« Other Megan on the web | Main | More on Brijit » I think I'm crazy too09 May 2008 02:09 pm Economics of Contempt: Call me crazy, but I think a permanent doubling of food and energy prices would slow our rate of economic growth pretty significantly. How long it would take incomes to recover "at current rates of economic growth" is irrelevant when the doubling of food and energy prices would lower the rate of economic growth. Given that we and all our machines run on either food or energy, it's a pretty safe bet to say that doubling their prices would have a sizeable impact on growth. TrackBackTrackBack URL for this entry: Comments (29)
C'mon! We're the fattest people on earth, eating way too much. We're the biggest wasters of energy on the planet, in our homes and in our transportation habits. We could adapt, over a few years, to a doubling of both food and energy prices, and do quite well anyway. The way we're living right now is simply not sustainable. Not that I'm terribly worried about it. The markets will take care of this, and I'm certainly not asking for any social engineering out of the porkers in Congress. I'd like some more nuclear energy, however, and a lot less ethanol. And a heckuva lot less subsidization of meat and dairy. But both food prices and energy prices will go up in the future, you can count on that. How we adapt is up to us. 
"We're the fattest people on earth, eating way too much." I would have thought so. However, according to one of those Forbes lists published last year, we're only the 9th fattest nation on earth. That seems impossible. How could anyone be fatter? What more could we possibly do?
It's interesting that oil prices shot up right when the US started turning huge amounts of food grain to fuel. Could that be introducing a huge inefficiency somewhere? We could make ethanol from our trash. Why don't we? Why didn't we start by using cellulose waste and woodchips and make biodeisel instead of burning through edible grain? I truly do not get that. Carl - We're the biggest wasters of energy on the planet, US industry is much more efficient and pollutes less than, say, Chinese industry. We're one of the biggest producers of commodities on the planet. That doesn't automatically translate to 'waste.' Or perhaps you were referring to something else.
Think he's referring SUV's and keeping the house a cool 60 degrees during summer. Maybe.
However, according to one of those Forbes lists published last year, we're only the 9th fattest nation on earth. That seems impossible. How could anyone be fatter? What more could we possibly do? Two glorious words:
??? Hasn't this already happened? Crude oil prices are 1000% what they were less than ten years ago. I don't know any analysts who think that oil will go to $250/barrel in the next few years, and even than would only be 200% of what it is today.
We're the biggest wasters of energy on the planet, in our homes and in our transportation habits. This is untrue. Plenty of countries do worse in the ratio of GDP per emissions. The US is certainly worse than Western Europe, but is slightly better than Canada or Australia. Russia, South Korea, Thailand, India, Poland, etc. all waste more. OTOH, if you were talking about per emission per capita, which I don't believe measures "waste" in the same sense, then again there are small countries that do worse than the US and the US does roughly the same as Canada and Australia. (Canada I believe passed the US in pure emissions per head.)
"We're the biggest wasters of energy on the planet, in our homes and in our transportation habits."-Carl Carl, you're not correct. The US represents about one quarter of the world's energy use and produces about one quarter of the world's GDP. So, contrary to popular belief, we are not especially inefficient users of energy. As Ryan W. and John Thacker point out above, developing countries like China tend to be the inefficent ones.
Isn't what we're looking at here the impact of inflation on growth. My recollection of the 1970s, when prices (in nominal dollars) went up by roughly a factor of 10, is that wages went up almost as fast. (Inflation, after all, is the positive feedback in the rises of prices and wages.) Inflation adjusted incomes stopped growing. But when the Fed finally got inflation back under control they were pretty much back to the same as they had been at the beginning.
I have heard the US described as the Saudi Arabia of food. Therefore, I would imagine a rise in food prices should be great for the worlds largest producer of agricultural commodities i.e. the US.
I'd suggest the "efficiency" back-patting seems a bit like whistling past the graveyard. Consider a family of 4 cooling a 6000 sq. ft. home to 68 degrees all summer long. It's obviously better that they cool it as efficiently as possible, but it's still a stupid waste of energy.
Consider a family of 4 cooling a 6000 sq. ft. home to 68 degrees all summer long. It's obviously better that they cool it as efficiently as possible, but it's still a stupid waste of energy. Undeniably a waste, but imagine them cooling a 1500 sq ft home to 72 all summer--they're still spending more on AC than, say, a similar family in Scotland. We suffer from greater climactic swings here than in many places in Europe, so it's harder for us to simply build homes suited to the climate. A breezy Med villa would be nice enough for the Massachusetts summer, but, shall we say, less than optimal for the massachusetts winter. Thus, we rely more on heating and cooling than people in Europe, and that should be taken into account.
