The Knowledge Problem
Commentary on Economics, Information and Human Action

Friday, July 25, 2003  

While I'm making recommendations, do go read Kevin Brancato at Truck and Barter. He's moved to a new web address, and Blogger is being cranky about letting him put on a forward, so ...

I am also long overdue in recommending Long Harvest, a weblog dedicated to the dynamics of technological change. It's a fascinating and informative read, and Paul Phlip is full of vision and creative ideas about the possibilities for human creativity.

posted by lkkinetic | 7/25/2003 07:31:00 AM

Knowledge Problem silence this week has been the consequence of a looming paper deadline; I have to get a paper pulled together for a conference by next Friday.

posted by lkkinetic | 7/25/2003 07:24:00 AM

While you're there reading the Gunter article, you should just read all of Tech Central Station today. They have quite a few good and thought-provoking articles on pharmaceutical pricing and importation, from such luminaries as Richard Epstein.

posted by lkkinetic | 7/25/2003 07:22:00 AM

CARBON DIOXIDE A CONSEQUENCE, NOT A CAUSE? This Lorne Gunter article on climate change at Tech Central Station discusses research that suggests the opposite of what lots of people have been thinking: it suggests that carbon dioxide is a consequence of global warming,not a cause. It's a very interesting, at a least to a certain extent testable, hypothesis. It is also consistent wtih research by Sallie Baliunas and Willie Soon and others that indicates the role that sunspot activity has had in warming the earth's surface and atmosphere over the past millenium.

Gunter's conclusion is a bit depressing, but realistic; he thinks that even if this hypothesis is not falsified by other research, the wide web of subsidies and special interests involving the alternate CO2=>climate change hypothesis will keep it from spreading in acceptance.

posted by lkkinetic | 7/25/2003 07:12:00 AM

Monday, July 21, 2003  

A reader has emailed me regarding my post last Tuesday on a recent Time magazine article on natural gas policy. He advocates a policy shift from regulation to taxation:

Well, Dr. Kiesling, if you accept the view of Time's writers that energy policy needs to consist primarily of regulation and subsidy, wouldn't you expect the process of making it to be incredibly politicized?

Like most commentators on this subject, Time's writers look right past the underlying reason we use so much energy: because it is cheap. Government policy is designed before anything else to make sure it stays cheap. When for reasons beyond the immediate control of government, business or consumers any form of energy becomes less cheap the adjustment is painful. Trying to avoid the pain by precisely aligning regulatory policy and subsidies for promising technologies is like trying to run on your hands -- it can be done, but not very well or for very long.

To set energy policy on its feet, we need to deal with the underlying issue. This means less use of regulation and subsidy, and more use of taxation. Raising taxes on energy use when energy is cheap will reduce economic growth in the short term. It will also make violent disruptions in the economy less likely; businesses and consumers not accustomed to using, and wasting, vast amounts of cheap energy will adjust more easily to changes in market prices.

This approach is obviously out of step with the "money for nothing, your chicks for free" fiscal policy of the current occupant of the White House, though it is no more politically unrealistic than what Time's writers propose. The one advantage of relying on taxation to reduce energy usage is that we know it will work.

I wholeheartedly agree that our current energy policy fails to deal with the underlying fundamental issues arising from a history of cheap energy. Some of that cheapness has arisen from plentiful supply relative to demand, and some has arisen from outright subsidies and manipulation of prices to make energy appear cheap to politically powerful constituencies.

I'm not sure that I am willing to go the next step and advocate taxation as an alternative to regulation, because I don't think we need to make energy artificially expensive (and I do think that removing market barriers to transparent pricing will incorporate lots of information that usually gets used as the argument for taxation to reduce negative externalities). I would first recommend that we make the subsidies and the manipulations transparent, eliminate them, and see how consumers respond to seeing the real value of the energy they consume. The lack of price and cost transparency is the most blatantly problematic in electricity, but it also exists in other energy markets.

posted by lkkinetic | 7/21/2003 10:03:00 AM

Wednesday, July 16, 2003  

Georgia Power offers green energy rate. Choice, what a concept ... Too bad that they still have to go through the cumbersome and obsolete regulatory rigamarole to offer choice to their customers.

posted by lkkinetic | 7/16/2003 08:29:00 AM

PHILOSOPHY AND NOVELS: Tyler Cowen mentions that he will be discussing "scarcity and the novel" at a symposium that David Levy has organized "on how proverbs, maxims, and novels contain wisdom of a kind comparable to the wisdom found in models."

