Where the US is falling behind: Cap and Trade Systems

I noticed an article in the Economist today that caught me off guard. It wasn't so much the focus of the article as it was a number associated with it. The Carbon Cap and Trade system in Europe is selling $40 billion (with a 'B') worth of credits every year. That's a pretty significant number for a program we hear next to nothing about in the States (The economist is a British publication).

Cap and trade is far and away the absolute best system I've ever studied in it's ability to accurately, efficiently, and cheaply create markets in hard to regulate environmental issues (pollution, overfishing, logging, etc.). I won't try to explain why Cap and Trade systems are so amazing - wikipedia can do that - but if I hear another person call it a Cap and Tax system, I may very well punch them in their ignorant face.

Fun fact: the US has a very successful cap and trade program that's been in place since 1990 for regulating Sulfur Dioxide emissions, you know, the main component of acid rain. Well, rather than continuing to kill food crops and wildlife, by 2007 the program cut emissions by 50% and did so for 80% less cost than any other measure. The EPA even has a graph for those too lazy to read.

Another fun fact:  Fisheries that have implemented a similar quota system (against initial dissent) produce more fish, at lower cost to the fishermen (because they're easier to catch, i.e. less work hours) and then in later years, the fishermen themselves advocate for lower quotas because of the positive impact it's had on their industry (read: their wallets).  The proof involves parabolic curves and production rates that explain why less is more and it's pretty fascinating but I'm not about to give an economics lesson.

Yes, I know, this was another meandering rant, but seriously, Cap and Trade - put it to use.

Building a Widget

I've spent the last two hours trying to build and troubleshoot a (very) simple widget to display current river conditions on the Lower Wisconsin.  I put the finished code below, so if you see a pretty graph, it worked!  (And if not...!@#$!@#%)

About half of my build time was spent trying to figure out why the heck it wasn't pulling the script loader off of my website.  Turns out, it was; the internet was just too slow and the widget would time out before loading (on the plus side, I'm getting paid to fill in as an office manager while I do this so I can't complain about slow internet).  I was able to load the code on a slimmer site and it came up in one of three tries so I'm gonna go with it.

Linking Economics to Business (my guilty pleasure)

I'm a huge fan of combining economics (quantitative) with business (qualitative) to get the best of both worlds and see a large amount of increased efficiency on the business side.  Tim Hartford put out an article today about just such a process:

http://timharford.com/2011/01/welcome-to-boss-onomics

WELCOME TO BOSS-ONOMICS

An article written by Tim Harford on the 22nd January, 2011.
Published on Undercover Economist. You can skip to the end and leave a response.

“What upsets me about the job? Wasted talent. People could come to me, and they could go, ‘Excuse me, David, but you’ve been in the business 12 years. Can you just spare us a moment to tell us how to run a team, how to keep them task-orientated as well as happy?’ But they don’t. That’s the tragedy.”

The Office’s David Brent understood that management mattered – and he proved it every day. Yet the academic discipline of economics has surprisingly little to say about the practical discipline of management.

John Van Reenen is an economist who wants to change that. Professor Van Reenen, director of the Centre for Economic Policy at the London School of Economics, recently delivered the Royal Economic Society’s annual public lecture in Manchester and London. It carried the title “Boss-onomics”; its message that management quality can be measured and does make a difference to the performance of a country’s economy.

Van Reenen and his colleagues have been using a double-blind interview methodology to evaluate the quality of managers. MBA students will call middle-managers on behalf of the research team and have a 45-minute chat about “lean manufacturing”, with open-ended questions such as, “say that a worker had been with you for a year, how would you go about considering his or her promotion?” The managers are unaware that the discussion is being marked on a variety of criteria; the MBA students doing the marking have no prior knowledge about the financial performance of the company in question.

The team has now completed more than 8,000 of these interviews across the world. Low scores are awarded to businesses with poor inventory management, nonexistent performance tracking, tenure-based promotion and other management practices from the dark ages.

The headline finding is that the average management quality of a country’s manufacturing businesses is closely correlated with labour productivity – output per worker per hour. Labour productivity itself explains much of the gap between rich and poor countries. As Van Reenen put it, the typical Tanzanian worker produces in a month what the typical American worker produces in a day, even given the same equipment.

The UK, despite progress since 1997, is not home to the best-managed companies – it heads the chasing pack behind clear leaders in the US, Japan, Germany, Sweden and Canada. Van Reenen has some ideas to fix that.

Competition policy is one obvious lever: the UK doesn’t lag behind the US because it has fewer excellent firms, but because it has more terrible firms. Such terrible businesses can only thrive if competition is weak – a theoretical result that Van Reenen has also shown to be true in practice.

