The Point of Diminishing Returns

Perhaps it is a good maxim of life - success of any form is always abused well beyond its usefulness to us.

Certainly this is true in regards to many drugs. Stimulants allow us to push ourselves beyond our normal limits. Depressants allow us to relax and escape demands upon us and upon overuse can make our problems worse. Both apparently have "tolerances". That is, drugs move us away from our balance point, so when this happens over time our body compensates by either processing the chemicals more efficiently or allowing their effects to diminish.

Debt is a different sort of category that opens bigger doors of abuse. Debt by nature doesn't exist because it is about negatives.

Nature doesn't allow negative quantities. If a lion is hungry, she can live off from "savings" - stored fat within her body, but if that fat isn't available, she will consume other "savings" - muscle which is more useful for catching prey than consuming but must be done. When all the savings are depleted, the animal will die.

Humans believe in debt because we can borrow from our future time - assuming someone will take our promised time. We talk about money, but ultimately money comes down to time, someone's time, even if not always our own. I can "lend" 1 year to X, and X can lend two year to Y, and Y can lend 3 years to Z, while Z might owe 2 months to me. That 1 year of mine might be "worth" $30,000 to me, but the 3 years owed by Y might be $200,000.

Within any system that successfully brings about a desired result, success tends to have some sort of natural limit. Successful wolves killing deer for food will bring an increased wolve population until their success (or another cause) ends their easy food supply.

A good system would have feedback mechanisms that alert participants of reduced returns.

In "the olden days", perhaps a pack of 12 wolves could feed itself well hunting only 3 hours/week. Years later, the same sized pack (competing among many more wider packs), might find it need 3 days/week to find the food it needs.

Clearly a 24 fold increase in effort for the same result is a problem, and averages don't tell the full story.

The original wolf pack might spend 1 hour/week on a good hunt, and 2 days/week on a slow week. In contrast the now pack might still spend 1 hour/week on a good hunt, but some weeks they hunt the whole 7 days without sufficient food. Averages are nice - saving up food consumed from times of plenty and using it up when times are poor. But you can see originally they always had enough, while now they sometimes don't.

Surely nature has genes set up to respond to periods of starvation by reducing reproduction, and some weaker animals might even die during these periods. So "needs" get trimmed down based on supply, and things go on.

Humans have done much to even out the cycles of abundance and scarcity for our needs, at least we're by-in-large much better off than the animals.

We also have economic signs. When money is flowing well, we can feel secure to borrow money (time) from the future to get what we need (or what) in the present.

Security for individuals is a messy thing however. If I'm employed in a high skilled job, I can earn much more money than I need, and use the excesses to pay down past debt, and save some for future needs. However if I lose my job, my sources of income may be drastically reduced for a time, and "promises" I've made over debt repayment may be outside my new reach.

It is a scary thing - even secure debt like a home mortgage. Abundance is wide and as individuals we can take chances to gain wealth - investing our money.

We're all depending on the large economy to sustain us, assuming past success will continue and that we know what we're getting into.

The depression of the 1930's was bad, affecting many more than the foolish people who borrowed money to invest in a bubble stock market. We tend to believe modern stock marget is more secure - better managed - and so long as investors are able to lose everything (The are not investing debt or their bare necessities), the system should work optimally towards our collective well-being.

The adjustments of the corporate scandels of Enron and others dropped the market, but people still had money and those able invested back in on the good deals.

Overall it is amazing to imagine how this big economic engine can exist, each little part acting in self-interest to produce and manage our collective success. Well, barring the reality of companies like Enron which made money apparently merely by buying and selling without actually producing anything. Probably there's a lot of nonsense in our capitalistic system, a lot more corruption than most want to admit, but apparently managable.

If we lived on an infinite planet, too big to be affected by our tinkering, and could keep expanding, I might imagine a point of diminishing returns might never be seriously faced. Short term scarcity would simply promote searches for new opportunity.

The fact that we do seem to be approaching physical limits - the world is explored, and our knowledge of that world is expanding to recognize all the exploitable niches for us.

I must project that collectively a point of diminishing returns IS approaching or HAS already come by wider averages.

Nature teaches success as exponential growth, then there's more of an open question what happens next. Either "overgrowth and crash", or "overgrowth and fall back" or "growth to steady-state".

Ideally nature is already giving us signals of our returns. Do we continue investing in the direction we're going, or do we choose a different path?

Energy is the biggest issue for me. We know fossil fuels are limited, and will be consumed sooner or later, and we'll need alteratives which may or may not be available to help us.

Imagine wolves expanding into a new land filled by deer. However these deer are all very old - they in fact don't reproduce at all, or so slowly to be inperceptable to animals with the lifetimes of wolves.

At first there's a wide abundance of deer and they make easy kills, but year by year their populations drop, and at an increasing rate as wolf populations grow.

When all the deer are dead, there's no other equal food resource to "transition" into. Perhaps besides the deer, there's lots of rabbits, and rabbits reproduce quickly, but just don't have the raw mass of deers, even with wider numbers.

If we question what's a "carrying capacity" of the land for a population of wolves consuming deer, we can't compute an answer because it isn't sustainable and eventually they must transition from deer to rabbit.

If rabbits allow a capacity of 10,000 wolves in a land, and deer population and wolves reproduction allows a 2% yearly population rise from an initial 100 wolves, the only real questions are "How long will it take before wolf population stabilizes?" (assuming a limit besides food), AND "How long will it take that population to consume all the remainind deer then?"

Humanity is in a similar question. Our success is based on a finite resource and the higher our population rises, the sooner we'll hit the limits of the resource and must transition to something else.

