Krugman on Oil

Krugman now says that resource constraints (particularly oil) will be a problem when we get a recovery. So I commented:

If oil resource constraint is a problem: how will that play out in the financial market? If it looks exactly the same as the GFC then how come all the economists maintain so strongly that the GFC was not about the oil resource constraint? All the semi-fraudulent financial activity moves the money around, but what brings the problem to light is when there is less total real wealth. How do we handle that? [Part of the answer is that the inflation rate has to be about 5% higher than the decline rate. This is also true when the decline rate is negative!]

Well this is another area where we need an open, vigorous, well-funded investigation of the facts. I commented on this in response to an Unleashed by a lawyer commenting on AGW. Here's my comment:

What we need to take out of this schmozzle is this: Any time you have facts dictating public policy, with winners and losers, then the engines of disinformation will run flat out on BOTH sides. It is crucial for public confidence that there be an open, vigorous, well-funded investigation of the facts led by people with mathematical skills who have no axe to grind. This is a core thing we need to add to the democratic process in the 21st century. And let us, with due respect to Ms Tranter, keep the lawyers out of it. [Why mathematical skills? The subject matter of mathematics is: thinking clearly about problems. We need more of it.]

Natural is orthogonal to Good

The wonderful "Australian Story" program (referenced here: http://www.abc.net.au/news/stories/2010/02/22/2826160.htm) emphasized that natural toxins are just as bad as unnatural ones. Maybe worse since they are intended to be toxic (plants are toxic to avoid being eaten). The Tassie government produced the traditional "natural so OK" response of the modern city dweller. Time's up on that. We expect the government to address natural problems as well as unnatural ones. Indeed we need to understand natural climate change as well as human induced climate change, since we can less afford a change to cold and dry than we can to warm and wet.

I declined to watch "4 Corners" since the subject matter sounded too depressing. But let us note that abuse of children is one of the evil parts of human nature. It is not true that human nature is innately good, with all evil being a malfunction. There is natural human evil, and it needs to be addressed by human means: Community-based resistance in various forms (such as education and punishment).

GP changing clientele not significant

GP's changing clientele not significant

A Tasmanian GP saw an increase in cancer patients and investigated. The Tas government declared that there wasn't a significant increase in cancer in her area. What's going on?

Certainly it is a good thing that she is investigating this and other correlated things (like oyster problems in the bay). However it is easy to imagine why a GP might see a changing client base.

When they first get to the town they have a short waiting list or no waiting list. This attracts people who have an immediate minor problem. As they become better known, particularly if they are good and are a native speaker of English, then they attract more customers. This makes the waiting list longer. People who want a quick fix or prescription go to the imported doctor with the shorter waiting list. People with more complex problems that have developed over time and not immediately perceived as urgent, will put up with the longer waiting list to see the doctor with a good commend of English and/or other perceived virtues. So that GP will naturally see an increasing number of cancer patients.

Facts impacting Policy need vigorous ...

Facts impacting Policy need vigorous review

Doesn't anybody else feel that the process linking scientific, engineering and technical investigation to the policy making process is bad. I mean really bad. Yes, scientists are often people who are not intrinsically suited to participating directly in the public debate. Still when the stakes are huge, as they are, then it is time to hold investigations where people are pushed outside their comfort zone. We need a vigorous, open, well-funded investigation into the facts, led by the best minds with a clear understanding of mathematics, and complete with substantial investigative powers. We need to identify people who are trying to deliberately mislead on both sides and get them out of the discussion. We need to make sure that the two sides address each others key points, even if they are not comfortable doing so. And in the end there is going to be uncertainty and we need to make decisions in that context, not invent fake certainty linked to various people's egos that becomes an obstacle to incorporating changing facts.

How big are the stakes? In many ways PO and AGW point the same way: electrification, nuclear [if only we could get on with those]. However surviving PO without massive depopulation may require using all the cheap energy we've got left. So the two issues need to be addressed together.

[Another TOD comment]

What money isn't good for

Money does two things well: It allows us to exchange goods efficiently, and to compare the price of goods at one point in time. However it is used for other things that it does less well, particularly in times of economic turbulence. Specifically:

You can't move wealth into the future through money.

As a corollary, you can't effectively compare prices across time. This universal assumption of money as a store of wealth and as a way of talking about future prices is one of the "thinking" things that gets us into trouble.
[Of course we all do move wealth into the future through money. When you put $1000 in a suitcase under the bed then you reduce the money supply which makes everybody else's dollars worth more. When you take it out of the suitcase to spend it later then you get your wealth back by making everybody elses dollars worth less. This process works fine on short time frames relative to the economic volatility.]

To take the EROEI idea to its logical conclusion, perhaps the trick is to create an imaginary effective-energy "currency" for talking about future costs.

Building groups that work

In tribes of 100-150 everyone knows everyone. We have adaptations designed to allow us to form larger groups and identify group members in other ways: We are the group that dresses like this, wears our hair like that, can pronounce "th", believe X [where X is complex and something that no reasonable person could believe], understand arcane aspects of our native language/dialect, hold particular facial expressions, follow mysterious cultural behavior... So the trick is to be in the correct self-identifying group: the one where members will actually help each other, and be able to do so. And if you're in an attempt to build such groups (like Transition Towns) then I'd recommend working on all those human ways of making a group self-identifying. Of course this will make other people/groups hate you, so you need to keep a lot of it secret. Oops, this is starting to sound like a nightmare. No wonder we want growth to keep going, even though we haven't really enjoyed it and we know it's an environmental disaster.

