128 million, the population of the eastern seaboard is on the order of 80 million, depending on what you count.  So while Japan is more population dense than the eastern seaboard, it is not wildly different.  The image of Japan being super-crowded is because people choose to live in its cities, particularly on the eastern shore, and country-side sprawl is not as common as it is in the US.  If the Japanese were willing to live further inland in the minor cities, their density would not be all that different from what is found in much of the USA.

Fracking boomlet, fracking bust...

Well, that was fun, folks.  Back at the height of the housing bubble, natural gas prices spiked.  This made it economical to adopt an existing oil-industry technique (developed in no small part by the federal government), hydraulic fracking, in the pursuit of natural gas trapped in shale rock.  This set off a gold rush, and like California in the 1850's, a lot of people are losing their shirts and the only people making money are those selling equipment to the suckers.  The rush mentality set off a huge burst of production, which preceded to cause, in combination with the recession, for prices to fall from nearly $11 per thousand cubic feet at their peak in 2008 to under $2 at their bottom last April.

So what is the status of fracking now?  A new report from the PostCarbon Institute lays it out in gory detail. Besides a lot of investors drowing in a mountain of red ink due to the rock-bottom prices, production has flat-lined.  Worse yet, the production rates of fracked wells plummets from the moment they are first tapped, falling by over 60% on average the first year and around 50% per year for the next few years.  Even to maintain flat production, something like $40 billion dollars of new equipment and drilling needs to be purchased every year.  In true Red Queen fashion, the fracking industry has to run faster and faster as its old wells' production falls like a rock, and new replacement wells, which are drilled ever further from the "sweet spots", have even less initial production and faster declines than the wells they are replacing.  It is a race they cannot win.  Even if they can outrun their creditors, they can't outrun physics and geology.  There just isn't that much frackable natural gas out there.  Below is a map of the major shale gas plays.  Note that they span about a quarter of the lower 48.  We've already poked and prodded everywhere, folks.  There are no more big plays to be found, and the biggest ones we have either leveled off or already in decline.

So no, fracking is not the long-term solution to anything.  It is an unsustainable boomlet that buys us at most a dozen years or so.  The same is true for the shale oil boomlet as well - it is a decade's worth of very expensive oil.  Both will peak sometime around 2020 and then we will enter yet another phase of long-term decline in production.  When we burn it and it is gone, and our only remaining choice to go after something that is deeper, thinner, dirtier, and even more expensive.  We need to start immediately on a major effort to plan for and construct the necessary infrastructure for a world where both oil and gas are very expensive, and we should be focusing on protecting our remaining high-quality oil and gas reserves rather than gold-rushing them into oblivion.  Our current path is madness.

Ecuador Avatar, and other interesting reads

A few reads I would like to share...

Meet the Shuar tribe of Ecuador, the closest thing here on Earth to what we all saw in "Avatar".  Of course, here on Earth, we turn a blind eye in order to make a quick buck.

Fleeing persecution, the Lykov family fled to the Siberian wild in 1936, whereupon they were isolated from human contact for the next forty years.

No, the minimum wage does not significantly affect unemployment rates.

Why does oil cost about $100 a barrel?  Because the marginal cost of producing one extra barrel of oil averages just about that amount for the major producers.  Get over it.

American carbon emissions are falling, but despite the claims, fracked natural gas is not the primary reason - the slow economy, followed by increasing use of renewables, have had larger impacts.

Language and Immigration



Last week, I officially sat out on my quest to tackle the JLPT-2 language test.  For a native speaker of a European language, at least, it is a beast.  Realistic estimates of the time required to pass it around 2000 hours of study, and almost certainly a significant amount of time living in Japan - and it is not even the highest level test!  The JLPT-1, required to enter universities, practice medicine or other professions, or apply for any number of jobs, requires half-again as much time and effort.  Just think about that:  these tests represent a year or a year and a half of full-time work, respectively. 