Do we have 10 years or 100 years? Does it matter? What livestyle will we leave the next generation? How long do we continue on a "rise and crash" path?

The only "safe" answer is to never become solely dependent upon finite sources of food or energy. If all fossil fuels disappeared tomorrow, could we all survive? Surely not. If we knew in 10 years all fossil fuels would disappear, how about then? I have strong doubts, although a clear limit would be helpful.

Ideally, like the stock market, you only invest what you can afford to lose. By gambling on 6 billion population, we're saying either we can afford to lose a good fraction of our population OR that we believe it is not at risk.

Sure life has no guarantees, and I admit the "only gamble what you can lose" approach to live may be too timid for even survival. I accept that times of hardship are also times of opportunity for developing new ways of living that we can't see now in our easy ways.

Since we don't have a clear "10 year deadline" for ending fossil fuels, we have to make due with ignorance. Maybe a population crash isn't so bad - maybe we're all just spoiled and the next generation can "make due" - even if it must learn the virtues of canibalism. Who knows?

Is it worth worrying about this?

Well, no, it isn't worth it actually. Worrying about the future only serves a purpose if it can promote action in the present. Is there anything worth doing different now?

World conventional oil production IS peaking - soon if not already, and at worst/best in 20 years depending on your point of view.

Such an event is worthy of celebration - our first global depletion of a dead natural resource. Maybe it's like graduation from high school. Our years of "dependency" upon our parents is over, and we suddenly have to try living without this support.

Sure, our parents are not dead (hopefully) when we graduate and they have lots more love and support (and money) they can offer us (if we visit them). But we know there's a high cost on that support - they would be there for us forever - we've got to let go.

Individual teens have it easy - they have lots of peers to talk with, and if a few fail, others won't and so success will go forward.

Our world graduation day isn't so free. We've only got one planet, and we can't afford to fail. If we fail, perhaps other peoples on other worlds far away might succeed, but we'll never know that. We'll only have a future of wasted potential - because we hung on too long.

Our "oil" parent can't "kick us out" before it must, can't show us tough love, except for what it is.

Higher prices for oil are on the way and that's good. Averages are not fun. Like our wolves lamenting their longer hunts for deer, we'll lament our longer hunts for oil. We still have many happy hunting grounds, but they are getting smaller, and some of us might not have as much as we need.

Oh, curious about the rabbits? I don't know what they are - probably lots of game still out there, but some won't be very attractive to us.

One such repulsive fuel is coal, and others are called "Sand Tars" and "Shale Oil". All are similar in ways to oil, but are much more difficult to process, and much more polluting.

The "global warming" issue which some have worried about gets much worse under coal or tar oils, but we're on a roll and we're not going to "leave home", if we can find a garage that we can still "crash in" when we need a roof.
http://www.fe.doe.gov/programs/reserves/publications/Pubs-NPR/npr_strategic_significancev1.pdf

I accept the prognosis that it is unacceptable to let our continued dependence upon imported oil increase year-after-year. It is a laudable goal to try to find resources closer to our reach.

The problem is in our high state of addiction, we're not evaluating these resources on the same standards we'd use if we could take or leave them.

We should be judging our energy by pollution requirements, not just costs. Maybe $50/barrel oil prices are enough to justify these dirty fuels, but that doesn't mean it's good for us to use them.

18 months ago I kicked my brother out of my house because he was using drugs and things were being stolen and I couldn't trust him and no longer had any delusions that I was helping him by providing a place to live.

I wouldn't do that to anyone and he's surely suffered more than I'd ever want to experience, and he's still not out of the hole, and might yet die next week from a dangerous lifestyle. It's not acceptable to me to let him suffer, but I know no other way.

I can agree with the accessment that environmentalists are "obstructionists" that cause more problems than they solve and sometimes cause WORSE consequences in the short run than had they let things go on. However I know there is "pain for my own good", and there are times when there's no GOOD path and delay no longer serves a purpose, if it ever did.

As world oil prices increase, there's going to be political pressure in many directions for alternatives, and EVERY ONE of them will SEEM inferior to what we've known. However they will not be interchanable.

Some will be WORSE in the long term, while others offer hope for eventual improvement.

Going back to coal should be a choice based on freedom - NOT necessity.

We have a small window of opportunity where we can challenge our alternatives while we still don't need them.

Overall a BEST managed solution now is a managed fall. I'd see us like the wolve population eating immortal deer, and recognize a fall is neccesary and react by managed starvation BEFORE the deer are all gone. Unrealistic surely, but humans maybe deserve to mention impossible choices before we ignore them.

Well, this is a religious point to consider. Jumping off a bridge because the world MIGHT end tomorrow is foolish, but maybe it's not a bad idea to map out the location of those bridges in case we need them.

I accept the thought it may already be too late.

The worst projected end-game for civilization is that of global warming gone mad. Global warming has the most affect in the polar regions - in the glaciers and ice, but more importantly in the permafrost of northern canada and russia.

Frozen organic material remains suspended in a partially decayed stated, and if it warms to a point of decomposition, microbial decomposition is capable of releasing massive quantities of carbon dioxide into the atmosphere - far beyond our little fossil fuel burning.

We might have "lit a match" to a fire that we have no power to stop. Feedback mechanisms are yet unknown in a complex earth, and she may yet have a tool to reserve this run away greenhouse. It might just be another ice-age - not in hours and days like silly movies - but over a few generations.

We can't know the affects of our actions, and perhaps all our best efforts are already useless. Perhaps we are best seeing the century as a "last party" and doing our worst.

I don't believe it. I do believe our problems are bigger than we all know, even as I accept the earth is more resilient than we deserve.

I am yet a wolf, consuming immortal deer in a field of wonder.

