Thursday, December 22, 2011

My thoughts on Ayn Rand, Consciousness, Capitalism & Universal Rights

A subtitle for this post is: "How Consciousness & Capitalism fit into the Philosophy of Growing Life."

I previously wrote a tribute to Benjamin Franklin, and I'm in process of writing a tribute to Andrew Carnegie. (There are plenty of other people who deserve a tribute in my blog, such as James Watt, Thomas Edison, Henry Ford, & the Wright Brothers, but I decided to start with Benjamin Franklin because I sincerely believe that no one person better exemplifies the philosophy of life that I'm trying to communicate in this blog than Benjamin Franklin.)

But before I focus on all of these other people, I wanted to write about Ayn Rand and her philosophy of rational individualism because she raises some interesting points about the nature of consciousness and what actions are moral in a world with conscious observers. And the reason that I'm taking the time to look at Ayn Rand's philosophy (before paying tribute to Andrew Carnegie) is that she would have some criticisms of some of my statements, such as "The goal of life is to expand life" or "The purpose of a power plant is to generate more power plants, and as quickly as possible."

The reason that I'm bringing Ayn Rand into the discussion here is that my philosophy of life (that the goal of life is to expand) would appear to her, as well as to other people, to be dehumanizing and lacking in moral agents. For example, if the goal of life is simply to grow life, then it shouldn't matter if that life is human, bacterial, fungal or vegetable. It might appear to some people that my philosophy of life is dehumanizing because it makes no differentiation between conscious forms of life and non-conscious forms of life. [In part, this lack of differentiation is due to the fact that I don't see things as black and white. I believe that consciousness comes in a continuous spectrum, with bacteria at the non-conscious side of the spectrum and humans at the conscious side of the spectrum.]

For Ayn Rand, consciousness is an axiom, a starting point, for all of the rest of her philosophy. And while I think that it's an important assumption to make in any philosophy of life, the question is:  are we forced into a philosophy of rational individualism just because we start with the assumption that humans are conscious?
   I don't think that we are forced into such a philosophy because, while consciousness is wonderful, fascinating, and still quite enigmatic, it is nevertheless a physical/chemical/biological phenomena. For example, consciousness goes away when you drink too much or when you are given certain anesthetics. While we know a lot of about consciousness, such as how to turn it on or off, we have no physical model of consciousness (even though Douglas Hofstadter has done a lot to equate consciousness with self-reference.) Because the nature of consciousness is still quite unexplainable, it is crucial to err on the side of caution whenever we make laws or take actions that involve the killing of conscious beings. (This includes non-human conscious species, such as dolphins and many of the great apes.)

Tuesday, December 13, 2011

Strangest Argument I've ever seen for Reducing Greenhouse Gas Emissions

While meandering through websites discussing global warming, I ran into one site that gives the silliest reason to stop emitting greenhouse gases...the reason is that the efficiency of our greenhouse gas emitting vehicles will decrease as the atmospheric temperature increases. (Follow this link: Global Warming-Lessons from the Second Law of Thermodynamics.) Don't try to get your head around this argument, it goes in a circle. This argument came from a physics professor.
I don't know what it is about physicists (including myself), but some of us initially seem to back some really strange and silly ideas when we move from pure physics to energy policy or energy engineering.
One of the goals of this blog is to reduce the time from "naive physicist" to "seasoned energy engineer" for those people who decide to transition careers.
I am still naive in some areas of the electricity grid, but I've learned a lot over the years with regards to how to build power plants with high rates of return on investment, even in a greenhouse gas constrained world.

So, this leads me to the article I ran across earlier today. The author, a physics professor at LaTrobe University, makes some bold statements in a new book titled "Energy: A Subtle Concept." 

1) "In tropical regions, the ambient temperature is already so high, the air already so humid, that plant-cooling and hence photosynthesis is at the limit of efficiency. Any increase in temperature and plant growth will decrease or stop."

2) "With greenhouse warming, the efficiency of every process on Earth will be compromised."  [including life]

I want to address these claims because they are completely off the mark. (It'll help if you read the review of her book in the link I posted at the beginning of this post...or again here.)

Monday, December 5, 2011

Going Forward, Not Standing Still: On the Arrow of Time, Entropy and Growth

I happened to be flipping through the TV channels and I saw a documentary by Brian Greene called The Elegant Universe  (if you're interested you can watch it for free online...though be careful because of the many errors he makes by trying to reach a large, public audience.) In particular, he states that the laws of physics are the same forward as backwards, i.e. that the laws of physics are time reversal symmetric. While three of the forces of nature are time reversal symmetric, the weak nuclear force is not time symmetric. And this force is most likely the cause of the arrow of time that we see in the real world.

But this is not a new fact. The lack of time reversal symmetry has been known since the 1960s, and Brian Greene would have studied this multiple times in life. But it's not only Brian Greene who repeatably makes this mistake; in a previous post, I discussed how Sean Carroll of CalTech makes the same mistake. Another physicist in the same boat is Julian Barbour, who wrote a book in 1999 called "The End of Time." This book, which I've only skimmed, suggests incorrectly that there is no such things as time and hence, no such thing as history, because the equations of motion of time reversible (which they are not, and as already stated above, this has been known since the 1960s.)

Why do so many smart people ignore the time asymmetry of the weak nuclear force and continue believing that there is no such thing as time or history?

It really makes me think that there must just be some people out there who prefer thinking that the world is time reversal symmetric because it falls inline with their philosophical's almost a statement that if there is no arrow of time, then there is no such thing as progress. That growth is an illusion. It appears that there are some people, like Brian Greene, Julian Barbour or Sean Carroll, who prefer thinking that there is no difference between the past and the future. This is basically a philosophy of nihilism, i.e. that there is no meaning to life.

Sunday, November 27, 2011

Debunking "Peak Oil" in all of its forms

The theme of this post is: it is unlikely that the production of oil and natural gas will peak in the next half century because an upward shift of the demand curve will likely offset any downward shift in the supply curve. The net effect will be a slight increase in oil prices, but largely no change in the rate of production of conventional+unconventional oil. There are plenty of economically-recoverable hydrocarbons reserves available for us to use in our power plants and transportation vehicles. And given that the use of gasoline currently has more benefits on average than environmental costs, I am led to the conclusion that it is unlikely that there will be a sharp decrease in the production of oil unless we invent a technology can achieve higher rates of return on investment than oil in all its diverse applications, such as cars, trains, planes and the production of plastics.