 

I have been living in Japan for almost three years total, without being able to speak the language at much more than an elementary school level.  Yet I have performed research at major universities and corporations, co-authored Japanese patents, written conference and journal papers, earned a fair bit of money, spent most of it, paid plenty of taxes, facilitated cultural exchange, and otherwise been a good resident.  In fact, the vast majority of westerners here in Japan are no better at Japanese than myself.  I would describe no more than 5% as fluent, and about a third as competent speakers, and the remainder as either short-term non-learners or those who have been here a while and picked up some Japanese by default but have no intention of hitting the books or working at it.  Despite the fact that most of us can barely speak Japanese and most of the rest of us can only speak slow, broken Japanese, we are clearly contributors and in many cases actively invited into the country (eg, JET program).

 

So it really gets my goat every time I hear someone complaining about immigrants' lack of English skills.  Almost universally, the people making this complaint can't speak another language beyond the Spanish they learned watching Sesame Street, and therefore have no idea how much work it is to become reasonably fluent in another language.  I am actually stunned by the level of English that most of my foreign colleagues living in the US possess.  Especially for those from non-European nations, learning English for them is as difficult as learning Japanese is for me.  They could only have gotten to the points they are at by countless hours of study.

 

These complainers are also wrong in that it is not necessary to speak English in America, just as it is not necessary to speak Japanese in Japan.  Sure, it is helpful to speak the native language, but there are always work-arounds.  You would think that the complainers, who almost always believe in "free markets", would leave it up to individual immigrants to decide how much English was worth learning in their particular case.  Strangely enough, however, these people want to make English our "official" language, require that would-be citizens (as well as the new "amnesty" recipients) learn a certain level of English, ban bi-lingual signs, etc.  This is pure nativism and should be frowned upon in civil society.  People should speak whatever language they want, learn whatever language they want, and the government should adapt to the people as we are, not vice versa.

 

 

 

 

America is not a family

One particular analogy people bring up when talking about the government's budget is a "family" analogy.  They will claim that we are like a family with $40,000 in income each year, but who is spending $70,000 and has $250,000 in debt, or some such figures.  There are multiple reasons, however, that this analogy is flawed and leads to false conclusions.

First, macroeconomics.  A family is tiny relative to the economy.  Regardless of how diligently they save or how wildly they ring up the credit cards, the overall economy does not change meaningfully.  This means that the chances that they will be laid off, hired, or see a big boom in orders at their shop are unaffected by their own spending habits.  The government, however, is not small relative to the economy, making up more than a third of it.  If the government slashes spending...well, there is a lot less spending.  People get laid off.  Tax revenues go down.  People wind up on the dole.  After all is said and done, it is not even clear that the money saved via the reduced spending isn't lost completely due to the reduced revenues and new safety net spending.  Even if the government comes out ahead, it is only marginally so, and at the great cost of millions being laid off.

But won't the private sector pick up the slack?  Not when we are in a liquidity trap.  If you don't know what that is, you simply do not understand what has happened in our economy the last four years.  The mechanism by which the private sector normally "picks up the slack" is by falling interest rates, which stimulate investment.  But when you are in a liquidity trap and risk-free interest rates are already essentially zero, they can't fall any further (since you can hold cash instead, they can't really go negative).  So if the government cuts spending in a liquidity trap, it just adds more slack to the economy, and employment and GDP fall.

A second problem with the family analogy as normally presented is that those who present it seem to think the family income is fixed.  They never pause to consider that one solution might be to work more.  Indeed, a nearly perfect analogy exists between the family members' hours worked and tax rates, as both are essentially proportional to income and more or less voluntary.  Given that we have the third lowest taxes in the OECD, perhaps our "family" problem is that mom and dad only work 25 hours a week each.  Likewise, spending on automobiles for the family and defense for the government are pretty similar in size.  Since our defense spending is second highest in the OECD (per GDP), perhaps the family's problem is that mommy drives a $40,000 SUV and daddy has a BMW.