Think he's referring SUV's and keeping the house a cool 60 degrees during summer. Maybe. First, how many people actually keep their houses at 60F? That's incredibly expensive even at $0.10/kW-h. 76-78F is a lot more practical. Second, per Wikipedia's interpretation of DoE data, the US consumes only about a quarter of its energy in transportation, which includes transportation energy use by business and industry in addition to general commuting. http://en.wikipedia.org/wiki/Energy_use_in_the_United_States Either way it's a bad argument and it shows no understanding of how closely energy use is connected to economic activity.
mouse, Either way it's a bad argument and it shows no understanding of how closely energy use is connected to economic activity. From your own link I find that residential energy use (energy used in private residences) is also about a quarter of all energy use.
You got it all wrong. Don't think of it as cost, think of it as value. If food and energy become twice as valuable, America, which produces both in abundance, will experience growth. Ok, that really isn't true for energy, but it is true for food. I think we're still a net exporter of food anyway.
It depends on how exactly one defines waste. How much do Americans spend every year attempting to remove the inconvenience to their lives? I mean, how many two person homes have three cars? How many small families live in 5,000 sq ft homes? How many people feel the need for the passenger compartment of their car to be completely warm or cool before they get in? As to China and her production of CO2 and other greenhouse gases/pollutants, don't forget that they are producing much of the nasty stuff(as in the processes and chemicals required) we don't want made in our country anymore. If you don't believe me that we don't want some of these jobs to return to America go visit the nearest tannery to your home. It's the sort of place that can turn the stomach of the toughest person, and force the most committed omnivore to at least consider giving up meat.
Jon - When I lived in China they burned coal without a filter to keep warm. In contrast, our power plants have pretty good filters on them. I'm curious what they produce in China that the US couldn't find a cleaner substitute for.
From your own link I find that residential energy use (energy used in private residences) is also about a quarter of all energy use. And how much do you think you can just dimiss as waste? In the contiguous 48 states where the majority of all energy consumption occurs, we have climactic extremes ranging from -30F in the northern midwest in winter, to around +120F in the southwest in summer, and very high summer humidities in the midwest and southeast. Some amount of winter heating is not optional in perhaps 3/4 of the US geopolitical boundary and some amount of summer cooling (including for dehumidification purposes) is not optional in perhaps 1/2. Moreover there's the factor of daytime energy use (including climate control) by persons working from home, either in a home-based business or telecommuting, that disappears into that 21%.
mouse, And how much do you think you can just dimiss as waste? I'd guess I'd predict that some portion of the 21% is waste. I'd even go a bit further and guess that more energy is wasted by the residential sector than by the 33% industrial sector. And this may just be a function of my definition of waste which isn't just a definition that turns on how efficiently energy is wasted in relation to the rest of the world. For example, I think it is wasteful for a family of 4 to live in a house that is bigger than 2500 square feet. The extra space isn't needed and energy is wasted building it, living in it, and maintaining it. At any rate, what's the actual answer?
"Consider a family of 4 cooling a 6000 sq. ft. home to 68 degrees all summer long. It's obviously better that they cool it as efficiently as possible, but it's still a stupid waste of energy."-keatssycamore Yes, some people could cut back a bit--like a certain former Presidential candidate with a 28,000 square foot mansion and a well-worn speech about "two Americas." More seriously, though, keatssycamore brings up a good point. In many areas inefficient pricing encourages wasteful energy use. Nobel laureate Vernon Smith points out how government regulation--by interfering with pricing--is preventing more efficient residential use of energy.
rwe, More seriously, though, keatssycamore brings up a good point. In many areas inefficient pricing encourages wasteful energy use. Nobel laureate Vernon Smith points out how government regulation--by interfering with pricing--is preventing more efficient residential use of energy. Since I'm already whining about how everyone has a bigger house than I do, I'll point out one of my favorite examples of this kind of encouragement. The unlimited mortgage interest deduction and, of course, it's extension to a 2nd home.