Those people who are making peak oil a big deal on the internet generally fall into one of the following camps:
1) Energy insiders like the former Matthew Simmons, who are pessimistic by nature (and tend to forget either about technology advancement, growth in demand, or the fact that proved oil reserves increase when the price of oil increases.)
2) Those who want us to stop using fossil fuels regardless of whether there is peak oil. This group is a) typically concerned about the environmental impact of fossil fuel use, b) probably unaware of the short-term positive economic impact of CO2 emissions, and c) possibly just anti-technology.
3) Those people who look at data from today's well, and conclude that decreasing oil output from many of today's wells implies the onset of peak oil in the near future.

When you take a step back from the peak oil paranoia and take a look at the data available on oil production and proved reserves, you can take deep sigh of relief. There's plenty of proved global reserves to meet current global consumption for the next 50 yrs. Now, this isn't to say that there won't be peak oil production for individual wells or for individual countries, it's just that there is plenty of global proved hydrocarbon reserves to supply today's demand for the next 50 years. And interestingly, global proved hydrocarbon reserves are increasing with time...not decreasing.
If you look at any one well, or even the output from whole countries, like the Mexico & England, there is often a peak in oil production. And this can have significant effects on the economy in those countries, but not on the overall global growth rate. It's important to focus on global statistics when making predictions about peaks in global production of oil. For example, as Saudi Arabia developed its oil fields in the 1950s and 1960s, they were able to produce oil cheaper than most oil produced in the US. So, the production of oil in the US reached a local maximum in 1970, even though there were and still are plenty of hydrocarbon reserves in the US. And now that the price of oil is significantly higher than the 1990s, production of oil in the US once again increasing.

The question is: what would cause the overall production of oil to peak?
Answer: a downward shift in both the supply and demand curves. Below are the reasons why I don't expect to see a downward shift in both the supply and demand curve.

Sunday, November 20, 2011

A tribute to Benjamin Franklin

This post can in no way do justice to Benjamin Franklin the husband, the father, the grandfather, the scientist, the diplomat, the run-away teenager, the philosopher, the printer, the governor, the friend, the socialite, the writer, the slave owner, the Deist, the vegetarian, the political aide, the apprentice, the slave trader, the engineer, the rebel, the author of "Poor" Richard Saunder's almanac, the frequenter of prostitutes, the abolitionist, and last, but not least, Benjamin Franklin the American.

I think that Franklin is still the Soul of Our Age. In other words, I'm saying that the era of Franklin has not yet completely ended. In many ways, we are still following directly in his footsteps, such as 1) Conducting scientific inquiry directed both towards practical problems and towards interesting questions about why the world is the way it is. 2) Honoring the virtue of public service, both in the government and in volunteer organizations. 3) Upholding religious tolerance (freedom to be a Deist, Christian, Jewish, Islamic, Buddhist, etc...) 4) Preserving freedom of the individual not to be a slave, the right to vote, freedom of the press, etc...  5) Holding individuals responsible for actions that harm society.
6) Admiring public and private virtue...while never being able to completely achieve that virtue 7) Focus on virtue not vice, and assuming that vice can be corrected through education.

Though, the Era of Franklin has for many years being slowly eroding away. The virtue of hard work is no longer universally held by people in the US. The Era of Franklin partially eroded in the 1920's with the Gospel of Consumption. The gospel of economic consumption was a direct attack on Franklin's focus on productivity and thriftiness. The Era of Franklin partially eroded in the 1930's with the advent of the welfare state, which Franklin argued against even before Adam Smith wrote the Wealth of Nations. The Era of Franklin again partially eroded in the 1940's with WWII and the Holocaust because here was definitive proof that there is evil in the world, and that evil can't be eradicated simply with education. And finally, the Era of Franklin partially eroded in the late 1960's and 1970's with the focus on individual happiness at the expense of hard work.

The question I have is: should we leave the Era of Franklin? Should we just leave it as an ornament on the Christmas Tree of Era's Past? (Like we do for the Eras of Julius Caesar, Frederick the Great, and Napoleon) Or should we defend the Soul of Franklin as our own soul, defending it from attacks by modernism, post-modernism, socialism, communism,  existentialism, and deep ecology?
In my opinion, we should defend and continue the Era of Franklin because his philosophy of hard work, religious tolerance, individual freedom, social responsibility, and scientific inquiry are the foundations of any good philosophy of life. More so, it has been when we're started to deviate from Franklin's philosophy of life that we have run into major problems, like the great depression.

Wednesday, November 16, 2011

What was the main cause of the 1929 Stock Market Crash? Ans: The shortening of the work week and a belief that consuming luxuries leads to growth

I've taken a look at the economic data from the mid to late 1920's (such as the prices of oil, coal, steel, wheat, etc...) in order to try to understand what was the cause of the stock market bubble that started in ~1927 and ended in 1929. From just analyzing the price data of individual materials, it's hard to see anything that stands out (i.e. no oil sharp increases in the price of oil or steel.) But when you look at the overall trends, you see a disturbing trend toward purchasing more and more items for personal pleasure, thinking that these items were helping to grow the economy. In other words, it appears that people in the US on average were consuming more and more luxuries while working less hours per week (all the while without the increase in productivity that could have justified the increased spending on luxuries and reduced hours.) And what's worse is that people convinced themselves that consuming luxuries was sustainable, i.e. we could afford to let people work less hours and pay them more because they will purchase more goods and hence get the economy going. This turned out to be a disastrous mindset, and a mindset very reminiscent of what happened in the 2000's. In the last decade, we convinced ourselves that a) a house is an asset that should increase in value with time [as opposed to a car or almost any other item] and b) our economy can grow even if the price of oil triples in a few years.

What I'm interested in is the answer to the following question: what allowed people (who were supposedly raised on the hard work ethic of Benjamin Franklin and others) to think that an economy can grow by just consuming more and more luxuries?

This post is devoted to looking into what were the main causes of the stock market bubble that burst in 1929. The goal of the post is to look at what did and what didn't cause the bubble and its eventual crash.

First, by looking at the price of oil during the 1920's, one sees that the general trend was a decrease in the price of oil, so we can't blame high oil prices for the stock market crash. Likewise, the price of both bituminous and anthracite coal was relatively flat throughout the 1920's.
So, what was going on?

a) Lack of Innovation
It appears that there was a lack of new technologies being introduced in the decade between 1925 and 1935 (the worse decade in the twentieth century as far as new production innovation.)

b) A Shorter Work Week
Many companies were allowing employees to have shorter work weeks. The typical work week decreased from 6 days per week down to 5 days per week.