Yet just about every time someone presents this analogy, they never consider the macro effects, ignore the SUV and beemer, and not only dismiss the idea that mom and dad are lazy and could solve the entire problem if they just worked full time, but actively argue that mom and dad are just so hard-put that if they worked more, their productivity would drop so much that they would earn even less overall!    So instead of addressing these issues, the family must raid Junior's college fund, ignore the leaking roof, and skip their annual check-up.  Clearly, that's a one-way ticket to prosperity.

High Speed Rail and the "free market"

All forms of transporation are subsidized, and most forms of transporation should be subsidized.  This is because transporation networks are public goods, whose benefits (and some costs) spill well beyond their borders, and cannot be captured by their users or owners.  Transportation networks enable our defense and disaster response capabilities, boost our economy and dramatically property values.  On the downside, they result in physical separation (thus making human-powered transporation difficult or impossible), pollution, noise, and congestion.  On balance, their spill-over effects are hugely positive, and because of this, "free markets" would significantly under-supply them.  Additionally, "free markets" would even fail to properly manage the networks they did build, as in far too many cases, much of the network would be a natural monopoly.

One popular myth is that because we have gasoline taxes, roads "pay for themselves" and are not subsidized.  This is not true and has never been true.  The gas tax is far too low to pay for all of our road spending.  Depending on how one does the figures, user fees such as gas taxes now only cover 50-70% of the money spent on roads in the US.  Compare this to Amtrak, which only received $562 million in subsidies in 2011 out of a budget of over $3.7 billion.  Yes, Amtrak is less subsidized than the typical American road.  Yet one of the first first complaints about HSR that most detractors bring is that it requires subsidies, while they ignore the fact that the competition is subsidized as well!  Also note that most of the HSR systems in the world are profitable, despite the subsidies for their competitors.  Even our beloved Acela, the closet thing the US has to HSR, is profitable. 

Subsidies, however, extend far beyond simple cash transfers or targeted tax breaks.  The biggest subsidies most industries possess is the right to externalize costs - to pollute, make noise, or otherwise inconvenience their fellow citizens without a reasonable mechanism for compensation.  All transporation systems have some negative externalities such as pollution, noise, congestion, accidents involving non-users, security requirements, and physical separation.  However, HSR has much lower externalities than its primary competitors, driving and flying.  Drivers externalize a lot of danger (some 5000 pedestrians and cyclists are killed by drivers each year), a lot of noise, consume a disproportionate share of our police enforcement, and pollute about four times as much as HSR per passenger mile, while concentrating that pollution in our highly populated areas.  Airplanes pollute about as much as cars per passenger mile, devalue the land around airports for miles with their noise, and again consume a lot of law enforcement dollars.  Both of these systems are critically dependant on oil, which is a major national security concern and is a likely driver of a fair portion of our military spending.  Add it all in, and you would need a gas tax something like $2.00/gallon (vs less than $0.50 in most states) in order to appropriately incorporate all these costs into the price of gasoline.  Certainly, $5.00/gallon gas would make driving and flying look a lot less viable.

HSR, in contrast, has fewer negative externalities.  The land value boost around stations is enormous, offsetting any losses for land near the tracks.  Noise is modest relative to automobiles, particularly trucks and emergency vehicles, and pollution is not only just a fraction of what is released by cars and planes but is also generally released in low population areas where power plants are located.  HSR also reduces congestion at both the roads and airports it competes with.

The "free market" cannot work when there are so many externalized factors, both postive and negative.  It will simultaneously under-supply everything, monopolize what it does supply, and supply the wrong balance of options because the externalities are not symmetric.  We have to approach the decision on how much capital to allocate to transporation, and how much to allocate between various options, using an entirely different conceptual framework.  Given the success of HSR abroad, and the virtually inevitable rise of oil prices over the coming decades, HSR stands out as a clear path forward to providing our transportation needs for the next century and beyond.

High Speed Rail–Density Distraction

It is absolutely certain that one of the first objections anti-HSR individuals will express is that the US has too low of a population density to support HSR.  This is logical, if you believe that our purchase of Alaska somehow diluted the population density of New York City.  Of course, that argument would be absurd.  What matters is local and regional density, not nation-wide density.  The question is what parts of the US have sufficient density for HSR, and which ones will during the time-frame of their operation.