[This was a comment in response to people trying to set up groups to prepare for Peak Oil]

In Praise of Speculation

Markets work best when there are well informed speculators. There is a current move by various guilty or ignorant parties to demonize speculation in the oil market. So I thought I'd list some of the benefits that we should get from substantive expert speculation.

If the future price of oil at time T will be X, then speculators should ensure that the price of oil now is at least X minus the cost of storing the oil till T minus the interest on that money till T. This brings forward the rise in the price. This is good because:

• Alternatives become cost effective sooner, encouraging innovation and investment in time. Without that one is trying to bring new technology infrastructure on line without adequate lead time.
• The higher price reduces consumption, effectively saving the finite resource for the most important uses.
• The higher price allows investment in more marginal oil sources.

The owner's of the oil are in a privileged position as potential speculators, since they can store oil at minimum cost by not pumping it. So it is nicely ironic that the Saudis have said they'll do exactly that, just as they are leading a push against speculation. In fact speculation is minimal so far, as shown by the lack of any stored reserves.

So let's encourage speculation. We should also demand transparency so that the speculation can be well informed.

On a slightly related note: Peak oil for the world is very different for peak oil for a particular country, since world peak oil affects the price much more. We also observe that when there is a sudden 1% drop in supply then the price has to go up enough to cause sufficient instant demand destruction. However that price rise will be too much, much too much, for a long term drop of 1% in demand. So, for example, at the current price of oil the reduction in economic activity will be too much, so the price of oil will fall back for a while. The reduction in supply is like a land slip under water, and the resulting wave is literally like a tsunami. So with supply falling and incipient demand still increasing and waves of demand destruction rippling, its going to be hard to see the signal for the noise. Lots of transparency and lots of well informed speculation will smooth this stuff out.

[This was a comment on The Oil Drum in mid 2008. It was right about the rise being followed by a fall, then a rise. However that was the end of the oscillation with prices stuck around $80].

Cold land, Warm ocean

It's warm but there's lots of snow. According to "Watt's up with that" the land surrounding the Arctic ocean is cold, but the oceans are warm. Warm ocean means lots of precipitation falling as snow in winter. Now it is interesting to look at how the last Interglacial ended. The temperature rose (sea level fell) steadily and faster than during the current Interglacial. Then it crashed with the sea level falling at 1cm a year: That's a lot of snow and ice build up.
Maybe at the end of an Interglacial the ocean is warm, but then the Sun gets weaker, and/or lots of junk gets thrown into the atmosphere by volcanoes. So the land gets cold. Lots of snow. Not enough Summer melt. Bingo.

Coal bad Glass good

I urge everyone to read Gregor Macdonald on “Coal and Treasuries” at http://www.theoildrum.com/node/6175. CO2 policy is about exactly one thing: leaving coal in the ground. Everything else is fluff. Nuclear is the only thing that can replace it. Australians need to understand this.

And here is a potential game changer, spray on very thin glass: Spray on Liquid Glass to Make Things Easier to clean and antimicrobial for Years and Can Increase Crop Yields. Need to be sure that fragments of it aren't more of a health hazard than the normal SiO2 dust we all live with. Just the seed protection alone seems likely to help us get through the peak oil food crisis.

What's coming up

The New Year resolution to do a post a day is starting to fade. Let me try to inspire myself with some things I can write about.

I'm working on my Bridge bidding system, Smart Acol. I can post some stuff on that and the rationale.

I have my programming language, COPL (Closure Oriented Programming Language), and there is much to write about that.

I have an open source software project called CallHome. It is the simplest way to add low performance real time stuff to the web. I have an implementation in C. Will redo and improve using the new language Go. I need to write an Internet Draft. Plenty to write about here.

I have my Smart Workflow project which I'm trying to write using Google App Engine. I need to get back to that, and write about it. It needs real time.

My main obsession, that stops me getting anything done, is understanding the Energy Crisis and the consequent (in my opinion) financial crisis. Ideally this will all gel together into a book: Energy Crisis Economics. I need to be more organized.

I also have in mind a book "Respect your Genes, but stand up to them", subtitle "the secret of happiness". I can do more posts based on the ideas in that book.

I have a big interest in health. Maybe if I wrote more about that then I'd keep to my diet and exercise program better. I mostly favour balance, rather than looking for good things to do and bad things to avoid. I do believe that vitamin D is important, but also that sunshine has significant benefits in addition to vitamin D production.

Advice for mums of boys

If you handle human life easily then you don't need to analyse. Still it is helpful for mums of boys to understand.

The first thing to understand about male behaviour is that we are optimized for primitive societies in which being a male is quite dangerous. In extreme examples of such societies, the sex ratio is 2:1, with the missing males victims of male-male violence.

The second thing is that girls don't evaluate boys in isolation. They evaluate them in the context of how they interact with other males. And boys are conscious of this. We concentrate on competing and cooperating with other boys. But we put our head up to see if the girls are noticing. Of course we compete and cooperate even when the girls aren't there, but too much of that is going to be unsatisfying.

Bridge was ideal for me. You have a partner you have to find, establish a relationship with, then cooperate with. There are opponents to compete against, and the sexes are mixed in varying degrees. It was nice that I was good at it, but it is more important to be able to cope with the competitive environment than to win.