Friday, November 11, 2011

How we could have avoided the 2008 recession & How to avoid similar ones in the future

Nobody likes a Monday morning quarterback or Captain Hindsight, but I think that it's important to discuss how we could have avoided the 2008 recession so that we can: a) get out of the economic funk we are still in, and b) to avoid or to minimize the damage from future bubbles that might arise.

In a previous post, I mentioned that the main cause of the 2008 recession was the high price of gasoline. This doesn't mean that there weren't other causes; it just means that we should talk about the disease (high oil and natural gas prices), and not just the symptoms (people foreclosing on houses because they were losing their jobs because of the high oil and natural gas prices.)

Sure, we hear about the housing bubble as major cause of the 2008 recession. But remember that we had a large tech stock bubble in the 2000's and we didn't have a massive recession in 2000, like the one in 2008. When you think about it for awhile, you're realize that a bubble alone can not be the cause of a recession. Let me explain this in detail.
    Let's image that we all own stocks in Company A. All of a sudden, the stock price of Company A starts increasing rapidly. If we think to ourselves "That's nice, but let's not act as if I'm now richer", then we will be okay when the price of the stock drops. The problem occurs when we convince ourselves "This is great, now I can take out a loan to go on a nice vacation."  In this case, when the bubble bursts, then you are left with a loan that you must (and should) pay back. So, the problem is not the bursting of the bubble; it's the mindset that the bubble was real and that this means that you can spend more money on luxuries than is justified based off your actual income.

What I think happened, between 1998 & 2000, is that people on average did not significantly increase their consumption of luxuries, even as stock prices of internet companies were going through the roof. Many people continued to work hard and continued to purchase luxuries just the same as before, and instead assumed that their increasing internet stock investments would mean that they could retire sooner than expected.
On the other hand, between 2003 and 2007, people on average did increase their consumption of luxuries, such as houses larger than what they could afford. We collectively forgot that a house is not an asset. (For example, the price of a car depreciates with price...why did we all think that the price of a house should increase in time?)

Tuesday, November 8, 2011

Links to Articles on Shale Gas Production

I wanted to collect together a series of articles on the development of shale gas and shale liquids in Texas, and its expansion from Texas to Arkansas, Pennsylvania, North Dakota, British Columbia, and overseas. The expansion of tight gas production in the US is having a profound effect in regional economies, as well as providing natural gas at a price that is allowing businesses to remain open that otherwise would have shut down when gasoline prices were increasing between 2009 and early 2011.

It's important to study shale gas development in detail, so that we can discern for ourselves what impact shale gas will have on the future of the US economy, as well as the global economy. It's important to get this right so that we don't over or under hype this potential resource.

On that note, here's links to some good articles as well as a quick description of each article:

Shale-Gas Reserves Have Potential to Reignite U.S. Economy

This very recent article from Bloomberg Energy does a good job of giving the history of horizontal drill and fracturing, especially the role of George P. Mitchell in developing these techniques for economically getting natural gas out of tight shale formations

An Information Video on Horizontal Drilling and Fracturing

This is a video overview of the technologies used to produce natural gas from tight shale formations. A must-see for anybody that's not already an expert.

Stepping on the Gas

This article and video interview by Daniel Yergen is an intro to shale gas development by this Pulitzer Prize winning author.

Sunday, November 6, 2011

Significantly cutting wasteful government spending will not cause a recession

I'm tired of the same old BS from political pundits that cutting the federal budget will cause a recession. This kind of thinking stems from faulty logic that suggests (incorrectly) that there is a positive multiplier effect of government spending. Once you realize that money is the capability to do mechanical or electrical work, then you'll realize that, on the average, US government spending has a negative rate of return on work invested because a lot of the US government's spending goes into projects with no return on work invested, including but not limited to: paying people to not work, paying people to do the equivalent of digging and filling holes, paying people to build bridges to nowhere, paying people to enforce drug laws, paying people to collect other people's taxes, subsidizing the consumption of prescription drugs, paying people to estimate the future of the economy (which they can't do at all), subsidizing solar energy projects that consume more work building and installing the panels than they generate in electrical work throughout the lifetime of the power plant, subsidizing ethanol blending in our gasoline, and finally, but not the most or least wasteful, paying people to count the amount of gold in Fort Knox.

Let me demonstrate the fact that most things we do will have a negative rate of return on work invested (and especially most of the things that the US or other governments spend money/work on.) I'll demonstrate this with a thought experiment that you can actually go out and do yourself.

Let's say that you are given 1 MegaWatt-hour (MWh) of electricity.  (You could try yourself by buying ~$100's worth of electricity, and then "investing it" in one of the following options.)

You can a) store the electricity in some batteries you own, b) use the electricity to purchase gifts for your family and friends,  c) give the electricity to the government to spend, or d) invest it in a private electricity generating company (for example, NRG Energy.)

What happens in each case after 1 year?
a) After one year, the amount of electricity in your batteries will probably have drained out and you will be left with no electricity. (Though, if you had used your money to purchase ~$100's worth of gasoline, you'd have roughly the same amount of capability to do work as at the beginning of the year.)  Option A (i.e. sitting on electricity or fuel) leads to a negative or zero rate of return on investment.

Saturday, November 5, 2011

"Anonymous" the movie & Paranoia all around us (9/11, Peak Oil, Birth Certificates, The Fed, Climate Alarmism, etc...)

I recently saw the movie "Anonymous" because I think that I'm distantly related to the de Vere family. I'm Not Sure about this, though, because my family genealogy only goes back about a hundred years or so.
In case you haven't seen it yet, the movie suggests that William Shakespeare was not the author of plays, such as Hamlet. This is not a new accusation, but it may be the first movie regarding this topic. Here's the trailer (with Everything in its Right Place playing in the background.)

I am not an English major so I have no clue about the truth of the accusation, but since watching the movie, I found a lot of biographical details suggesting that Edward de Vere was the author of Hamlet. I have no real interest in whether this accusation against William Shakespeare is right or wrong, but I certainly like the possibility that a possible relative of mine is the author of Hamlet rather than somebody to whom I'm in no way related.

Does believing that William Shakespeare is the not the author of Hamlet make you a conspiracy nut? I don't think so, and the goal of the rest of this post is for me to explain what I think are good forms of paranoia and bad forms of paranoia.

Here are some characteristics of possibly healthy paranoia:  (1) willingness to hear both sides of the debate,  (2)  general skepticism of authority and so-called authorities, and (3)  acknowledgment that we all lie

Here are some characteristics of unhealthy paranoia:  (1) telling yourself that you have no control,  (2)  believing that there is a massive conspiracy that would require the involvement of hundreds of people lying and/or keeping silent on the lie, and,  (3)  disobeying Occam's Razor.