Another weak spot in the UK is the prevalence of family-managed firms. It is still quite common to hand the chief executive’s role to the oldest son in the UK, and management quality tends to suffer as a result. Van Reenen argues that family firms should not be exempt from inheritance tax, because the government shouldn’t be offering tax breaks which encourage badly managed firms.

There is also the possibility that the government could try to improve management quality directly. Britain needs better apprenticeship schemes, and the scrapping of the Education Maintenance Allowance looks insane.

But civil servants themselves should refrain from handing out management advice: government-run companies rank right at the bottom of management-quality tables. David Brent is alive and working in Whitehall.

A Day in the Life of a FedEx Delivery Driver

I was one of about twenty drivers hired on as a delivery driver for the Christmas rush working under FedEx Ground.  When I say rush, I mean volumes steadily increased from a couple thousand packages a day to nearly 10,000 packages a day running nearly 100 delivery trucks.  Maybe more, I'm not really sure.

I've been doing Cross Plains mostly, and some Verona and Oregon lately, though the first few weeks were all over the place-never on the same route more than once (Janesville, Stoughton, Waunakee, Far Eastside, Near Eastside, Westside).

At first, 60-70 stops a day seemed to be the going rate - roughly a full day at a leisurely pace.  Then the procrastinators kicked in with their holiday shopping and I started doing upwards of 120 stops a day - sometimes almost 14 hour shifts.  At one point, the Department of Transportation required I stop work for the rest of the week because I bumped up against the 72 hour work week limitation for drivers.  This wasn't uncommon.

An easy day.  Not uncommon to have twice as much.

When it comes time to deliver the packages, you'd assume a GPS comes standard.....nope.  Instead, you're given a 20 page turn-by-turn routing guide based on the packages scanned onto the truck.  (I bought a GPS)

My lifeline.

Of course this isn't much use when you can't quite make out street names.

Um....yeah! That's gotta be Timber Ln.

Or more often, finding house numbers (assuming they have any to begin with - for the love of god make them visible!!!)

Your guess is as good as mine.

But at least the views are nice.

Somewhere in Cross Plains.

At the end of the day, it's back to the distribution center.

Just your average everyday sorting facility

Trucks are parked inside (when there's room) where the night shift sorts incoming loads onto route specific pallets.

All in all, it's a pretty sweet job.  I'd definitely do it again next year.

Flipping the Bird

It occurred to me today that I rarely see someone flip the bird anymore; almost like it's become a lost art, standing proud (or pissed) with that upward thrusting middle finger sending a silent but powerful signal of what your thoughts are on the matter.

Seems almost as if the bird has become nostalgic, replaced by the more direct and less subtle vocalizations of four letter words uttered with ease and not given so much as a second thought.

I get the sense that this is how older generations feel when they begin to view the newest ones with contempt at the lack of respect and their contributions towards the devolution of society.

Flipping the bird just seems classier.

Close the Washington Monument

The National Park Service wants to add airport-level security to the Washington Monument.  Bruce Schneier says we should close it:

...Let it stand, empty and inaccessible, as a monument to our fears.

An empty Washington Monument would serve as a constant reminder to those on Capitol Hill that they are afraid of the terrorists and what they could do. They're afraid that by speaking honestly about the impossibility of attaining absolute security or the inevitability of terrorism -- or that some American ideals are worth maintaining even in the face of adversity -- they will be branded as "soft on terror." And they're afraid that Americans would vote them out of office if another attack occurred. Perhaps they're right, but what has happened to leaders who aren't afraid? What has happened to "the only thing we have to fear is fear itself"?

An empty Washington Monument would symbolize our lawmakers' inability to take that kind of stand -- and their inability to truly lead.

...The empty monument would symbolize our war on the unexpected, -- our overreaction to anything different or unusual -- our harassment of photographers, and our probing of airline passengers. It would symbolize our "show me your papers" society, rife with ID checks and security cameras. As long as we're willing to sacrifice essential liberties for a little temporary safety, we should keep the Washington Monument empty.

Terrorism isn't a crime against people or property. It's a crime against our minds, using the death of innocents and destruction of property to make us fearful. Terrorists use the media to magnify their actions and further spread fear. And when we react out of fear, when we change our policy to make our country less open, the terrorists succeed -- even if their attacks fail. But when we refuse to be terrorized, when we're indomitable in the face of terror, the terrorists fail -- even if their attacks succeed.

...We can reopen the Washington Monument when we've defeated our fears, when we've come to accept that placing safety above all other virtues cedes too much power to government and that liberty is worth the risks, and that the price of freedom is accepting the possibility of crime.

I would proudly climb to the top of a monument to those ideals.