I have one example of this that I wish I had time to research. In Pride and Prejudice, when Lady Catherine de Bourgh has finished dressing down Elizabeth and refusing her consent to marriage to Darcy ("are the shades of Pemberley to be thus polluted?" is a priceless line), Elizabeth says

I am only resolved to act in that manner, which will, in my own opinion, constitute my happiness, without reference to you, or to any person so wholly unconnected with me.

This meaty quote raises a lot of questions: what is Austen's conception of happiness? How does Austen form her conception of the role of social networks and relationships in individual happiness? Who is Austen reading that gives her the intellectual fodder to develop this conception? There's a lot in 18th-century philosophy that bears directly on this articulation of Elizabeth's life vision, and I'm just not familiar enough with it to make a persuasive case.

I welcome any thoughts and suggestions on this matter. I am sure Austen was reading Hume, and this resonates with a lot of Hume to my ear. But what about the later guys, like Godwin? What about Rousseau (scary thought, but ... one of Elizabeth's charms is that she is natural and unaffected, which smacks of Rousseau)?

BTW, I highly recommend anything that Tyler Cowen writes to any and all.

posted by lkkinetic | 7/16/2003 08:18:00 AM

Tuesday, July 15, 2003  

TIME ARTICLE ON NATURAL GAS SUPPLY: Steve Antler also remarked on this Time magazine article on natural gas and energy policy. I find the headline striking:

Inflated oil prices and natural gas shortages are wiping out jobs and savings, thanks to three decades of bungled energy policy. Get ready for more bungling

And here's their take on the politicized process by which this is happening:

Why are Congress and the White House responsible? As part of a long-standing ritual involving Democrats and Republicans, lawmakers and Presidents have devised energy plans that add up to no plan at all—not deliberately but by default. In pursuit of different agendas, competing interests tend to cancel one another out over time, leaving the nation with no coherent direction on energy. Lawmakers launch programs to develop alternative-energy supplies but later quietly cut or eliminate the funding so there are no realistic alternative sources. They enact legislation offering incentives to stimulate crude-oil production in the U.S., when the politicians know—or should know—that the programs will not do so in any significant way. They encourage utilities, businesses and industries to shift to natural gas, then fail to ensure sufficient supplies of the fuel. The lawmakers refuse to make the tough choices on energy supplies and consumption, while they cater to the demands of campaign contributors and special interests. Worst of all, when politicians craft a conservation program that actually works, they abandon it. As a result, after three decades and dozens of energy bills, Congress has helped position Americans so they may be closer to an energy crisis than at any time since the oil shocks of the 1970s. And this time, the U.S. is finally beginning to run out of domestic oil and easily recoverable natural gas.

This article is a very useful wake-up call on how pernicious the control-and-manage mindset is in combination with the ridigities introduced through the interactions of active special interests in this incredibly politicized process.

posted by lkkinetic | 7/15/2003 09:09:00 AM

READ THE PROPOSED SENATE ENERGY BILL: The Senate Energy and Natural Resources Committee has a user-friendly page on S.14, the Senate energy bill proposal. The page also tracks proposed amendments.

I agree with Steve Antler that we are very likely heading into an energy crisis; I would differ in my characterization, though, and say that it's not that we don't have an energy policy, it's that we keep trying to control and manage energy markets through politicized processes and institutions, giving politically motivated special interest groups (such as environmental activists and the oil industry) the incentives and the means to try to control and manage energy markets to achieve their personal objectives.