Saturday, October 29, 2011

Peter Navarro on the Failure of Regulating Electric Utility Companies

Peter Navarro is a famous economist who has written numerous books and given multiple lectures on economics. (Note that you can download his lectures on economics for free from his website.)
He got his start working for the Department of Energy, studying why electric utilities continued to use high-priced oil in power plants, even after the Arab Oil Embargo of  1973-74. In this post, I will be summarizing and analyzing a book he wrote in 1985 titled "The Dimming of America: The Real Cost of Electric Utility Regulatory Failure," because I think that understanding how best to regulate the generation, transmission and distribution of electricity is one crucial way for our to grow our economy. The reason that I'm analyzing a book written in 1985 is that this book gives a series of 'lessons learned' and 'policy suggetions' that apply to today's world just as much as they did in 1985. In fact, the California Energy Crisis of ~2001 can in large part  be understood by comprehending the  basic theme of Navarro's book, "Regulating electric utilities so that they can not pass on increased costs to customers will cause an increase in electric shortages and blackouts." It's a pretty straightforward theme, and the book shows why regulating the price that a public utility can charge for electricity will eventually cause electricity shortages and blackouts. (Note: the same can be said for regulating the price of natural was done between 1938 and the mid-1980's.)

Before discussing his book, I think that it's important for you to know the inflation-adjusted price of electricity in the US for commercial customers between 1960 and 2010 in 2005 US dollars. The general trend was a decrease in prices in the 1960s, and increase in the prices in the 1970s. This was followed by a decrease in prices between 1982 and 2000, and then followed by an increase in prices between 2000 and 2008.


Monday, October 24, 2011

Fuel cells, Thermoelectric Generators, Solar Photovoltaics, and the Origin of Life

In a previous post on fuel cells, I mentioned that you are a fuel cell.  Meaning that you are made up of billions of fuel cells, i.e. mitochondria. You are not a piston engine, nor are you a steam turbine. What's fascinating is that, of the multitude of different types devices that humans have designed over the years to generate electricity and transportation (such as turbines, rockets, reciprocating engines, MHD, solar cells, fuel cells, thermoelectrics, and thermionics), biological creatures have only come up with two type of generators of work: fuel cells and photosynthesis. To my knowledge, there has not been a single biological creature that uses mechanical generators, like piston engines or turbines, and it appears that there have not been any biological creatures that use thermoelectric generators to provide power from a temperature gradient. Why haven't non-human life forms developed mechanical combustion based systems to generate work and power? (Examples of work and power are: movement against friction, moving chemicals against a chemical gradient, and moving mass against the force of gravity.)
Instead, biological life forms use a combination of fuel cells in combination with photovoltaic cells to generate work.
Why did biological creatures only developed a narrow range of different generators of electrical or mechanical work until humans evolved means of generating work from the wide range of devices we use today? Is a high temperature combustion device out of the question for a biological creature?

This means that learning about fuel cells can help us understand more about ourselves. But while I think that fuel cells are fascinating devices and will find certain niche applications in the short term, I realize that what's worked in the past is not always what will work the best for the future.  In particular, fuel cells are unlikely to lower the cost of getting into outer space, and once we start sending self-replicating solar robots to the Moon, these robots probably won't be fuel cell based. They will likely be either solar photovoltaic or solar thermoelectric based self-replicating robots. Why?

The robots will have to self-replicate using the materials available to them. Biological fuel cells, such as bacteria, are unlikely to grow on the Moon, because of the lack of carbon and nitrogen. And human-designed fuel cells (such as PEMFC's or SOFC's) require platinum or other hard to mine metals, such as Yttrium, as well as a fuel source. Instead, it seems possible to make solar panels, thermoelectric generators, and batteries using only the most abundant chemicals on the Moon, such as silicon, iron, aluminum, titanium, and sodium. The silica on the moon can be used to make silicon, which is used in solar PV's, in thermoionics, and in batteries. The iron, aluminum and titanium would comes from iron oxides, alumina, titanium dioxide, and would form the casing and structure for the solar panels and batteries. The sodium would be used as the ion carrier in the batteries. Also, the iron would be part of the electrode of the battery. Phosphate might be one of the difficult materials to find, so there might need to be some change in the battery chemistry for these self-replicating solar robots, i.e. solar auxons.

Thursday, October 13, 2011

Addicted to Oil? The Case against Calling it an Addiction

Can we in any way truthfully state that we are addicted to oil? It's almost turned into a cliche to say that we're addicted to oil. As if the proper response is supposed to be "Dah!"
But I'd like to step back and take a serious look at why we use the word addiction to describe our use of petroleum liquids. Once you start digging a little deeper, you'll see that all of the major arguments break down for using the word 'addiction' to describe our use of oil. And after you realize that the arguments fall apart, you might ask yourself: why would we want to stop using oil if there is so much good that comes from its use?

So, here's a list of the major arguments, and then my critique of the reasoning.

1) The money goes to terrorists...this is one of the most absurd arguments. There are terrorists in every major country. Should we stop buying anything? Or is it just Muslim terrorists that scare us? Do we boycott all products made in the Middle East?  Of course not.

2) OPEC has too much leverage over the price of oil...while it's true that OPEC is a cartel that has control of ~40% of the world oil market, we don't the stop buying cell phone just because Verizon has ~40% of the market. Same holds for Microsoft.

3) Oil is a global commodity and so we're at the whims of global demand. Local fuels like biodiesel are better because they aren't a global commodity...This is an absurd argument because if we really started using non-petroleum liquids like biodiesel or ethanol in any significant quantity, these fuels would become a global commodity. Even now, ethanol is starting to become a global commodity as now that Brazil exports some to Europe.

Sunday, October 9, 2011

Summary and Table of Contents of the Blog

Table of Contents for  “Grow, Baby, Grow: How to expand life in the universe”

My goal is to communicate how life can expand and grow, both on this planet and on others. To grow, we need to obtain a large rate of return on investment from our electricity generating technology, so a main focus of this blog is on the economics of electricity generation.
To summarize, the goal of life is to expand. Life requires mechanical or electro-chemical work to survive, and to grow, it requires a large, positive rate of return on work invested.

The goal of this post is to present a table of content of the posts created for this site, and to highlight the connections between the posts.  Each of the major themes is numbered below:

1)    A detailed summary of my philosophy of life can be found at the following post.

A Summary of My Philosophy of Life: How Best to Expand Life?