I agree.

"Jobs and Entrepreneurs" - Spare me

If I read one more article proclaiming the solution to creating jobs is making it easier for people to become entrepreneurs, I may shoot something.  At the very least, I've unsubscribed from two of the worst offending publishers.

First of all, what is with this nonsense about "we must make jobs, jobs will save us!"?  There's talk of government spending to support jobs that otherwise wouldn't exist.  Why?!?  If those jobs aren't producing enough to make them worth their while, why should we send more money down the drain after them just for the sake of saying "we saved a job".  That's not how a free-market works.  Free markets allow jobs to be made where those jobs make sense.  Supporting car manufacturers is nearly the same idea as supporting horse and buggy drivers.  When the demand for something disappears, you can't magically make it reappear.

Second, encouraging everyone that lost their job to become an entrepreneur just doesn't make sense.  You can't teach it in a class.  You can't flip a switch and make someone want to take on the workload, the responsibility, the wherewithal to create a successful business.  If anything, our education system has done a fantastic job of removing the necessary traits for entrepreneurship from most people over the past 50 years.  Schools weren't set up to encourage creative thinking and problem solving skills.  There's always "the right way" to do a problem.  Risk is something most people will no longer accept.

Third, the majority of people putting out these articles are self employed bloggers.  Their business is blogging. It's great that they're able to make a living from it, but they write like everyone that's going to start a business is going to start a blogging business.  I can't blame them, it's all they know to write about, but they can't generalize generalize the entire entrepreneurial population as online businesses.  Absolutely everything leads back to the real and physical world and the internet will never be self sustaining without that world.

Fourth, people aren't going back to work because unemployment is now 99 weeks.  Average time to a new job when unemployment runs out? 2 weeks.  There's a reason Europe's unemployment rate is always around 10%.  A significant portion of that workforce chooses not to work while they collect their sizable unemployment benefits.  That's why even when times were great in the United States and employers couldn't hire enough people, the unemployment rate was still hovering around 4%.  A certain percentage of the population will always have the incentive not to work while unemployment benefits exist.

Fifth, the people that think they want to start a business have it backwards.  I can't count the number of times I hear someone say "yeah, I'd love to start a business!".  Well, that's nice.  I'm sure you love the idea of starting a business, but good luck with actually making that happen.  Making money isn't easy.  You have to have an idea so good that other people want to pay you enough for it.  More importantly, you have to know every in and out of that idea, or at least more than most people know about it.

For the vast majority of people, you HAVE to do what you know, do what you're passionate about.  If you don't have either of those, you're never going to make it.  You'll never gain traction because you're just not remarkable.  You'll burnout doing something your heart isn't in to.  You're better off keeping a day job.

All of this comes back to my belief that you shouldn't encourage new entrepreneurs.  The people that can make it will get there with or without outside intervention.  At best, you'll convince a few people on the margin.  At worst, you're gonna have a lot of bitter, disappointed people.  If you really wanted to help, make like easier for those businesses that already exist and are growing. Remove barriers to that growth - stop legislating laws like everyone has multi-million dollar budgets to comply with them (I'm looking at YOU, dairy industry and YOU, campgrounds).

Trying to guess where the world wants to go and pumping money into that direction only serves to decrease efficiency.  It generates waste.  The smartest people in the world will never accurately predict where the world will go.  As much as I like renewable energy, it's wrong to prop it up with subsidies.  A far better option is to make the alternative less attractive.  Make oil and coal more expensive.  The market (yup, all of those entrepreneurs) will figure out the best direction - and it won't be ethanol (so stop wasting resources).

Delivery Driver

It's official, I start delivering Christmas this coming Tuesday.  I've been hired on by Fed Ex for the Christmas rush.  If all goes well, I may even get to continue working with their contractors after the January travel month is over.

The best part may be that they pay well enough in one month to cover an entire month off plus a ski trip to Montana, a road trip to Florida, a cabin trip to Lake Superior, and a business trip to Salt Lake City.

Can't complain about that.

Oh, and the rental canoes have been ordered!

The Economics of Voting: What Do You Mean My Vote Doesn't Count?

According to data obtained from the Statistical Abstract of the United States , in the 2000 presidential election the voting-age population of 18- to 20-years-olds was 11.9 million. Of that population 40.5 percent reported they were registered to vote but only 28.4 percent reported that they voted. This pattern of voter behavior was not a one-time aberration. In fact, of all eligible voter population groups, 18- to 20-year-olds have consistently been the least likely to vote in national elections. Does such voter behavior on the part of the young mean they are uncaring, irresponsible members of society; or, does such voter behavior represent individual rationality?