I don't have the heart to abandon the slaughter yet, but I see the end will come, and I hope that it will happen sooner than later.

I won't wish anything upon the next generation that I won't wish upon myself.

Social Security panel Discussion

Tonight I attended a panel discussion on Social Security reform - organized by U.S. Representative Martin Sabo, with Skip Humphrey representing AARP, and Mitch ____ supporting President Bush's reform approach of personalized accounts.

As usual statistics offer new levels to the art of lying, or at least projecting finances 50 years in the future leads a lot of room for alternate interpretations.

Skip supported raising the SS income cap from $90k now to $140k. He said that would raise the tax coverage BACK to 90 percentile of income, (from current 85%), AND that would allow SS to be viable into the indefinite future.

Congressman Sabo offered a different approach - raising the returns rate for SS surplus borrowing from current inflation+4.1% to inflation+4.7% and said that would do the trick.

President Bush's nebulous proposal towards "Personal Retirement Accounts" (shhh don't call it privitization), would magically allow the multitrillion dollar costs from a "pay-as-you-go" system to private accounts to be funded by the gained investment income in stocks or whatever.

A disturbing argument used by Mitch X-X, was a race argument - saying basically that black men have a lower life expectancy than whites and therefore don't get the same returns as whites over their live-times, and that the personal accounts would allow family of an apparently young-dying black man to get his account balance when he dies.

He also brought forth a statistic that the "average returns" rate from SS is 0.8% for someone born in 2000. That means an average retiree, had she put the same amount of money into an interest bearing account at the fixed rate of 0.8%/year, would get the same returns as Social Security projections. He mentioned that when the program started there were 40 workers for every retiree, while now there's 3.4 workers/retiree.

Overall I respect his being willing to speak in a largely left-leaning audience, but I found none of his positions convincing.

For me the "weakness" of Social Security is NOT in the fund itself, but in the reality the current SS surpluses are "borrowed" into the general budget, while they'll need to be repaid some day.

Sure, the government can promise to give any return it likes on SS borrowing, AND it can apparently print money as it likes to pay off that debt. I accept that the government investments might be SAFER than the stock market, but I don't accept the smooth sailing financial projections. Okay, no one is projecting smooth sailing, but neither no one has any idea how we can run a government without spending more than it takes in by taxes.

I don't know if the government can "default" on its debt, but I expect if it DID, the economy would be much more messed up than anything we want to imagine.

Overall I wanted the question answered "How can we accumulate SS surpluses without allowing them to reduce and hide our declared deficits?"

Unfortunately the question was not answered. Sabo seemed quite happy about this surplus availability and seemed unconcerned how we'll budget our federal spending when it is no longer available.

I'll be attending an up coming MN Independence Party "meetup" on the federal debt - should be very interesting!
http://independence.meetup.com/1/events/4212887/

Oh a few links mentioned at the end of the discussion for further research as you like:
http://www.aarp.org/ Retirees - nonpartisan
http://www.cato.org/ Conservative
http://www.heritage.org Conservative
http://www.cbo.gov Congressional Budget Office

Enjoy!

Killing two birds with one stone

Some obnoxious people like to see the silver lining in every cloud and say every problem is an opportunity.

Well, in my better moods I might agree, at least for the sake of argument.

Ideally, for any problem you don't want to face, it is best to make the problem go away by redirecting it to become someone else's problem - ideally someone you don't like.

Responsibility is a nebulous thing after all, easily manipulated in the messy world of politics.

Okay, let me try a hand at this game:
1) Minnesota's economy is unreasonably addicted to oil imports for our transportation.
2) Minnesotan are unreasonably addicted to gambling.

Similar problems it would seem to me. Both problems require similar solutions - we need a crisis which will get our attention and convince us that perhaps easy street isn't what it seemed.

Come-on, think outside the box - how can we solve both by playing them off each other?

Hmmm... well first we have the Minnesota Republicans think it's unfair that a few indian tribes are making so much money on their casinos without sharing with the deficit spending state government. Let's call them "The A-Whiners".

Second we have silly people in the state who believe it is their god-given right to buy the largest vehicle they can find, and live miles from their regular place of gambling, and think that any price for gasoline over $0.99/gallon is caused by greedy oil companies. Let's call them "The B-Whiners".

Ideally we want the A-Whiners and B-Whiners to scape-goat each other as the cause of their unfortunate problems.

I think the solution is obvious:

Let the Indian Tribes use their ill-gotten wealth for the good of the state.

Instead of pocketing their profits, they ought to use it to subsidize tribal gasoline sales.

The Indians are NOT the Enemy - NO! They're our "friends"! They purchase gasoline at the market rate of $1.90/gallon or whatever (including state excise taxes of course), and then resell it for a pretty $0.99/gallon.

They can promise "50% of all tribal profits will be directed to subsidized gasoline sales."

Of course there must be limits - we don't want people reselling their purchased cheap gas for a pretty profit. NO, just like the $5/change give-aways I remember, they'll track car licenses and limit people to say 1 fill-up or 20 gallons, whichever is less, per week.

Then the Indians will clearly be doing the state a favor in subsidizing travel and gamblers will have an incentive to visit for their weekly gambling AND gasoline fix. Since they can only fill their takes once/week, it'll encourage moderation in their gambling.

Everyone wins.
1) The state gets more gasoline excise tax income
2) The casinos get more business, easily recovering their lost income.
3) The gamblers get their cheap gasoline.