2)     One of the main themes throughout the blog is that we don’t face an “energy” or an “exergy” crisis, but rather a crisis of decreasing rates of return on investment. We suffer from a ‘growth’ crisis in the US, Japan and Europe.

There is no Energy or Exergy Crisis. It's a Problem of Low Rates of Return on Investment. Understanding the Problem by Correctly Defining Energy, Exergy and Entropy

The Cause of the 2007/2008 Recession: Our Decreasing Return on Work Invested and How to Fix the Problem

And the following is a book review and critique of Power Hungry for Robert Bryce. This post shows that it’s important to know what the problem is before you write a book discussing possible solutions.

Cherry-picking 'figures of merit' to suit your argument


Thursday, October 6, 2011

Adam Smith on the Real Measure of Exchangeable Value

In my opinion, the only sound monetary policy is one that maintains a constant average price of work [kWh], such as electricity, by increasing or decreasing the amount of currency in circulation. The ability to arbitrarily print or remove currency from circulation would be taken away from private banks (i.e. the Federal Reserve.) In this post, I'd like to show that Adam Smith was perhaps one of the first people to realize that wealth can measured by the amount of labor (i.e. work) it can purchase. It is labor (i.e. work done by humans, animals, and power plants), and not gold or paper currency, that is the best way to measure the value a commodity.

In this post, I quote from Adam Smith's "The Wealth of Nations,"  while making a few changes to modernize Smith's words. The goal of this post is to show that Adam Smith was on the right track when he stated, "Labour is the real measure of exchangeable value." While quoting Adam Smith, I'll stop every so often to expand upon his thoughts by using brackets [ ], and to discuss what he's saying by replacing the term 'labour' with the term 'work', which has units of [kW-hr]. (Note: a work-based currency maintains a constant average price for purchasing electrical & mechanical work [kW-hrs].) By replacing the term 'labour' with the term 'work', we'll see that the real measure of exchangeable value is work. In Adam Smith's society, the main sources of work were: a) the wind, b) rivers, c) human labor and d) animal labor. In our society, the main sources of work are:  a) electricity and b) mechanical work in our vehicles. We generate different types of work and orders of magnitude more work globally today than back in 1776 when Smith's book was first published. But the idea that both work and the rate of return on work invested should be the measures of value is timeless.
And so, now we start with Chapter V of Book I of "An Inquiry into the Nature and Causes of the Wealth of Nations." (Note that the italics are subsection titles.)

Ch V. Of the Real and Nominal Price of Commodities, or their Price in Labour and their Price in Money

Labour is the real measure of exchangeable value.  Every man is rich or poor according to the degree in which he can afford to enjoy the necessaries, conveniences, and amusements of human life. [Note: I disagree with Smith's last statement. He seems to be implying the wealth has something to do with happiness.] But after the division of labour has once thoroughly taken place, it is but a very small part of these with which a man's own labour [work in kWh] can supply him. The greater part of them he must derive from the labour of other people [or machines], and he must be rich or poor according to the quantity of that labour [work in kWh] which he can command, or which he can afford to purchase. [Now Smith is back on track. A person is rich according to how much labour he or she can purchase.] The value of any commodity, therefore, to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labour which it enables him to purchase or command. Labour, therefore, is the real measure of the exchangeable value of all commodities.

Sunday, October 2, 2011

You are a Fuel Cell

"Know thyself."  Inscribed at the temple of Apollo in Delphi.

I want you to know why it's important to study fuel cells and why it's important to know how they operate. While fuel cells vehicles and fuel cell power plants are still not a major player in energy markets, and honestly, they aren't even a minor player in the energy markets, this wasn't the case roughly a hundred years ago. Fuel cell power plants used to dominate the transportation market.

The reason that fuel cells used to dominate the transportation market is that humans as well as all animal species are made up of trillions of fuel cells. Each of the mitochondria in your body is a fuel cell, capable of turning chemical exergy (i.e. sugars in the presence of oxygen) into work as well as CO2 & H2O. [In fact, some researchers have started using mitochondria in lab-scale fuel cells.] The mitochondria in animals use proton conducting membranes and concentration gradients to generate ATP from ADP and AMP. Just as in a PEM fuel cell, in order to generate work, the electrons can't travel through the proton conducting membrane, or else the electrons would short out the circuit, and no work could be generated. Instead the electrons have to travel outside of the proton conducting membrane and be consumed by oxygen molecules at the cathode along with the protons travels through the membrane to form liquid water. The electrons travel through what's called protein electron transport chains. The reaction at the cathode is the reduction of oxygen, i.e. O2+4H++4e <> 2H2O and the reaction at the anode is the oxidation of NADH, i.e. 4NADH <> 4NAD+4H++4e. The NADH was generated from sugars in the Krebs cycle.

Saturday, October 1, 2011

The Cause of the 2007/2008 Recession: Our Decreasing Return on Work Invested and How to Fix the Problem

I still hear everyday that the cause of the recession was a housing bubble, or even that the cause of the recession was all of the money that the Federal Reserve printed.

The real cause of the US recession in 2007/2008 was high oil prices. Or put another way, the cause of the recession has been the slow decrease over time in the return on work invested for getting oil out of the ground and into a chemical form whereby it could be used in our transportation vehicles. While the Federal Reserve didn't help matters, i.e. some of the increase in the price of gasoline was due to the Federal Reserve's inflationary monetary policy in the last decade, the overall problem we face has been the increase in the average amount of work required to get gasoline into your car. (This is the amount of kWh of work required to get the gasoline into a form that your car can use...including the 'work' transferred to the government in the form of taxes...and should be compared with the amount of kWh's of work that can be generated from the combustion of the gasoline in your car. The last term divided by the first term is the total return on work invested.)

The costs (and hence the work consumed) have been increasing for the following main reasons, which I will expand upon in a later post. The easy to access, low sulfur, low viscosity petroleum liquids have largely been already tapped. What remains requires some combination of:

1) Drilling to greater depths
2) Horizontal drilling
3) Fracturing with explosives and sand
4) Forced flow with steam or carbon dioxide
5) Drilling off-shore
6) Increased removal of sulfur
7) Increased chemical conversion (such as using high viscous oil sands as input products)
The other main causes of the increasing price of gasoline have been:
8) US government spending/debt problems affecting interest rates
9) Inflationary monetary policy of our banks (i.e. the Federal Reserve prints money and gives it to bankers and the US government)

We don't face an energy crisis or an exergy crisis. We face a return on investment crisis.

Did Christianity cause the fall of the Roman Empire?