The “mid-west corridor” serves as a good example of a typical place that is suitable for HSR.  Specifically, this discussion will focus on five state – New York, Illinois, Pennsylvania, Ohio, and Indiana, which form a fairly densely-populated corridor between New York and Chicago.  The population, land area, population, and GDP of this five-state region stacks up very comparably to France, which has one of the world’s best HSR systems, the TGV, which not only servers over 100 million riders a year, but has set numerous speed records and generates annual profits of over a billion dollars.  In contrast, no true high speed rail exists in the United States, with the closest example being the Acela Express, which barely averages half the speed of HSR.

 

Location	Population	Area (sq mi)	Density	GDP ($bil)
New York	19,570,000	47214	415	1157
Illinois	12,875,000	55584	232	644
Pennsylvania	12,764,000	44817	285	576
Ohio	11,544,000	40948	282	483
Indiana	6,537,000	35867	182	268
Total	63,291,000	244249	282	3127
France	60,876,000	210688	289	2560

 

A robust mid-western HSR system might look something similar to the map below.  One line would leave westward from Boston, travel across upstate New York, along Lake Erie to Cleveland, where it would become the “Tri-C” line heading south through Ohio into Kentucky.  A second line would leave New York City, head west to Pittsburg and then bend back north to meet the first line at the Cleveland airport before heading straight west to Chicago.  There it would turn south for St. Louis.  Several small and medium size north-south connectors and the DC-Boston line would fill out the grid pattern.  The total distance of track covered within the five-state boundary is just shy of 2500 miles (4000 km).  France, for comparison, has about 1200 miles of HSR in operation, 130 miles under construction, and over 1600 miles in the planning stages.

 

 

It is clear that at a regional level at least, the mid-west corridor states have sufficient population density to support HSR.  This argument is only going to grow stronger with time, as the population of the US is projected to rise by more than 50% during the remainder of this century.  The only possible objection I see here is that local population density might be insufficient – that while our cities have enough people, they are too sprawled out.  There is some truth to this, but this ignores both the fact that our population is going to grow, and the fact that the very act of building HSR will influence future density patterns.  Land near HSR stations is some of the hottest real estate on earth.  Build it and people will move there.

 

What goes for the mid-west applies elsewhere.  The entire eastern seaboard has population densities similar to the mid-west corridor.  Florida has a population density of 350 people per square mile.  California’s population is 242 per square mile, but half of the state is empty deserts and mountains and virtually all the people reside on either the coast or the central valley.  Even the eastern third of Texas, where most of its residents reside, has a population density similar to France. 

 

There may be good reasons not to build HSR along our eastern, western, and southern coasts, as well as the mid-west, but density is not one of them.  They already have sufficient regional density to support HSR and will only have even higher densities for the foreseeable future.

High Speed Rail - Build It and They Will Ride

 

Over the coming weeks, I am planning on presenting a series of blog posts defending the construction of a nation-wide network of high speed rail (HSR) trains.  This would be a major endeavor for our nation, costing in its most expansive forms, such as the "Dream" system shown above, sums on the order of a trillion dollars.

Having used the Japanese Shinkansen HSR system many times and ridden the French TSV once, I am absolutely convinced that HSR is the best transportation system for mid-distance intercity travel.  In the range of 100-400 miles (150-600km), HSR is as fast or faster than flying, faster than a car, and far more comfortable and timely than either, while costs are similar on a per-mile basis.  Additionally, HSR results in about a quarter of the carbon emissions relative to flying and driving, while reducing many other major pollutants by similar amounts.  HSR, like all forms of public transit, tends to increase property values, enhance economic activity, provide mobility for the elderly, handicapped, and young, and help foster the "walkable urban" communities that compose some of the most sought-after real estate in the country.  Oh, and did I mention that HSR is TSA-probing-free?