"For example, I think it is wasteful for a family of 4 to live in a house that is bigger than 2500 square feet. The extra space isn't needed and energy is wasted building it, living in it, and maintaining it." I'm pretty sure Al Gore's pool house is bigger than that. I remember growing up (in Canada) and being lectured by the scolds how evil we were because we were the biggest users of energy per capita in the world - my answer: Hey, it's really friggin cold up here! More seriously, Canada burns a LOT of natural gas in order to power the machinary that extracts oil from the tar sands. That is really very stupid - they need a nuke plant or two, since the Canadian shield is very geologically stable and it is close to the massive uranium deposits in Saskatchewan. Then they can sell the gas south for even more profit - and burning gas in the midwest is cleaner than coal.
keatssycamore Could we stop with the bashing of the mortgage interest deduction? Really... it's not an *advantage* to home owners as much as it's a leveling of the field with renters. Consider the following example to see why. I find a $1m house I like. I could: 1) Buy it and live in it. In a world with the home mortgage interest deduction these two choices are (nearly) a wash. In both cases I pay interest and property taxes and deduct them from my taxes. Now imagine a world without the home mortgage deduction. In situation 2, I would pay interest and property tax and deduct them as a business expense. On a $1m home, you can expect to pay around $20k a year in property taxes, and about $70k in interest (in the early years)... if you can afford that kind of outlay, you are probably looking at the highest tax bracket (33% for the sake of argument, it's close, and I'm not in the mood to look it up right now). So that's a $30 handicap on owning the home vs renting it... just from the tax treatment. Now ideally, we'd like taxes to be agnostic with regard to the choice of whether to rent or own, and that's exactly what we get from having mortgage interest and property taxes either deductible or not deductible for both homeowners and landlords in the same way. If you didn't make home mortgage interest deductible, you'd be favoring renting pretty dramatically. If you removed the deductibility of mortgage interest and property taxes from landlords... you'd cause a massive increase in rents. Take your choice, but I suspect that deductibility is more politically palatable to everyone.
Re: Some amount of winter heating is not optional in perhaps 3/4 of the US geopolitical boundary More than that even. Freezing tempertatures occur regularly in winter all the way south to northern Florida (and sporadically well into peninsular Florida and in S. California as well). To prevent pipes from freezing you must heat your house somehow. Sure, it can be done with a wood burning stove instead of a furnace (I have friends in Western New York who heat that way), but you're still producing CO2, even if not using oil or gas.
What is considered "waste"? A family of four could live in a 1200 square foot house, a 2500 square foot home, or even one that is 6000 square feet. Which one is the most wasteful, and why?
Consider a family of 4 cooling a 6000 sq. ft. home to 68 degrees all summer long. It's obviously better that they cool it as efficiently as possible, but it's still a stupid waste of energy. 6,000 sq. ft. is waaay above the average floor plan even here in California. Are you under the impression that 6,000 sq. ft. is a typical American abode? How have you come to this interesting, but non-factual, opinion? As for 68 degrees, that's a tad chilly for my personal taste and I am unacquainted with anyone else having sufficient polar bear blood in their family tree to find that temperature shirtsleeve comfortable. 72-74 F. is more my preference. But when the outside air temp is 80+, 90+ or, especially, 100+, I'm damn well going to run the A/C. In So. California, that's just part of making ones habitation habitable. I grew up in No. Michigan in a time when residential A/C was virtually non-existant in that area. A lot of people there had the idea that it was wimpy or even borderline sinful to have machinery cool one's house. Of course if anyone had suggested some similar putative lack of moral fiber attached to heating a house during sub-zero winters, he would have been regarded - correctly - as quite mad. As for me, I have both heat and A/C and use each as required by meteorological circumstance. Neither is a "waste." Both are simply what it sometimes takes to make certain climates livable when the weather would like to make things otherwise. Where do you live, k-syc?
I'm not k-syc but I'll answer anyway. I live in the hot and humid SE of the US (near Atlanta right now after time in Baton Rouge). While I can agree that turning on the AC is nice when the weather gets above 80 degrees I still view it as wasteful.
Dick, 6,000 sq. ft. is waaay above the average floor plan even here in California. Are you under the impression that 6,000 sq. ft. is a typical American abode? How have you come to this interesting, but non-factual, opinion?...Where do you live, k-syc? Of course, I don't believe that 6000 square feet is a typical American abode. Can you find anywhere where I wrote anything like that, Dick? Hey Dick, I didn't write that the average home is 6000 square feet. Did I Dick? I said it was wasteful. Is that really a controversial statement, Dick? Though I'll grant that my view of square footage is probably skewed since my family of four grew up on farm in central Kentucky in a home that was 1200 sq feet (including the "mud room"). We heated (as best we could) with a wood stove) and there was no air conditioning. Today, my wife and I live in Louisville, Kentucky in a nice 1400 sq foot house. Frankly, I sometimes fear I'll get lost in it b/c it's too big. Anyway, what was your point again, Dick?
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Megan, making me have to Google for the blog you're citing is too much work.
Posted by John Thacker | May 9, 2008 2:34 PM