I'm taking a break from the topics of electricity generation and the Federal Reserve.

Note: this post should not be construed as an attack on the Christian faith. While I am not Christian, I respect most forms of Christianity because there are plenty of hard working people around me, like my wife, my mom, my dad, my grandparents, my extended family, my friends, my co-workers, and my neighbors who have learned to reconcile the tenets of Christianity with a love of their country and with a love for hard work. I care more about their actions than the details of their beliefs. The issue I want to address here is to what extent did the particular Christian faith of the second to fourth centuries A.D. lead to and stem from a hatred of the Roman state, and to what extent did this cause the decline and fall of the Roman Empire.

Edward Gibbon's main theme in The Decline and Fall of the Roman Empire was that Christianity was a major reason for the Roman Empire's decline and fall. He listed other reasons, including: (a) various abusive, almost independent military organizations; and (b) a series of inept, blood-line emperors who wasted the government's money on lavish parties and gladiator competitions. The history of Rome (as well as the extensive history of monarchy) teaches us that passing on power via birth is not as stable as it seems at first. While the idea of monarchy addresses the question of who follows next, the person chosen is often unfit for the job of managing the state, and often just leads to major and bloody fights over who should rule next.

But in today's post, I'd like to address the main theme that Gibbon addresses: did Christianity cause the fall of the Roman Empire? In particular, did the Church cause ordinary Roman citizens to give us their allegiance to the Empire in favor of an allegiance to God and the Church, such that Rome was left incapable of managing the affairs of such a large empire?

Thursday, September 29, 2011

Ben Bernanke is the Anti-Robin Hood

In the words of Kanye West, "No one man should have all that power."

Federal Reserve Chairman, Ben Bernanke, looks so innocent.
I've watched him in a fair number of videos online, and in all of them, I can't help but think that he has no clue what he's doing, that's he's in over his head. (Here's an example.)
But some days, his distortions of the truth shine through. For example, he said that the Federal Reserve returns a profit for the US government. The truth is that the Federal Reserve prints money, and some of this money goes to the US government and some of it goes to the owners of the Federal Reserve, i.e. Bank of America, Wells Fargo, JP Morgan, etc... This is not really profit because the money came from us in the form of a tax: inflation tax.

Here's the problem: the Federal Reserve has been printing money even when prices are increasing. QE2 was an example of when the Federal Reserve was printing money while prices were increasing. In late 2010 and early 2011, gasoline prices (as well as all of the major price indexes) were increasing, and hence the purchasing power of the dollar that you earned decreased. The Federal Reserve printed money, and gave some of the money to the banks (in the form of interest for having done no work) and some of the money to the US government (in both the form of purchasing US Treasuries and direct profits given to the Treasury department.) The question is: where did they get the money to do this? Answer: they printed the money out of thin air, i.e. they taxed all of us by devaluing our currency. More currency, and the same number of goods means less goods for those who earned the money the real way, and more goods for those who earned the money by printing it out of thin air.

If on the other hand our purchasing power had been increasing (due to dropping prices of gasoline and electricity), I could understand printing money to avoid deflation, but twice in Ben Bernanke's short term as Federal Reserve Chairman, he's printed money while prices were rapidly increasing. The second time was 2010/2011. The first time was in 2007 / 2008. The price of gasoline was going through the roof. Instead of removing money from circulation (in order to maintain constant purchasing power of your hard earned dollars), Ben Bernanke printed money (i.e. printed money in order to lower the Federal Reserve's interest rates.) This was a tax on every man, woman and child who owns dollar bills. (Mostly the middle class, but this also hits the poor hard as well because food, gasoline and electricity are a main portion of their budgets.) How the hell did Bernanke convince himself that printing money while prices were increasing would be a good thing? Where in any economics textbook did he learn that printing money while prices are increasing would lead to the betterment of society?

This is why I state firmly that Ben Bernanke is the Anti-Robin Hood.

Tuesday, September 20, 2011

Could an electricity-backed currency cross the borders to Canada & Mexico?

The idea of a North American currency union is not a new one, but it's one that's hardly talked about. I've been thinking a lot recently about how interested or willing the people in the US, Canada and Mexico are to creating a combined currency, like the Euro. Given the problems with the Euro right now, the idea of using a single currency sounds like a really bad idea. (And it is politically a really bad idea right now.) But the idea of a single currency between the US, Canada and Mexico could be a really good idea because it would eliminate the need for currency exchange. This means that the prices of consumer items could be lower (by a small percent.)

Why are we afraid of a single currency? Because we don't like the idea of people in other countries being able to affect the value of our hard earned money. And that's exactly what's happening right now in Europe. The European Central Bank (ECB) is printing money and lending that money to struggling economies (such as Greece.) This is a problem! The value of the Euro (in terms of its ability to purchase fuel and electricity) is decreasing as the ECB prints money to 'help out' countries like Greece. This means that people in countries like Germany are being taxed to bailout Greece. Germany is being taxed by inflation in order to maintain Greece's unsustainable standard of living. This tax affects the rich and poor alike in Germany. Inflation hits those the most who keep their money in 0% bank accounts.

While the Euro is a particularly bad example of a single currency for multiple countries, there are good ways of implementing a single currency. My goal for the rest of the post is to explain how to implement a single currency for the US, Canada and Mexico that avoids the problems the Euro.

Monday, September 12, 2011

Tax Waste, Not Productivity

I've been excited for awhile about the idea of reading a post on "taxing waste instead of taxing income." I see the ability to tax as the ability to destroy demand for a certain product. For example, if you tax income, then you have the ability to destroy demand for income. If you tax waste, then you have the ability to destroy demand for products that produce waste, and shift demand to products that don't produce waste.

So, in this post, I wanted to see if it was possible for the US gov't to replace 100% of the income tax with taxes on waste. Note that the total revenue from income taxes is roughly $1 trillion US dollars, so let's keep that in mind when I discuss the items below.

So, what would I include in my list of potential items to tax:
(These are items that we are hoping get rid by taxing)

1) Municipal Solid Waste
2) Hazardous Waste
3) Nuclear Waste
4) Electronic Waste
5) Medical Waste
6) Industrial Waste (such as slag from steel production and fly ash from solid combustion)
7) Emissions of ozone depleting chemicals
8) Acid Gas Emissions
9) Greenhouse Gas emissions (once we get to the point that the addition of GHG's is net harmful, rather than beneficial. This number is some place between 500 ppm and 1000 ppm.)