Given that our projected population in the year 2100 is almost 478 million, finding ways to move the additional 160 million Americans who will be living here a century from now is a long-term project that we cannot ignore.  It is also likely that more roads and more airplanes are simply not the answer, both due to issues with congestion and limited returns on trying to cram more vehicles through the same spaces, and due to the fact that both are heavily reliant on oil, whose price is almost certainly going to rise with time.  HSR, which is compact, self-contained, and electricity driven, can complement both our two existing networks intelligently, while greatly improving our chances of successfully integrating so many new Americans.

Social Security Sustainability

Any retirement system, when faced with increasing life spans, must resort to at least one of the following:

1:  Delayed retirements / increasing the retirement age
2:  Lower payments during retirement
3:  Higher savings rates or taxes when working

There is nothing wrong with this.  This is simply an obvious result of longer lifespans, and is equally true whether the retirement system in question is public or private.

Thirty years ago, Ronald Reagan and the Democratic Speaker of the House Tip O'Niell made a deal with regards to Social Security in order to deal with the gradual increase of life spans that had accumulated to that point, thus extending Social Security's actuarial balance into the 2030's by building up a reserve for the retiring baby boomers.  This was accomplished by a mix of tax increases and raising the retirement age, which was set to gradually increase to age 67 by 2022.

Thirty years later, we can see farther.  Our lifespans have increased even more, and therefore we either have to save more, retire still later, or try to spread the same amount of retirement dollars over a larger number of years.  What are Social Security's options for insuring its long-term stablity?  Actually, they are not all that bad, requiring modifications no worse than what Reagan and O'Niell chose.  There are plenty of options, such as raising the Social Security tax by 1% for both employer and employee, elimination of the earnings cap (currently $113,700, above which income you do not pay Social Security taxes), raising the retirement to 70, and a host of other smaller changes such as changing the cost-of-living-adjustment to be less generous, changing the payout formulas in order to reduce benefits to higher income workers, bring state and local government workers into the system, a straight benefit cut, etc.  Of course, these can be mixed and matched in any number of ways in order to hit the target.  For example, raising the retirement age one year, phasing in a 0.5% tax increase on both sides over ten years, and raising the cap 20% would put Social Security into balance for the entire 75 years that its actuaries calculate.  A group of policy wonks could crank out a bi-partisan, balanced solution over lunch. Given that Democrats hold the presidency and half of congress, and polls strongly indicate that the public prefers tax increases to benefit cuts in this matter, a fair deal would probably focus on the tax side.  The public, wisely in my opinion, realizes that this program is extremely valuable in ensuring a basic retirement for all, and is worth the price.

In the long run, Social Security can be thought of a system that transfers about 5% of the national income from current workers to current retirees.  It is self-evident that this is forever sustainable.  The only question is whether it would be better to shift this to around 6%, in order to maintain benefits at their current levels as the number of retirees increase, or whether to keep it at 5% and spread the money thinner.  Either way, Social Security is forever....or at least as long as we want it, which I hope is the same.

The Opposite of Sustainable, Helium Edition

One way to attempt to define any word is to think about its opposite.  In that vein, the situation concerning our helium supply may well be the absolutely least sustainable element of our entire industrial system.  I won't get into the details about the Helium Stewardship Act of 2012 (details here, and here), but let's just say the situation is so bad that Republicans and Democrats are agreeing.  So what is the problem?  It is not just the mismanagement of our helium reserves - the largest in the world -which the HSA is attempting to address.  Rather, it is the twin facts that there just isn't very much helium on earth, and that if we loose it, we lose it - forever.

Helium is unique among all elements in the fact that is both very light and inert.  Hydrogen is even lighter, but highly reactive, which means that is generally found bound to heavier elements such as oxygen, forming water.  Helium, however, floats around all by itself.  Now if you remember your freshman chemistry course, you may recall that kinetic energy is proportional to 0.5 x mass x velocity squared.  You may also remember that temperature is basically nothing more than average kinetic energy.  This implies that at any given temperature, small things must be moving faster.  Well, helium is so small that its velocity at the temperatures found in the upper atmosphere (where it inevitably floats, being lighter than normal air) is so high that it often exceeds the escape velocity of the earth.  So if you pop that balloon, your helium floats up and up, and doesn't stop until it leaves the earth's grasp forever.