The Senate energy bill does not improve on that gloomy outlook. I'll have more to say on that later.

posted by lkkinetic | 7/15/2003 08:52:00 AM

Friday, July 11, 2003  

MORE ON CALIFORNIA ELECTRICITY REGULATION: This Dan Walters column from today's Sacramento Bee puts the current debates over electricity regulation in the context of the 1996 debate. Very good read.

posted by lkkinetic | 7/11/2003 04:35:00 PM

CLEARING THE AIR: Run, don't walk, to the Reason website and read this wonderful article by Joel Schwartz on air quality in the US from Regulation magazine, a superb quarterly published by the Cato Institute. In noting the disconnect between actual air quality improvement and the general perception of poor air quality, Joel observes that

This disconnect between perception and reality is, in part, the result of environmental activists’ exaggerations of air pollution
levels and risks, which make air pollution appear to be increasing when in fact it is has been declining. State and federal regulatory agencies sometimes also resort to such tactics, and the media generally report those claims uncritically. As a result, public fears over air pollution are out of all proportion to the actual risks posed by current air pollution levels, and there is widespread but unwarranted pessimism about the nation’s prospects for further air pollution improvements.

Read the whole thing, and pass it around to everyone you know. This is good stuff.

posted by lkkinetic | 7/11/2003 10:44:00 AM

A NEW DECLARATION OF INDEPENDENCE: I am indebted to Glenn Reynolds for linking to this Ed Cone column on the foundations of liberty. It's a wonderful, heartfelt articulation of a vision of civil society that is very compelling, and in great part is what gets me out of bed in the morning.

As we celebrate the freedoms already won, let’s celebrate as well our coming freedom from the tyranny of politics as usual and the yoke of corporate infotainment culture. Let’s commit ourselves to becoming a nation of grown-ups, with an eye for accounting, a respect for complexity, and a well-developed sense of humor. It’s time for the emerging libertarian majority to make itself known. ...

Principles endure, but needs and resources change, so solutions under the libertarian consensus need to be dynamic instead of static. Entrenched interests, served by both major political parties, are dug in against liberty. We need to root them out without dismissing the various good ends toward which they set off before getting trapped in their trenches. ...

Any attempts to change the current system will get you labeled if not libeled. So what. Liberal and conservative are characterizations that serve the powerful. I feel reduced by them, not defined. The libertarian consensus is the new counterculture, a motivating force behind the second superpower emerging on the Web, the future. Let’s celebrate it on the Fourth of July, and then get to work on making it happen.

posted by lkkinetic | 7/11/2003 10:37:00 AM

RE-REGULATION BILL IN CALIFORNIA REJECTED: On Wednesday I mentioned the committee rejection of California AB 428, which I claim reflected a continued control and manage mindset in California regarding electriicty markets.

Today we hear that the re-regulation bill, SB 888, failed to pass a Senate utility committee vote:

"I don't want to repeat what happened in '96 when a lot of legislators rushed into something and now regret what happened," said Assemblyman Manny Diaz, D-San Jose. "I just want to make sure we do it right." ...

The measure, SB 888, is opposed by energy producers and a long list of commercial energy users. Written by Sen. Joe Dunn, D-Santa Ana, the bill did not receive a single vote in support from the Assembly Utilities and Commerce Committee. ...

Dunn's bill would give investor-owned utility companies the option of buying power from third-party generators or generating some or all their power needs themselves.

Dunn's measure did not attempt to deal with the controversial issue of whether industries should be able to shop around for an energy provider, also called "direct access."

The defeat of both bills creates an opportunity to construct a more adaptable and resilient foundation for the introduction of competition into California's energy markets.

posted by lkkinetic | 7/11/2003 10:21:00 AM

NATURAL GAS POLICY UPDATE: Natural gas is back on the DC policy radar screen this week, according to this article from OIl & Gas Journal. In Senate testimony Thursday, the National Petrochemical & Refiners Association advocated removal of restrictions on domestic natural gas exploration. On the other hand, this LA Times editorial advocates conservation and removing barriers to importation of LNG, but not removing barriers to domestic exploration.

Notice the shared nugget in these various positions: government policy at many levels provides barriers to a resilient and robust set of interconnected energy markets.