Randomness and the Laws of Physics: Quotes from "MetaMath" by Gregory Chaitin

For those of you that were following my series of posts on the source of the directionality of time and the post on Godel's Incompleteness Theorem, I thought that you'd be interested in the following quotes from a book by Gregory Chaitin called "MetaMath." I'm going to just copy down the quotes, and then make a quick summary at the end. If you're interested in starting a discussion, write a comment, and I'll expand on my thoughts about the book.

"Since you can always fit an equation through a set of data (even random data), then question is: How do we decide if the universe is capricious or if science actually works?
And here's Leibniz's answer: If the laws has to be extremely complicated, then the points are placed at random. But if the law is simple, then it's a genuine law of nature; we're not fooling ourselves!"

"The laws of physics (as written in binary form) must be smaller in length than the data they try to fit."

"A number with infinite precision, a so-called real number, is actually rather unreal!
Most real numbers are transcendental, and hence not computable.
Why should I believe in a real number if I can't calculate it?"

 "So what would be really nice [in a computer program] is to be able to obtain more intelligence, or a higher degree of consciousness, than you yourself possess! You, who set up the rules of the [software] universe in the first place."

Sunday, September 11, 2011

To the Fallen & To Those That Remember

My thoughts and condolences go out to all people today who lost loved ones on Sept 11th.
So many lives were taken away when those planes crashed and when those buildings collapsed.
Having not lost any close friends or family members in those attacks, or in any other such a horrible tragedy, I have no clue what you face, are facing or will face in the days ahead.

I'm glad to see so many brave family members read the names of those who died in the attacks on Sept 11, 2001. It gives me courage to know that others can overcome the pain of a lost one, and to speak their loved one's name in front of millions. I thank you all for passing on your memories of the fallen to us, the living, who can help to continue their work and their goals. Their passions must be passed on to those of us who can follow in their footsteps.

Life goes on. Life is stronger than any one of us can image. Life has endured the worse of crimes against humanity, and life will continue to endure and to grow after the untold horrors that it will face in the future. It won't be easy to overcome the challenges we face, but we must face them together, as a community, not as individuals. We need shared memories and we need shared stories of the heroes, of the fallen and of those who just remember.

Friday, September 2, 2011

On Left/Right Symmetry, the Platonic Ideal, and Godel's Theorem

[Another break from engineering today...more on symmetry...and asymmetry]

Plato, who lived in Athens from (429 to 347 BC), believed that there exists a realm of perfect, ideal shapes. He believed that the shapes we see, such as the circles we try to draw on pieces of paper, are but imperfect Earthly forms of a perfect, eternal ideal that we can't see.
The idea that everything is but an imperfect example of a smaller set of pure objects might be fine and dandy for certain mathematical objects, such as the circle or the five Platonic solids (tetrahedron, cube, octahedron, dodecahedron, and icosahedron), but the idea of a perfect object breaks down for living creatures. Unfortunately, the philosophy of idealism as developed by Plato and Socrates hindered the eventual development of the theory of evolution because many people believed that each species was related only to its eternal ideal form, and not to other species. I will point out in this post the error in thinking that there could be such a thing as a perfect cat or a perfect elephant or a perfect homo sapiens.

Throughout the history of life, there have been "either/or" symmetry-breaking moments. One of the first examples was when life forms used and grew only left-handed amino acids, instead of right-handed amino acids. (For more information on the difference between left and right handed molecules follow this link.) I think it's important to stop and ask: why did life develop the ability to use only left-handed amino-acids? (Note that there are a few bacteria that use right handed amino-acids, but the overwhelming majority use left-handed amino-acids.) It turns out that this is still an open question because the evidence scientists have collected to answer the question doesn't directly confirm any one theory.

Thursday, September 1, 2011

Lilith, The Mirror, and the Strange Loops of Consciousness

I want to take a break today from technical and economic subjects to discuss something really interesting in the topic of mythology and consciousness.
While listening to the audio book of "Don't Know Much About Mythology,"  I learned that in some forms of Jewish history/mythology, there's the story about Lilith, Adam's first wife. In one creation story, Lilith was made from the earth like Adam. But she would not be subservient to him, so she left him and went to Red Sea to hang out with devils. This left Adam all alone, so God decided to create Eve from Adam's side, so that she would be subservient to him.
I never learned that story growing up, but sort of wish that I had. What's interesting is that this seems like an eternal theme...should the guy chose to marry the girl with whom he could be best friends/lovers or should he chose the girl who will obey his wishes? I could see this being turned into a Hollywood move set in modern times.

Also, it turns out that, in some of these extended stories, Lilith is associated with being able to control women who look in the mirror for too long. This makes me think to what extent has human consciousness developed because of mirrors. This seems like an interesting theme because I've always thought about the question: when in history did primates evolve the capability of recognizing themselves in a mirror. There are many species that 'pass the mirror test.'
These include all of the great apes (chimps, orangutans, humans and gorillas), bottle nose dolphins, orcas, elephants and supposedly the european magpie. How did these species evolve the capability to recognize themselves in a mirror? What surface acted as a mirror for them?

Friday, August 26, 2011

What is the purpose of a power plant?

Here's a little brain teaser for you all.

What is the purpose of a power plant?

Please send me your answers to this riddle via email or via the comment section below.

Incorrect answers include:
1) To generate electricity
2) To generate money
3) To look pretty

While answers #1&#2 seem correct, the electricity and the money generated at the power plant are mere means to an end. The question is: what is the end purpose of the power plant?

Here's the hint to the correct answer:   Replace the word 'bacteria' with the word 'power plant,'  and then see how you would answer that question.

Wednesday, August 24, 2011

Power & Paranoia: A Discussion of "Power Currency" by James Rogers

I recently read a book that discusses the idea of energy backed currency: "Power Currency" by James Rogers. [Note: this is not the James Rogers who is the CEO of Duke Energy.]
The book is a mix of interesting ideas along with good old fashion paranoia (and there's some real paranoia in this book that I'll discuss at the end of this post.) In general, the ideas in the book are extremely naive because the author occasionally assumes that all electricity can sell at the same price; he makes no mention of the 'time value of money' or the return on investment of any of the electricity generation or electricity storage concepts discussed in his book; and he often mistakes the units of power with the unit of energy. The only reason that I decided to read the whole book is that it covers a topic that I find interesting:  the connection between electricity generation and currency. It also does a good job of telling the history of various currencies that we've had in the US since the founding of the country. For example, I learned a lot about the gradual growth in the money supply, the gradual increase in debt-backed currency, the gradual decrease in gold-backed currency, and the evolution of the US central banks through US history.