Well, that's just the beginning. After a time the reservations can negociate with the state to expand more casinos within the higher population metro area, and EVEN declaring small corner convenience stores as "tribal businesses" and they can have a few slot machines AND sell their $0.99/gallon gasoline. (They could have a special requirement that purchases require 3 pulls of the slots to qualify for the price - that'll pull in a few more suckers)

Slowly overtime the Indians will gain so much wealth that they can buy out all the oil companies that operate in Minnesota, and gain monopoly power with their subsidy - who can compete with gambling income?!

Well, I've not quite worked out the end-game, but it seems promising so far.

What do you think?

I know, we'd best take this slow. The conspiracy has begun...

Emergency Broadcast System

BEEP BEEP BEEP BEEP

This is a test of the Emergency Broadcast System. The broadcasters of your area in voluntary cooperation with the Federal, State and local authorities have developed this system to keep you informed in the event of an emergency. If this had been an actual emergency, the Attention Signal you just heard would have been followed by official information, news or instructions. This concludes this test of the Emergency Broadcast System.

http://www.fas.org/nuke/guide/usa/c3i/ebs.htm

Interesting this the EBS was set up due to the threat of nuclear attack, and later extended to include local weather threats.

Communication in times of crisis can be critical, although what message to offer at these times may be less than clear, and even counter productive to individual well being.

If there's a nuclear attack (or any WMD attack - chemical, biological or nuclear) in downtown metropolis, perhaps the BEST choice is for people nearby to travel away from ground zero as fast as possible to minimize exposure to radiation. On the other hand, the roadways are not set up for a free-for-all evacuation, so faced with an impossible panic which will allow no one to escape, it's better to tell people to stay in their basements to leave the roads open for emergency traffic, and those smart enough to ignore the recommendation.

The September 11, 2001 attack did not trigger a national message on the EBS to my knowledge, or at least not locally. I was asleep during the attack, and was notified by my dad by phone and the TV programs were pre-empted with news on the events as they unfolded.

Overall perhaps general muddled preemptive use of media is the best we can handle in times of unpredictable catastrophic emergencies.

Just like our "Emergency rooms" in hospitals, maybe we're pretty good with using our skills and intelligence to focus on immediate problems.

It seems to me that a harder response is for emergencies that occur over a slower period. You would think we'd be better at responding to slower events, but it may be the opposite is true, at least we're no better at responding. Fast events can be "over" before we can do anything, and then we're left with reacting to the results. Slower events give us time to react before the maximum harm and we can consider different reactions which may make things better or worse than had we done nothing.

Economics seems a place of generally "slow" crises. Economics has decisions that help the overall well-being of a group AND individual well-being, and given time to react people's individual decisions can make things worse for all. Like the bank runs in the great depression of the 1930's. Or worse - stock market buying and selling. Anyone invested in stocks who can't afford 100% loss is a herd animal waiting to bolt the first sign of danger.

I can't really imagine if peak oil threats will lead to overreactions, but certainly gas stations are "bottle-necks" to our transportation system that can be mobbed under rumors of price spikes or limited supply.

It's a silly way to panic - especially given the limited range of a "single tank of gas" - Well a conservative driver could probably keep a tank of gas for a couple months if needed, but probably most of the panicked people rushing the gas stations will have "needs" that will empty them again in under a week.

Given "panic attacks" by mobs, it's hard to tell if the EBS could be used to quell the fear.

Probably it's format would cause the reverse as it would legitimize the panic. Public announcements by a high government official would do better - Governor, or President.
It seems to me very likely such panic attacks WILL occur in the coming decades as short term shortages and price spikes come into play.

In some ways I imagine such overreactions are necessary for consolidating power enough for leaders to react to our dangers. I mean that in a negative, manipulative way, but maybe still necessary to exploit fear that has previously only been bubbling quietly beneath the surface.

Ideally a "paternalistic" society should keep crises pretty much secret from the wider community UNTIL the government is ready to offer a response to them. I mean as a father you don't worry your children about a threat of losing your job. Instead you just try to save as much as you can, and if/when the fateful day occurs, you'll be ready to break the news while having resources to buffer the short term effects to something that is acceptable.

Given that coal and nuclear power are the only two large-scale "under-utilized" energy resources available to our ummmm "over-achieving" society, the best plans for the government is to invest in these alternative energy sources to the degree possible, and when crisis occurs, be prepared to SELL them as "nearly ready" and "our only choices".

Also after periods of crisis/shortages, the government can act on crisis management in conserving and properly allocating resources where they're most needed. That's the nice thought, although in reality, market forces will handle things perfectly well.

It is an interesting question. GIVEN short-term shortages, IS it immoral to profit by raising prices?

If I'm a gas station owner, faced by 3 weeks of no new supplies and 4 blocks of cars lined up for my gasoline, what should I do? Raising prices cause more panic, while not raising prices encourages my reserves to be depleted too quickly.

The only legitimate response to shortages is a system of rationing. The government ought to pass laws that says all fuel sales have to use ration coupons, which are purchased from the government. Coupons might be nontransferable as well to prevent fraud or scalping.

The advantage of this system is consumption is controlled and the government profits from the shortages rather than individual gas station owners, even if the government chooses to reimburse station owners for participating in the system.

I'd expect such a system to be set up given projections of medium term shortages (multiple months).

A proactive government might prepare such a system right now, BEFORE crisis. A paternalistic government would do it secretively to prevent panic.

Perhaps these crises will never happen. Perhaps we're just a "blessed time" where resources always become available just when they're needed.

However given terrorism, and 60% of our oil now imported, I would say such a system is best implemented sooner than later.

Going along with the logic, if a government can implement a rationing system AFTER shortages, what about BEFORE shortages?

Republicans will dislike interference in "free markets", even if they might acknowledge the "fear profiteering" is immoral.

