Friday, August 27, 2010

Conversation on Terry Tao's Buzz

Robert Smart - This is an aspect of Jevon's Paradox. We need to look at the total picture: tax on light bulbs (or electricity or carbon) means less tax on something else which provides money that will use energy when spent. Energy and production are closely linked (including embodied energy of imported goods). The core question is: Does the government want to reduce energy use or move energy use to a different source? If the latter, then renewables will not do the job. Another mathematician (Prof David MacKay) wrote a book (Sustainable Energy: Without the Hot Air -- free on web). I read early versions where Nuclear was classed as unsustainable, but in the final version it is one of the options and actually it is hard to get the sums to add up without it.
By the way, as I pointed out to John Baez, one of the problems we have in addressing all these questions is that there are no good models of the economy. A good model would have to understand the flows of some funny things like people and sentiment. It would have to deal with money in a sophisticated way since it is peculiar stuff (because governments can and do print it, and maybe unprint it).
Edward Mehrez - @Willie: ....deleted...

@Robert: Jevon's paradox is a great observation, much of the policies enacted by the government tend to have limited scope and thus only fix problems that arise in a partial equilibrium framework whereas Jevon's paradox extends the analysis to other markets in which the government participates through it's expenditures of its tax income and thus considers a more general equilibrium framework. However, whether or not the government will use the income to purchase or manufacture goods that expend as much, if not more, energy than the energy use that was taxed is unclear to me. In a perfect information setting where the government is perfectly informed as to the utilities of all generations and considers the welfare implications of the externalizes on all generations (perhaps discounting future generations to some extent), Jevon's paradox does not occur; but, the real world is a different story...
9:00 am
Robert Smart - Edward: Consider another law, Lieberg's Law of the Minimum. That says that the currency of life is whatever is in short supply. Now consider our situation. Before the Industrial Revolution energy was in short supply and wages were driven to the floor (leading to large wealth disparity). Since then the thing in short supply has been skill-weighted workers. So we've seen the rise of the middle class and energy prices have been driven to the floor. Now we are temporarily back to energy being in short supply. Don't believe me? Look at what happens to the price of oil whenever there is a hint of economic recovery. That means that Lieberg's law applies and money is energy. Suppose that the government gives everybody free haircuts. Not much energy in that right? But the barber has money to spend then, and everyone has more money because haircuts were free. And if you follow the cycles and the epicycles and the epiepicycles of that you'll get to energy. Well we'd have more confidence in that if we had a good model of the economy.
Does Terry mind us having a private conversation under his buzz? Apologies if so.
10:10 am

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