The Founding Fathers believed that a concerned and informed electorate was necessary to establish and maintain an efficient and effective democratic society. Eligible voters were expected to take time to study the issues and candidates, discuss these issues and candidates at public meetings, and then carefully weigh the relevant information before deciding how to vote.

Although an informed citizenry is desirable from a social point of view, it's not clear that individuals will find it personally desirable to become politically informed. The reason has to do with cost. Obtaining detailed information about issues and candidates is a costly endeavor. Many issues are complicated, and a great deal of technical knowledge and information is necessary to make an informed judgment on them. To find out what candidates really believe (and how they will act on those beliefs if elected) requires a lot more than listening to their campaign slogans. It requires studying their past voting records, reading a great deal that has been written either by or about them, and asking them questions at public meetings. Taking the time and trouble to do these things is the cost that each eligible voter has to pay personally for the benefits of being politically informed.

What are the benefits of being politically informed? Some people simply enjoy being informed; it is a form of entertainment, like going to the movies or parties. These people will be willing to make an effort to acquire some information on public issues just for the sake of knowledge. The other benefit from being informed has nothing to do with satisfying intellectual curiosity. Being politically informed provides prospective voters with the knowledge they need to influence social decisions in directions that will yield them the greatest benefit. Unfortunately, this does little to motivate most people to become informed because the benefit in question does not seem to amount to much. The probability of one person's vote having any effect on an election is practically zero. With millions voting in national elections, each citizen is safe in assuming that his or her vote really doesn't count, at least in terms of being decisive.

So for most people, including eligible voters 18 to 20 years of age, the costs of becoming politically informed are noticeable, while the benefits are negligible. As a result, most people limit their quest for political information to listening to newscasters or political pundits, casual reading, and conversations with friends and family. Even though most people would be better off if everyone became more informed, it apparently is not worth the cost for most individuals to make the effort needed to become informed. They will receive benefits from the awareness of others whether they study the issues or not. And if no one else becomes informed on the issues, an individual who does not become informed will not be able to change things noticeably, no matter how politically aware she or he is. Therefore, voter apathy is not the result of moral decay or lack of patriotism in our society. It's simply the result of individuals acting rationally. This phenomenon is known as rational ignorance or rational apathy.

The implications are very interesting. For one thing, legislators have an easier job than they otherwise would. With most of the public poorly informed on complex issues, elected representatives are under less pressure to be informed themselves. They will be able to score points with their constituents back home for policies that give the appearance of solving problems, whether they do or not. Since the effects of many policies are hard to predict, even by experts, we can expect a great deal of legislation to be passed that aggravates the problem it was intended to solve.

Lack of political awareness on the part of the public also makes it easier for politicians to get away with exaggerated claims and promises as well as false and misleading advertising. Whether we are dealing with a politician promoting his or her candidacy or a salesperson promoting his or her product, such as a car, there is a tendency to exaggerate the truth if it will help convince the consumer to vote for, or buy, the product. The more consumers know about a product, the less advantage can be realized by false advertising. And the fact is that most people spend more time and effort sizing up the alternatives when they buy a car than when they vote for a political candidate. Polls consistently indicate that the majority of the people of voting age do not even know who their congressional representatives are, much less how those representatives stand on specific issues. When people buy a car, they at least kick some tires and take a test drive; more often than not, they have an experienced mechanic check it out if the car is pre-owned. People are motivated to become somewhat informed in these cases because, as opposed to voting on election day, the decision they make on a car is the decision that determines what they get. This fact reduces the benefits that a salesperson can realize from gross misrepresentation, though it does not eliminate it entirely. But don't expect to hear the outrageous whoppers from salespersons that politicians tell routinely: salespersons can be sued; politicians cannot.

But if this analysis is correct, why did 28.4 percent of 18-to-20-year-olds vote in the 2000 presidential election? An important explanation is that there is an expressive benefit from voting-a benefit having nothing to do with the election's outcome: People feel good about expressing support for, or opposition to, particular policies and candidates. And since no one vote is likely to affect the outcome, it costs a voter effectively nothing to achieve expressive satisfaction by voting. So if a person feels good about expressing support for “helping the poor” or “protecting the environment,” he or she can vote for government programs that claim to accomplish these noble goals (or for candidates that support them) at almost no personal cost, no matter how much these programs will cost-for example, in higher taxes-if they pass. While expressive benefits have the desirable effect of motivating more people to vote, they do little to motivate people to vote on the basis of information rather than emotion.

High Water - Ugh

The high water on the Wisconsin River could certainly go away now.  The first week was cute, the second week was annoying, and now it's just plain getting ridiculous.  Life in a Wisconsin canoe rental business I guess.