Note, however, that the natural gas market may be more resilient than the energy Chicken Littles think it is. Increased natural gas storage over the past month has decreased concerns about short-run price spikes in natural gas; however, fluctuations in futures prices do not paint such a rosy picture (according to the Energy Info Source story cited above):

"Although the support of market fundamentals for high gas prices has weakened, 'street' support for high gas prices remains strong," said Tom Woods, senior natural gas consultant at PR&C. "As a result, a price decline in the next few months could be short-lived or more modest than market fundamentals would suggest."

While concerns about storage fill should lessen in the coming months, this improved outlook is likely to be accompanied by factors that could strengthen perceptions of deteriorating North American gas supply availability, thus putting upward pressures on gas prices. "As a result of this growing tension, we expect gas prices to decline, but that decline is likely to be accompanied by increased volatility."

So we have seen a pretty robust supply response to the current and anticipated price increase. That's a good thing. It does not, though, change the fact that we would have less volatility with fewer, and more economically justified, regulatory obstacles to LNG importation, domestic exploration, and fuel use diversification. And that we would consume less energy overall, not just natural gas, if retail electricity markets had an active demand side. Active demand means less wasteful consumption.

posted by lkkinetic | 7/11/2003 09:58:00 AM

Thursday, July 10, 2003  

THE FEDERAL FUEL OXYGENATE MANDATE IS BAD POLICY: Just before the holiday I testified at a Congressional hearing in Diamond Bar, California, on the transition from MTBE to ethanol as an oxygenate in southern California's fuel. The text of my written testimony is available at the Reason Public Policy Institute website.

The hearing was called by Doug Ose (R-CA), who is the Chairman of the Government Reform Committee's Subcommittee on Energy Policy, Natural Resources and Regulatory Affairs. The topic was essentially twofold: the stated focus was the transition from MTBE to ethanol in California to satisfy the EPA's fuel oxygenate requirement, but the larger related issue was the examination of whether the EPA should reevaluate and ultimately eliminate the oxygenate requirement. California must use oxygenated fuel in most of southern California, which is an EPA non-attainment zone. The rest of the state uses CBG, California blended gasoline, which is a very clean-burning fuel.

Refining is not a "plug-and-play" activity, not by a long shot, and the hearing brought out the ways in which the refiners are adapting their processes to the ethanol requirement. But that requirement is a constraint, and the ensuing lack of flexibility makes their jobs much more difficult and increases their costs. The oxygenate requirement introduces rigidity into energy markets, rigidity that can lead to supply's slow response to changing market conditions, even predictable changes.

My remarks focused on those rigidities and on the continually evolving science of the effects of ethanol on soil and water. My written testimony highlights the negative environmental effects of increased ethanol production (increased fertilizer production and use, killing fish in the Gulf of Mexico, etc.) as well as ethanol consumption and leakage into soil and water. But the ultimate point I tried to get across is that input-based fuel regulations are ill-suited to adapt to unknown and changing market and environmental conditions; nor do they induce the technological change that has been the foundation of our economic growth for the past two centuries and will continue to do so if such impediments are removed.

The past decade in particular has illustrated the power that incentives have to shape human behavior with regard to environmental quality. Regulations that rely on command instead of incentives have repeatedly shown that they are ill-suited to meeting the range of goals that we have, including environmental quality. Performance-based requirements that recognize incentives can generate improved environmental quality, as long as statutory regulations do not dictate how that is to happen.

posted by lkkinetic | 7/10/2003 08:31:00 AM

The California ISO has been in the throes of restructuring for the past two years, and has released what is likely to be its final design proposal. The ISO board has approved this proposal. In lieu of my slapdash review of it, I attach here some comments from a very knowledgeable and insightful colleague of mine. I don't entirely agree on things like LMP -- I'm still waiting for a good explanation from LMP supporters of how LMP is not a tool for centralized control, no matter how decentralized it looks -- but that's a mere quibble.

Bottom line: still a mixed bag, still too much desire to control and regulatory uncertainty from "market mitigation" procedures.

The new design changes don't get it right. What's more surprising is that they do get some things right. More interesting among the changes are the actual improvements made in the market design, especially given the heavily politicized process.