At the current, we have "excise taxes" applied to fuels. As long as supply can meet demand, why set up a rationing system?

I don't have time to answer now, but a question worthy of further thought.

Higher Energy Prices OK

Today at noon on MPR, I heard a speech from a member of the Federal Reserve who talked about his "optimistic" view of the U.S. Economy as robust and strong.

At the end in questions he was asked about oil prices. He said the economy has handled the 40% rise in oil prices over the last year with continued growth. He admitted that higher prices are good for us because it'll promote more conservation. He also supported a rise in gasoline taxes beyond our current "high" prices to improve our roadways.

I tend to agree with his assessments, and it's nice to hear the view of someone not elected who doesn't have to lie to the public.

Higher energy prices are good for us, AND our economy can handle it.

If we can't get elected officials to support energy conservation, then let's get market forces to do it for us.

Did you hear that OPEC? Bring it on!

Free Trade?

According to an article I read today, Canada is compelled to sell Natural Gas to the U.S. under the North American Free Trade Agreement (NAFTA).

I try to imagine what this means. If I can produce 100 apples/year, and my local market can consume 80 apples/year, then I imagine I'd have 20 apples/year as surplus which could be sold to a wider market as whatever price that market will bear - partially independent of the price I sold to my local market.

That's perhaps "Protectionism" because it means local demand get first access to local products.

Apparently under "Free Trade", it's an open market based on supply and demand. If U.S. demand for apples raises their price to $5/lb, while Canadan market is selling apples at $2/lb, THEN, apparently, the U.S. can "bid" on Canadan apples, thus causing the "value" of Canadian apples to approach the $5/lb level. At suh a level, Canadians will likely reduce their apple consumption, and thus "freeing" more apples to be exported.

Is that a correct intepretation?

If I am a Canadan apple producer, apparently I may not be "allowed" to sell my apples at $2/lb to my local market UNLESS I make those same apples available for export at the same price. If I charge $5/lb for "exported consumption", and $2/lb for "domestic consumption", will the NAFTA treaty be used to oppose this free decision?

The question is strange - sellers want the best prices they can get, and so they'll be glad to allow prices to rise and allow domestic consumers to pay more, even if domestic consumption is decreased as a result.

Well, the "problem" of this free trade is that different countries will have different levels of wealth. Canadians may be poorer than U.S., so if the U.S. has more wealth, it can drive up prices so that the poor can't afford them.

The "market" solution is that high prices encourage expanded production, even if there's a delay of results. High prices mean production increases until costs come down again.

The article I was reading was on Natural Gas production. It complained that Canadians may eventually be upset that their natural resources are being depleted faster while they may need them in the future.

I would think gas-sellers could just keep raising the price until demand responds - I mean to slow production. Is it against the rules to try to sell a resource above market prices?

If I am selling mummified apples that don't decay ever, and I have no fear of losing their value, then I can just set my price $20/apple, and if no one buys, I'll just keep them until they do. Of course that won't help my local market gain access.

Considering another way, say I'm selling my car. If I sell it to "family", I might sell it "below market value". Free Trade would imply it is illegal for me to sell my car for below market value unless I gave others an opportunity to bid for it.

Very strange sounding, but a single item makes it less clear perhaps.

Say I'm a grocery - heck, call me "Sam's club". I sell to "members" at below market value. I can control my buyers by having requirements upon them. Perhaps where they live?

What if I had a "buyer's club" that had racial requirements? Can I say "Only Native Americans can buy my products?" or "Only Jews?".

I know for employment at least, you're not supposed to "discriminate" against people for reasons of gender, race, etc. Similarly for renting out housing.

Free trade has a noble ideal perhaps - everyone has equal opportunity. The "unfairness" mainly comes that some have more wealth than others, and they can perhaps "bid" up prices for anything beyond the ability of others to pay.

I guess the issues come out also in "Banana Republics" - countries which convert local production of food to export markets that can earn higher profits, but deny local markets enough food. SO the choice of crops is made by markets, not by local needs. The producer can "choose" what to grow, but if he is in debt, then he's restricted in his crops to what can get the best price.

The opposite side is that foreign sellers can buy into any market. If the U.S. has industrialized farming and cheap fuel to produce a crop for export, it can drive out local production of the same crop which might have been providing local jobs and keeping more money within the economy. So all the small farmers are forced to sell their land, go to the city for inferior employment, and rich industrialists can buy up the land for cheap export crops.

It does appear that most of the flaws of free trade come from cheap fossil energy, but also obviously in terms of environmental destruction and pollution as well. If apples=apples no matter how they are grown, then economics encourages apples to be grown in places with the lowest pollution standards.

I get the arguments at different levels, but I'm not convinced of clear action or opinion. I think individuals and governments ought to have the right to protect local markets from imports or exports. Some say protectionism hurts consumers, but I guess I accept the argument that there is virtue in local markets for stability and higher costs may be acceptable.

The Next Big Thing

Fashion, so I've been told, loves novelty, and good marketers are always looking how to make their wares the next hot item that lights up the sky and tells us we're all alive.

I wonder who's going to be the Marketers for the coming Oil Crisis? Who's going to make their millions sharing thrills and chills of energy prices that we can't afford?

I know it's pretty quiet now, but seriously, the game is ready to be played.

I, as an environmentalist, want expensive energy because it is the only market force that will encourage us to at least slow our extravagant ways.

Capitalists want expensive energy because we're all dependent upon it and by anticipating the market, they can bid up prices and send costs soaring, and then jump out into a cool profit until the next round of chicken.

Survival is always a novel idea, and we imagine we're pretty stretched already - in debt and time. Who has time for survival?

It is a curious question.