For this reason, helium only exists as a trace as in the atmosphere (roughly 5 parts per million), making it all but impossible to extract from air.  Rather, our helium sources here in earth are natural gas wells.  Helium is naturally formed as the by-product of some nuclear decay processes.  In a few special locations deep beneath the earth, a combination of high concentrations of radioactive elements and impermeable cap-rock has allowed small pools of helium to accumulate over millions of years, trapped beneath the earth.  This virtually always are co-located with natural gas, which is trapped under the same rock layers.  Our National Helium Reserve in Texas, whose contents we have been selling off at below-market rates for years, contains 30% of the world's known helium reserves...and will be gone by 2018.  Experts estimate that there are only 25-30 year's worth of extractable helium left on earth.

With respect to all other elements, the worst we can say is that we are trashing our high quality ores and resources, and our kids and grandkids will be forced to go through a time and labor-intensive process of picking those valuable atoms out of our trash, or extracting them at great effort from whatever low-quality resources we may have overlooked.  Not so with  helium.  If we don't catch it and recycle it, it is gone.  Our descendants will be forced to either do without, or harvest it from space at an astronomical cost.  Lest you think helium is just for balloons and blimps, it is also critical for any number of industrial and technological processes, such as MRI scanners.  All sorts of our latest and greatest inventions either cannot work or cannot be manufactured without it.  The Helium Stewardship Act is a step in the right direction, or at least a cessation of the outright stupidity of heading in the wrong direction, but we need to act far beyond what is in this bill.  Helium use should be restricted to only the highest value applications immediately, and the reserves protected rather than sold.  Likewise, helium recycling should be enforced.  This resource, more than any other, is one that we need to protect.

Ocean of Concrete, Demons and Dogs

Japan is a wonderful country, with a long, deep history, a unique culture, and pockets of sublime beauty.  Yet Japan, on the whole, is ugly.  Terribly, pointlessly, for-no-darned-good-reason ugly.  You likely have seen fantastically beautiful photos of Japan, taken at some thousand year old temple in Kyoto, or in some secret pocket garden of the most meticulous craftsmanship.  Well, let me show you the other 99% of the country.  Below is the view out my window, from Kobe facing south across the inland sea, with Wakayama prefecture barely visible on the far side.  This, not some perfect garden, is what you see almost everywhere in Japan - concrete, ugly buildings, and power lines.  If I turned the camera a bit, the vending machines, corny bright signs, and some rusting old cars surrounded by trash, just to complete the effect.

 

 

I recently got around to reading Alex Kerr's Dogs and Demons (my Amazon review can be found here), which I had been putting off for a long time precisely because I knew that he and I agreed on this point, and I didn't want to reinforce my negativity on this topic.  In his work, Kerr lays out in no uncertain terms how the terrible nexus between Japan's deliberately corrupt government, its heavy industry, and its peoples' overwrought fears of natural disasters has allowed this beautiful nation to encase virtually all of its coasts in concrete, dam all its rivers, and cast a spider-web of lines and cables over what seems like every last inch of the country, while conciously removing almost all elements of nature from their cities outside of those few meticulous gardens.

Japan can do better than this.  The power lines can be buried, particularly in the city cores and near major attractions - one should not have to stand on their head to take a picture of an ancient Zen temple that doesn't need to be photoshopped to remove power lines or other random modern junk.  The rivers can be freed and the coasts exposed as well.  Your walls of concrete are largely ineffectual against disasters, while choking the life and beauty out of your nation every day that they exist.  The ugly signs can be regulated, the trash picked up, the trucks blaring propaganda as they cruise down the street banned.  There is so much in Japan that is great, and its people are some of the most eco-concious people I have ever met in many respects, willing to go to lengths to conserve energy that no American would even fathom.  Yet they bury their nation in concrete, cables, trash, and noise, to no avail.