1. An integrated forward market - A day-ahead market with pricing that accounts for congestion on the grid. No more easy ways to submit a schedule to intentionally create congestion and then getting paid to "relieve" it. The party causing the congestion will pay for it rather than having congestion costs socialized among all users of the grid.

2. Locational Marginal Prices - A true nodal LMP system, at least on the generation side, rather than the current zonal system that lumps huge service territories together for pricing purposes. However, they did chicken out on full nodal pricing for consumers, hence consumers won't get quite the right price signals. If the consumer zones are intelligently drawn, this might not be a major problem but obviously the averaging will mute economic signals. Most of the Northeast integrated markets also do some sort of zonal pricing for load, though there is some push for full nodal pricing from industrial customers.

3. Congestion Revenue Rights - these sorts of congestion hedges are useful tools in the market.

4. Residual Unit Commitment - Okay, here is a potential problem. RUC gives the ISO the opportunity to "second guess" the market, with the market getting all of the cost and/or benefits of ISO decisionmaking. Essentially, if the ISO thinks that actual load the next day will be higher than day-ahead/hour-ahead schedules indicate, it can set its unit commitment to prepare for the ISO's higher forecast, i.e. turn on a few extra generators. If the ISO is right, then a more efficient set of generators is available to serve the actual load and consumers save a little; if the ISO is wrong, then too many generators are available and consumers pay a little more. The "not-for-profit" ISO will have little incentive to efficiently second-guess the market.

5. Market Power Mitigation - if the proposal is similar to an earlier version of the plan then the market power mitigation plan is a real mixed bag. I lean in favor of the so-called "Automated Mitigation Plans" in which the parameters for mitigating bids in the market are known ahead of time, rather than a post hoc "antitrust" style investigation as is currently continuing at the FERC with respect to prices in California in 2000-2001.

The other good news-bad news pair in the press release concerns the proposed ACAP requirement which has been abandoned (probably a good thing, since it was a new idea not completely worked out and untested), in favor of a plan under development by the California PUC and other agencies (unlikely to be a good thing).

But again, overall I think this is movement in the right direction.

LMP markets are doing good things in New England since implemented in March of this year. Finally politicians and power companies in Boston and southwest Connecticut are getting serious about siting power lines and generation. Localized payments - coming out of localized consumer pockets, for the most part - are being made for special load response programs in southwest Connecticut. These things are happening because the regional power market has implemented a LMP system in place of the previous
single-price market. I expect similar consequences for California.

Not perfection, but improvement.

posted by lkkinetic | 7/10/2003 08:10:00 AM

Wednesday, July 09, 2003  

THE CONTROL AND MANAGE MINDSET MARCHES ON IN CALIFORNIA: The California legislature has entertained a few different bills this year that would reinstate direct access for some electricity consumers. And it is quashing all of them, and choosing instead to reinstate more traditional, top-down, no-incentives-in-sight cost-based regulation (through SB 888).

The latest effort to reintroduce consumer direct access is AB 428, which proposes a "core/non-core" split between customers, and allows consumers to choose to opt out of core service and contract with an energy provider directly and independently, on mutually beneficial terms. Yesterday the California Senate's Energy, Utilities and Communication Committee rejected the bill by a 3-2 vote. The quote from the Chair of the committee, Debra Bowen, sums up the the control and manage mindset:

Senate Energy, Utilities and Communications Chairwoman Debra Bowen, who voted against the measure, said she was concerned about the "vagueness of the PUC's charge" in crafting implementation of the bill. Ms. Bowen said she preferred the now-deleted language in SB 888 that required the legislature to approve any direct access proposal by the commission.

"I do believe there is a role for the private sector in competition, but given how critical each decision is and the fit of various (parts) together, I'd really like to see the entire package before it takes effect, and I was comfortable doing that in SB 888," Ms. Bowen said.