I myself can afford pretty much any energy cost. $10/gallon for gas you suggest? Well, given I can drive under 3000 miles/year at 30mpg or better, that's a cool $1000 for my gasoline bill. Not too bad.

Unfortunately my dependency extends wider than simply my personal driving. Everything I purchase is made far away, and needs to be transported. Maybe that transportation is pretty efficient, but jumping prices times five must have an effect.

I've been told there's a general link between gasoline and natural gas prices - they move up and down together - which is not necessarily implied, but makes some sense if they can be partially substituted for the other.

Heating my home is another story. I just purchased a 94.1% efficient furnace, and perhaps it'll help reduce my heating bill, but say my new bill will still be around $600/year minimum. Multiply that times 5, and you get a hefty $3000 heating bill! Again budgetable, although I think it would be time to do a little more investing in window coverings and insulation, right? Plus maybe 55F is not so bad of a temperature with a nice sweater or two, hmmm?

Of course if natural gas jumps in price, heating by electricity will be more economical - leading to a quick jump in electricity usage - AND of course our spare electrical capacity comes from the fancy new natural gas plants. Of course burning natural gas directly for heat is guaranteed more efficient than using electricity as a middle step.

So our electric bill jumps - from maybe $300/year now to $1500/year. Maybe still budgetable if I've got a job, and I can buy a few more flouresence bulbs.

And leaving those direct energy bills, buying products of any sort are going accumulate a new "energy premium" and perhaps double in price.

Thus a spike in oil prices (60% of u.s. energy consumption is from oil) could perhaps cause 100% inflation in everything we use. That means we all need to earn about twice as much to live as we did before. What was your "disposable" income last month?

Of course some businesses simply will be no longer profitable and go bankrupt - leading to higher unemployment - less people having money to buy from the remaining employed. Factory inventory starts piling up without buyers. Factory workers are laid off. Interest rates skyrocket, bankrupsty levels skyrocket, unemployment skyrockets.

Where does it all end? Is it an exaggeration? Certainly I'm no economist - I can't tell you about probabilities or real relations of prices and the economy. I can only say that we're all pretty much in the same boat. We'll all pay whatever I must to get the resources we need, and when our cash runs short, we'll be leaning on friends and family, and the system may or may not support us.

Is investing in a new car a good deal these days? I would say no - that money could better have gone elsewhere - reducing debt, or investing in resources that will reduce your dependence upon high income each month.

It seems to me that the only "fair" investment is a mortgage because when your mortgage is paid you've got a place to live with only utilities left - which can be reduced to degrees, AND shared.

Losing a job is a great blow to anyone anytime, but worst in a depression where there's still debt to be repaid, bills to pay, and few opportunities. If you don't have debt, then you are more free to take jobs that are available - jobs that perform functions that are really needed - rather than mass producing things that no longer have a local market to sell them.

Unemployment still isn't so bad, if you've got a little savings, or shared living where bills can be divided. Then you have more time available to network with neighbors and figure out something you can all do to help each other survive.

If things get bad enough, the cities themselves lose their attraction, and those without employable skills may be best exported to the country side, become manual labors on the farms in exchange for a few pennies, a warm meal, and a place to sleep.

It's much easier to picture the worst and imagine trying to survive, but I suspect the problem will be things will fall in stages, and each stage seems to add new burdens upon the last, making life just a bit more unbearable, but with no alternatives in easy reach.

We're all like frogs, sitting in an approaching boiling pot of water, never quite uncomfortable at any given moment to jump out and seriously face the fact things may never be the same again without our lifetimes.

Tough thoughts, and I don't believe a one-of-them, but well, I can imagine. So I'll keep watching.

Peak Oil

Never heard of this?

You will soon enough.

This week I gave a speech in my Toastmaster club on this subject.

The "theory" is that oil, being a finite resource, follows a characteristic production curve over time shaped like a bell, with exponential increase in production as development expands, and slowly peters out after a peak production, and exponentially decays back down to zero.

The America Petroleum Geologist, Hubbert, looked at the discovery, production curves of the U.S. (lower 48 states) oil wells and using this information predicted in 1956 that oil production would peak in 1970, and he was right on. Our oil production has declined ever since, even with Alaska and Gulf of Mexico production added it, they've not halted our ever continuous decline. As of 2004, the U.S. imports 60% of our oil needs, and this will continue increasing no matter what we try to do with domestic production.

Over recent decades similar analyses have been performed on world oil markets - recognizing that most of the large discoveries are all decades ago. With this information projections have been made on what is the "ULTIMATE" oil production over the lifetime of our "age of oil", extrapolating traditional production and technologies for increasing production from older wells.

Estimates for the "Ultimate reserves" vary:

• Geologist, Cambell (1995): 1.8 Trillion barrels
• USGS (2000) (95% confidence): 2.2 Trillion Barrels http://www.eia.doe.gov/pub/oil_gas/petroleum/presentations/2000/long_term_supply/sld001.htm
• Geologist, Harper, BP, (2004): 2.4 Trillion Barrels. http://www.thebusinessonline.com/modules/news/view.php?id=29138
• "Average statistics of the major oil companies": 2.9 Trillion Barrels
  USGS (2000) (50% confidence): 3.0 Trillion Barrels
  http://www.busrep.co.za/index.php?fSectionId=&fArticleId=2392226
• USGS (2000) (5% confidence): 3.8 Trillion Barrels

These estimates include both "consumed" AND "remaining" reserves.

How much have we consumed so far? Just about 0.960 trillion barrels.

At the moment we're consuming about 82 million barrels/day, or 30 billion barrels per year, and that rate is increasing an average of about 2% per year.

So why should we be worried if there's so much oil still left?