Granted, vagueness can be a problem. But requiring layers of approval? Wanting to know in advance how the parts are going to fit together? Senator Bowen and her compatriots have an unrealistically high requirement for certainty and ex ante knowledge of outcome. They also continue to want to regulate both inputs and outcomes, which is also unrealistic. This requirement is likely to doom California to a static and stagnant electricity industry, to the detriment of its residents and businesses. Except for the utilities, who are part and parcel of the control and manage mindset:

But the ability of customers to change their minds on whether to choose a provider after three years would make it difficult for utilities to plan ahead, said Gary Schoonyan, director of regulatory policy and affairs for Edison International (NYSE:EIX - News) unit Southern California Edison. He also disputed supporters' arguments that reinstating direct access would encourage generators to build power plants in the state, and that service providers would sign contracts for their output.

"I don't believe energy service providers will be signing ten-plus year contracts with generators, or that customers will sign them with providers. We don't see new infrastructure being built as a result of this bill," Mr. Schoonyan said.

Again, the quest for certainty and stability through putting the brakes on customers. I become less and less sanguine about California's energy future. The various direct access bills are all as legalistic as you would expect, but at least they would provide some measure of choice and competition in an environment desperate for it.

My earlier comments on SB 888's attempt to re-regulate California's electricity industry are in this post from 8 May.

posted by lkkinetic | 7/09/2003 08:45:00 AM

ELECTRICITY STORAGE SEEN TAMING VOLATILE PRICES: Electricity storage is one of the holy grails of the industry. Those who wish to continue regulating and controlling this dynamic, complex industry use the inability to store electricity cost-effectively as an argument for why electric networks have to be regulated. Of course, this argument is a canard -- many things we consume are not storable (airline seats, hotel rooms, haircuts, for example), yet we do not regulate the prices or investment in those industries. But the sooner technological change moves us toward effective storage, the sooner we remove one arrow from the quiver of the control freak arsenal.

Thus I am heartened by this report on innovation in new storage technologies. The article starts off poorly, saying

Sharp price swings and congestion on the power grid are hallmarks of the deregulated power market partly because electricity, unlike other energy commodities, cannot be stored.

See how the canard rears its ugly head? This statement is false. Sharp price swings and congestion are hallmarks of a partially deregulated wholesale power market that does not allow the participation of the demand side in bidding. Furthermore, much of the volatility in electricity markets could be diffused through the use of financial instruments to diversify risk (and I don't want to get into the regulatory and industry obstacles to increased use of financial instruments). Yet again, someone tries to hang the volatility hat on deregulation, but the hook ain't there.

The article then goes on to discuss compressed air storage and its potential. It's still not cheap, particularly when you take into account the energy used to compress the air. But it's a start.

posted by lkkinetic | 7/09/2003 08:11:00 AM

THE GREENEST ELECTRON: I am thrilled by this quote in an article on building energy efficient buildings:

"The greenest electron is the one you never use," said Stephen Smith, the executive director of the Southern Alliance for Clean Energy, based in Knoxville, Tenn.

Yes! So why are so many "environmentalists" opposed to market-based pricing of electricity? If you let them, prices contain the information that enables a consumer to decide whether it's worth it to them individually to use the energy at that time or wait. And if prices reflect scarcity and the actual cost of bringing additional electricity to market, having those price signals can reduce overall energy use.

Huh? you say ... aren't you just time shifting, not actually reducing use? Here's the cool thing: even if all the retail consumers are doing is shifting their use away from expensive (i.e., peak) hours to cheaper ones but still use the same number of kilowatt hours, the production of the electricity is likely to require less energy input. Peaker plants that start up more quickly are more expensive to operate and tend to use more fuel per kilowatt hour of electricity produced, so time shifting reduces overall energy use in production of electricity.

Just one example of the many complex interactions that market processes enable, and regulatory processes cannot replicate. And it illustrates the alignment of economic incentives and environmental incentives (insert standard comment on property rights and rule of law here).

posted by lkkinetic | 7/09/2003 08:00:00 AM

Monday, July 07, 2003  

Thanks to Glenn Reynolds for posting on MIT's Government Information Awareness initiative. As stated in this Houston Chronicle article,

GIA hopes to create an enormous but self-sustaining community where users do the work of keeping it running and credible.

Its creators at Media Lab -- a research center whose eclectic projects bridge technology, the arts and media -- view the project not just as a way to pool the collective wisdom of government watchdogs but also as a tool to counter new government technologies that are consolidating information about citizens.

This is the same kind of decentralized, networked information-sharing thinking that underpins the internet generally, and open-source software specifically. I hope that in conjunction with the efforts of The Electronic Frontier Foundation (mission: with digital rights and freedom for all ...), such decentralized networks lead to increasingly clear notions of private rights and government responsibilities to respect those rights.

Oooh, there I go being an optimist again!

UPDATE: This "about" sub-page on the GIA website has a very interesting quote from Franklin Roosevelt:

The only sure bulwark of continuing liberty is a government strong enough to protect the interests of the people, and a people strong enough and well enough informed to maintain its soverieign control over its government.

It also indicates how transparent an institution this information network is intended to be: note at the bottom the section titled "Data Model", where you can see how the information is gathered, analyzed, and connected. Fascinating, and a very healthy example of transparency of process to increase credibility of outcome.

I'll be very interested to keep an eye on this one ...

posted by lkkinetic | 7/07/2003 12:10:00 PM

STATE LIQUOR REGULATIONS ARE ANTI-COMPETITIVE: Boy, you go away for four days and the world throws up some serious treats for your return! I've been arguing against state-level restrictions on the importation of alcohol for years and years, and I am ecstatic to report that the Federal Trade Commission has weighed in on the negative consumer effects of such bans. From Thursday's press release on the report:

A Federal Trade Commission staff report released today concludes that e-commerce offers consumers lower prices and more choices in the wine market, and that states could expand e-commerce by permitting direct shipping of wine to consumers. The empirical study finds that state bans on direct shipping prevent consumers from saving as much as 21 percent on some wines and from conveniently purchasing many popular wines from suppliers around the country. FTC Chairman Timothy J. Muris stated, "E-commerce can offer consumers lower prices, greater choices, and increased convenience. In wine and other markets, however, anticompetitive barriers to e-commerce are depriving consumers of those benefits."

This study does something very important, and all too rare in government policy-making: it relies on amassing and analyzing empirical data to evaluate the competitive effects of a policy.

"Policymakers had little actual evidence to assess the impact of online wine sales on prices and variety. The study of wine sales in McLean, Virginia is the first empirical study assessing how state direct shipment bans affect consumers," said Jerry Ellig, Deputy Director of the FTC’s Office of Policy Planning. Ellig and Alan Wiseman, a former FTC economist, co-authored the McLean study.

You can read the entire report to judge for yourself the weight of the empirical evidence. In my estimation, this report provides a strong argument against the continuance of state alcohol importation bans.

Now if this argument can help overcome the political power of the wholesalers ... perhaps we will even revisit the specifics of the repeal of Prohibition, which stipulated the wholesaler industry structure with which we are now saddled. Yes, I'm an optimist! But this report feeds my optimism that knowledge drives away ignorance and that knowledge can be sufficient to overcome rent seeking in a decentralized network society such as ours.

posted by lkkinetic | 7/07/2003 11:58:00 AM

Tuesday, July 01, 2003  

VACATION, ALL I EVER WANTED: I am going to New Hampshire for a long weekend with my husband's family, and as others have done this week, I'm posting the books I'm taking with me:

The Lunar Men: Five Friends Whose Curiosity Changed the World, about the intellectual comraderie of Erasmus Darwin, Josiah Wedgwood, James Watt, Matthew Boulton, and Joseph Priestley

Paris to the Moon, essays on being an American living in Paris by Adam Gopnik, who wrote the "Paris Journals" for the New Yorker

Freedom Evolves, Daniel Dennett's latest book, in which he argues that "there is indeed such a thing as free will, but it "is not a preexisting feature of our existence, like the law of gravity.""


posted by lkkinetic | 7/01/2003 10:49:00 AM

For a great scientific background to why hydrogen fuel cells are still far from commercial viability, read this outstanding Tech Central Station article from Monday. Smil's argument is thorough and precise. It also complements the economic arguments I made in this spring's Let the Hydrogen Economy Evolve 5-part series at Reason.