First because 2/3 of the oil exists within the Middle East - most within 5 countries.

Second because the U.S. has the highest per capita oil consumption rate of a large country. We have 5% of the world's population and consume 25% of the world's oil production. Other developing countries are catching up to us, although they'll never make it, but their thirst for oil will drag us down sooner than otherwise.

Third because even by the HIGH 3.0 trillion barrel ultimate reserve estimate, we're only 12-15 years from the half way point of consumption, and that's the point in Hubbert's theory where oil production tends to slow down - where easy reserves have been taken, and more and more of the remaining oil will become slower and more expensive to extract.

Sure Saudi Arabia will have cheap oil (to extract) available for decades, but that doesn't mean their rates of extraction will be able to compensate for reduced extraction elsewhere.

The world oil consumption is soon reaching a point where production will not be able to keep up. It's just a matter of time, and as we approach that day, early warning signs will appear - as every localized disruption of production is multiplied on the world markets as temporary price spikes when there's insufficent supply to meet demand.

It is of course insane for the U.S. to continue on our current course of action - depending on this soon to be ever more expensive fuel, ever more dependent upon Middle Eastern oil, ever more costly import, throwing our trade deficit ever deeper, and pretending we can afford the world's most expensive military to help keep this vital resource flowing.

It's going to end sooner or later. The party's nearly over, and then we'll see what "Freedom" means to us, what "Independence" means, and how our democracy can pass through an energy crisis on a magnitude never seen before.

It is already too late. No matter how hard we tried now to reduce our dependence upon oil, it would be too slow to avoid the coming oil crisis. Anything we do now will just help ease us ever so slightly into a world we have yet to imagine - without the resource of cheap oil.

Dream all you like about "building a better world", "Spreading democracy around the world", but soon we'll be looking much closer to home - like trying to figure out how to run airlines with fuel prices 5-10 times higher than now, and trying to figure out how to produce our industrial agriculture without cheap petroleum products for fertilizers, or maintain our vast roads ways - not to mention running all the vehicles that keep our economy flowing.

Foolish people say "The stone age didn't end because we ran out of stones, and the oil age won't end because we run out of oil." Some are convinced something better will come along when we need it - like oil came along to "save the whales" from our demand for their oil. Nice story, but I don't believe it. Societies HAVE failed because lose of primary resources.

We have alternatives - most namely Coal, which is more costly, more dirty, but capable of being processed into petroleum. Canada has "oil sands" which also can, with heat, be processed into a petroleum like substance - with large pollution output and higher productions of carbon dioxide into the atmosphere. Nuclear energy is continued to be promoted within circles as the way we'll escape our soon-t0-be apparent return to an agrarian culture.

None of these alternatives will be quick enough to avoid severe upsets to our ever debt-ridden culture and economy. None of these will improve our environment like we'd tried to do for the last 50 years. None of these are ultimate long term solutions that can sustain us in a world we will want to live in.

Don't believe me? Do your own research and see what options there are.

Personally I admit I'm small and powerless. Of course I would have implemented high fuel efficiency standards long ago, and applied a European level tax on gasoline and petroleum uses to conserve also long ago. Some of these might have made a difference, and still can't hurt, but it seems denial goes too deep. People want to remain asleep as long as possible, avoid the insane dependency, and let the next generation figure out how to go to "the next level" of destruction.

Well, my bet is there is no "next level" available to us. My best bet is between political instability and geological and technical limits, the date of peak oil is sooner than later, and then we'll get what we deserve - the harsh light of full sun burning into our foolish shadows we too long failed to see. We'll see soon enough. Unfortunately denial will run deep.

I'm asleep as well - still hoping for "Managed transition", even if downward, but overall it seems too hard. I'll just try to stay out of debt and hope for the best. What I can do? What can any of us do?

Have a nice day, while you can still enjoy a vision of the future that ever grows more wonderous.

Majority Rule

The idea of majority rule is simple:

• Let a decision be supported by at least a majority (50%+1)

There's nothing special about 50%+1, except that it is the highest guaranteed support in an either/or question with definitive results. (There's just one case of failure - an exact split on an even number of votes - traditionally broken by a coin toss or cutting a deck of cards.)

You can also consider decision by a "super majority": Let a decision be supported by at least 60%. It's an equally valid requirement, but much less practical if a decision MUST be made immediately.

However even a 50%+1 rule STILL fails when voters are given more than two choices.

Consider the 1998 Minnesota Governor race:
http://www.sos.state.mn.us/election/genstate.pdf
**********************
RP, VENTURA 37.0%
R, COLEMAN 34.3%
DFL, HUMPHREY 28.1%
GPM, KEN PENTEL 0.3%
LIB, GERMANN 0.1%
GRP, WRIGHT 0.1%
**********************

In a 3-way race, everyone having one vote, no choice was supported by 50%.

Our partisan elections work by "Plurality" which means "Most votes win".

A plurality system offers no lower limit for support by winners. It can allow a candidate who is supported by a majority head-to-head over every other candidate to lose because voters had too many choices and another candidate can win merely for being MOST DIFFERENT from the other candidates.

We can do better and there's a number of competing systems that could allow us to pick our winners by AT LEAST 50%+1 of the voters.

1) Top-two Primary

http://www.seattleweekly.com/features/0448/041201_news_primary_primer.php
http://www.fairvote.org/irv/louisiana.htm

This system is what many cities do for mayor with nonpartisan elections. The primary allows everyone a chance to support their favorite, and the strongest two candidates go forward to the general election.

We don't have this option within Partisan elections because the primary is used to pick the top candidate within each party.

2) Top-two Party Primary

This system is a hybrid between a "top-two primary" and a "Partisan primary"

A Partisan primary allows the top candidate from each party to advance to the general election.

This hybrid system combines the votes for all the candidates in a single party, and the two parties with the most combined votes get ONE candidate to advance to the general election.

This system is BETTER than a "partisan primary" because there's open competition between all candidates. Voters are free to choose their favorite candidate from different parties among different elections. I might vote for a Republican for Governor, a DFL for Attorney General, and a Libertian for Secretrary of State. There's no threat of insincere "cross-over" voting because every party is at risk of elimination and no one can risk voting for a candidate besides their favorite.

So again, the general election is down to the strongest two candidates and one will get a majority.

3) December top-two runoff or (Two Round System)

http://www.aceproject.org/main/english/es/esd04.htm

If no candidate has a majority in the November election, the top-two candidates can be retained in a runoff election in December. This approach is used in a number of states. (Some only hold the runoff if no candidate exceeds 40% of the vote)

This again allows a majority decision, but requires voters to come out again to vote and often causes reduced voter turnout, and requires more money for ballots and counting. Still, it is a valid method, giving the voters a final chance for a majority to unite behind one candidate.

4) Instant Runoff Voting (IRV) - http://www.fairvote.org/irv/

This system allows voters to offer rank preference choices. For example: 1) Ventura, 2) Pentel, 3) Coleman. First choice votes are tallied. If no choice has a majority, the weakest candidates are eliminated, and votes for eliminated candidates are transfered to a next choice - just like a real runoff. There's no fear in offering lower preferences because they only count if all higher preferences are eliminated.

When there's only two candidates remaining, one will have a majority support.

There are variations on IRV. The standard model says to eliminate one candidate at a time. A quicker system follows the top-two approach, eliminating all but the top two candidates in the first round. The primary difference is a slower runoff allows the chance for an initially third place candidate a chance to rise up and win, while a top-two runoff disallows that.

The primary issue with IRV would be in voter education (marking ballots) AND higher demands on voters. In order for your vote to count, you have to offer enough preferences until you're sure one of them will make the final top-two. If you fail to rank enough choices, your vote will become wasted - just like if you didn't vote in the last runoff round.

5) Condorcet pairwise system - http://www.eskimo.com/~robla/politics/condorcet.html

The primary problem with runoffs in general is in a close 3-way race, any candidate might win depending which two survives to the final round.

If you have an election like : Coleman=38%, Humphrey=31.01%, Ventura=30.99% . Anything close to a tie means a small shift in votes would change the final two candidates, and possibly the final winner.

How do you fairly eliminate one of these three? The Condorcet method says don't eliminate any of them and instead compare them in pairwise elections:

Pretend Head-to-Head comparisons:
Ventura beats Coleman 51% to 49%
Ventura beats Humphrey 55% to 45%

Given these example result above, we can see Ventura is the strongest candidate and deserves to win. It doesn't matter weather Coleman beats Humphrey or vice versa because Ventura can beat both of them.

This is the approach of the Condorcet method. Such a winner is called "Condorcet's winner".

NOTE: When I give these head-to-head "subelections", they are assumed to be measured from rank-preference ballots, like IRV. Everybody's vote counts between each pair once. (Voters do not need to rank all the candidates, but obviously benefit in ranking all acceptable candidates who stand a chance of winning.)

A theoretical drawback of this approach is that it is possible no candidate will meet this condition. For example in the rock-paper-scissors game, there's a cycle of head-to-head wins - the balance of power excludes a "center" compromise choice. Cases like this would have to technically be called a "tie" in Condorcet and something would have to be done to break that tie. In politics of a left/right spectrum, it is very hard to imagine such cycles, but possible given different people voting on different issues.

Hybrid systems can also be constructed that combine a plurality count elimination round AND a Condorcet pairwise round. The plurality count eliminate weaker candidates in a first round, a head-to-head count among the remaining strong candidates determines the winner.

The plurality elimination round could have different thresholds of survivability:

A simple elimination rule might be: Eliminate all candidates who have at least half as many votes as the plurality candidate OR keep at least the top-two candidates.

Of course the SIMPLEST hybrid system is the "top-two instant runoff" system. Condorcet is trivially reduced to a single pair of candidates in the second round. If you want more than 2 candidates to survive the first round, then Condorcet offers a way to treat these candidates fairly without elimination.

CONCLUSION

That's my simple summary of voting systems that support the principle of majority rule. There's many other systems you can consider - Borda, Approval, Bucklin, Ratings, but most of the other systems fail to support the "one person, one vote" ideal of democracy. That doesn't mean they are worthless, but it means we'd need to change a most fundamental principle of democracy.

So when you hear ideas like "Instant Runoff Voting" supports Majority rule, know this is true, but there's other equally good approaches to consider. Myself, I'll support any of the 5 methods above (or variations), and if IRV is the most viable path, I'll take it.

Comments are welcome.

A new beginning

I decided to open this blog for a place to offer my humble thoughts on the world around me. I plan to reflect primarily on politics in Minnesota and the United States, and the world as inspired. Economics and capitalistic topics will likely also find expression here.

I choose to remain anonymous, not because I have anything to hide, just that it reinforces the reality that I'm an average nobody who has an opinion.

Either my words will stand on their own, or they'll fall. I'll strive to keep supportive links to my arguments. My purpose is to learn and share.

Of course the fun of blogs is that they have no promise of an unbiased view, but I strive for truth that possibly can reflect more than one singular point of view.

As I can, I'll take the view from all 3 blind men inspecting an elephant so trunk, leg, and tail all are offered as evidence, and as I can I'll leave it up to you to imagine how they all might fit together.

Thoughtful comments are welcome.