Interestingly, on the same day, NEC unveiled its methanol fuel cell-powered laptop computer. As I said in this 17 March post, this small fuel cell research will ultimately generate some very useful lessons for larger fuel cell research. Methanol fuel cell laptops and PDAs are a step toward our hydrogen future, and are a sensible way to test-bed fuel cell technologies without stampeding to the fuel cell vehicle.

posted by lkkinetic | 7/01/2003 10:38:00 AM

As you've probably figured out by now, I am a huge Jane Austen fan, particularly Pride and Prejudice. In part my love of Austen is her incisive observations on human nature and human interactions with social constraints, in part it's the wit and irony with which she paints her pictures. And of course, since 1996 it's been largely encouraged by the superb BBC/A&E 6-hour production of P&P, with Colin Firth delivering the definitive performance as Mr. Darcy. Indeed, I never felt like I fully comprehended the range of emotional repression and depth of Mr. Darcy until this production (and it doesn't hurt that Colin Firth is drop-dead gorgeous).

Anyway, in the course of my recent P&P perusals on the web, a poster at The Republic of Pemberley posted links to two Martin Amis articles on Jane Austen. Amis is apparently also a huge Austen fan. The earlier article, from the Atlantic Montly, 1990, is a bit rambling and impressionistic (for I have developed a taste for the incisive and analytical, so Amis' writing often falls flat for me), but I thought what he said about Darcy in his concluding paragraph was quite interesting and insightful:

Darcy doesn't account for the novel's eternal humor and elan, but he does account for its recurrent and remorseless power to move. Elizabeth's prejudice is easily dealt with: all she needs is the facts before her. Yet the melting of Darcy's pride demands radical change, the difference between his first declaration ("In vain have I struggled") and his second ("You are too generous to trifle with me"). ... This is the wildest romantic extravagance in the entire corpus: a man like Mr. Darcy, chastened, deepened, and finally democratized by the force of love.

This Amis article from the New Yorker in 1996 is much better, in my view, although I find his ultimate concluding paragraph a bit fatuous. He starts in by discussing viewing Four Weddings and a Funeral with Salman Rushdie, which is itself an interesting concept, and then goes on to discuss sentimentality in the course of getting to Jane Austen's modern lovers and his review of the 1995 BBC production. (aside: I also disagree with him about Benjamin Whitrow's performance as Mr. Bennet, who I think needs to resort to wryness and twinkle to keep himself sane while being married to such an intellectually inferior woman. Humor is the universal coping mechanism.)

I think here Amis touches on, but does not discuss, another reason why I love Austen: she is romantic without being sentimental. Her most compelling heroines are typically rational actors facing constraints, choosing based on their reason, but still not willing to sacrifice principle for pragmatism. I think here in particular of Elizabeth Bennet and Elinor Dashwood, neither of whom would marry solely to raise the financial prospects of her family, but would marry only for a love grounded in reason, respect and integrity.

posted by lkkinetic | 7/01/2003 10:09:00 AM

Today my go-to guy is Steve Antler, who is full of good content. I am particularly intrigued by the French small-l-liberal Sabine Herold, whose pro-market stance and actions against French strikers Steve dicusses in this post. I also love the picture of her speaking in Paris, in the Tuileries, with the Arc du Carrousel and the Louvre, and the French flag, in the background. What a compelling portrait.

Her organization, Liberte, j'ecris ton nom, has a webpage that's full of good content. I particularly like this editorial on the risks of securing and defending liberty. My attempt at translating the conclusion (with some help from Babelfish):

Writing liberty's name is not free. Those who claim liberty always take a risk. Those seeking liberty are often suspected of being ambitious gold diggers, at best drunk on their discoveries, at worst embittered by their unsatisfied quest. People of action and realists, we run the risk to bring this high ideal into existence. Faithfulness to this risk drives us to make our way freely before our destiny. "Thus let us see this fear as a salutary future, which causes us to take care and fight, and not the kind of soft and idle terror that cuts down and annoys the heart." --Tocqueville

posted by lkkinetic | 7/01/2003 09:40:00 AM
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