So, I'd like to point out some of the interesting ideas in the book, then I'll point out some of the errors in the book, and finally, I'll discuss the shear level of paranoia and how we can avoid succumbing to paranoia. We can't solve our problems if we start with fear, especially fear of death. But I will save this discussion to the end of this post, and focus now on places where I agree with the author of "Power Currency."

As James Rogers states, Electricity meets the theoretical requirements of money:
1) Medium of exchange -- widely used by nearly everybody
2) Unit of account -- indisputable and recognized value
3) Standard value -- consistent over time in terms of other items

Saturday, August 20, 2011

On Symmetry and the Rate of Return on Investment: Economics using only physical units

I'd like to join together two of the major themes in my blog:  symmetry and the rate of return on investment.
In a prior post, I mentioned that there is connection between the two:   those projects that yield higher rates of return on electrical & mechanical work invested will produce more symmetry than those processes with low rates of return on work invested.  Let me be clear here. In this case, I'm not talking about reflection, rotation, or translation symmetries. I'm talking about permutation symmetries (i.e. entropy.) Follow this link to my previous post to see how high rates of return on investment leads to more (permutation) symmetries.

Now, I'd like to discuss why I prefer using the internal rate of return on investment rather than the levelized cost of electricity when calculating the comparative economic viability of different electricity generating power plants. One advantage of the IRR is that it's units are purely physical [%/yr] (whereas the LCOE has units of [$/MWh].) Another advantage is that the IRR is nearly-symmetry when calculated at different locations on the globe and at different times (a sort of near-symmetry in space-time translations.)

What I'm trying to do in my research is to reduce the amount of calculations required to determine which type of power plant to build and where. Is there any underlying order and structure? Or instead:  is everything local?
By this I mean,  does each location in the world have to do separate calculations to figure out what is the right type of power plant?
At each location, there will be different prices for natural gas, coal, oil, labor, materials, and taxes, as well as different wind speeds, water flow rates and geothermal resources. Then there's the problem that different countries use different currencies. And finally, you have the problem that not only are these prices changing in location, but they are also changing in time.

Wednesday, August 17, 2011

A Major Problem with the US Federal Reserve: The member banks are guaranteed by law a 6%/yr RROI

A recent US politician claimed that the US Federal Reserve Chairman would be a traitor if he allows the printing of money between now and the next election. This is an extreme statement. There is no need to threaten people with death (which is the punishment for treason) because you disagree with their political views. (There is no correct political system because there's no way to know that one system of governance works better than another system because you can't try both at the same time. All we have to go on is history, and history can only be a guide not a rule book for how act in the future.) While it's extreme to call the US Federal Reserve Chairman a traitor, there are a lot of people (myself included) who are very anger with the US Federal Reserve Chairman for printing money while there was already significant inflation. So, I wanted to discuss why people have so much angry towards the Federal Reserve system right now. The goal of this post is to discuss one of the little discussed secrets of the Federal Reserve: the member banks are guaranteed a 6%/yr rate of return, regardless of how the economy is doing, and can print money in order to raise the funds to pay themselves the 6%/yr rate of return. The reason this is a secret is that there is a lack of transparency in the Federal Reserve System.

In many of my posts, I discuss ways to improve the Federal Reserve by forcing it maintain a constant level of inflation (preferable 0% inflation.) While I have no ability to predict the future of the economy, I can claim the following:  if we adopted an electricity-backed currency (i.e. maintained a 0% inflation in the average price of electricity), then there would be transparency in the US Federal Reserve. "And no funny stuff!"  Right now, there is no transparency in the US Federal Reserve. The system is a mess. There is no certainty. For example, can you tell me whether the Federal Reserve is going to print money again? Is it aiming for a certain inflation rate?

Instead, we have created a system in which the few profit at the expense of the many. And because of this, we need to improve the US Federal Reserve operates. The relation between the people and central banks has evolved throughout US history; and the system we have currently will not, should not, and can not last. I suggest forcing the Federal Reserve to maintain a constant inflation rate (preferable 0% inflation in the price of electricity...but I'm open to other suggestions) and to adjust how much money they are able to pay themselves (see below) depending on how well the economy is doing.
We, the people, have a healthy fear of the Federal Reserve, and it's a healthy fear because we have created a system in which the largest banks in the US can print money pretty much whenever they want.

Here's the dirty, little secret that isn't discussed often. The banks that make up the Federal Reserve are guaranteed by law a 6% annual rate of return on investment.

Sunday, August 14, 2011

Thomas Edison on Electricity-Backed Currency in 1921

I found this lengthy quote from Thomas Edison in a recent book by James Rogers called "Power Currency."  I will be reviewing his book in a future post. In this post, I'd like to quote Edison as he was responding to an interviewer about Henry Ford's idea in 1921 of having the government build power plants (like hydroelectric dams) by issuing currency against the power plant instead of getting people to invest into interest-bearing bonds. (Note: this is an idea that James Rogers totes throughout his book, so I'd like to present the argument before I point out the problems with this idea of having the government issue currency to build power plants rather than having the private sector build power plants via issuing bonds and stocks. Note also that there is a general level of paranoia that runs throughout this Edison quote and which echoes in Roger's book. For those of you have read my previous posts, I have a severe distrust of our current fiat currency, but that doesn't mean that I have a severe distrust of making money. I think that the decision on where and what type of project to invest in should come from those people who are investing their own money...not by politicians who use taxpayer money to invest in projects, and certainly not by politicians that can create money out of nothing to invest in projects, even power plants as suggested by Ford & Edison.) And now, I present to you Edison's stance on allowing government to issue currency (rather than bonds) to build power plants:

"Make it perfectly clear that I'm not advocating any changes in banks and banking," said Mr. Edison (in 1921). "Banks are a mighty good thing. They are essential to the commerce of the country. It is the money broker, the money profiteer, the private banker that I oppose. They gain their power through a fictitious and false value give to gold.
"Gold is a relic of Julius Caesar and interest is an invention of Satan," Mr. Edison continued. "Gold is intrinsically of less utility than most metals. The probable reason why it is retained  as the basis of money is that it is easy to control. And it is the control of money that constitutes the money question. It is the control of money that is the root of all evil.
"Then there is another way--the method my friend Ford proposed the other day. He proposes just to go along and forget about gold. He says that the government can finance Muscle Shoals without applying to money brokers for permission, and I think that he is absolutely right about it."

Saturday, August 6, 2011

Grand Challenges of the 21st Century in the Field of Electricity Generation, Transmission & Use

Here's what I see are some of the grand challenges for the 21st century, as related to the field of electricity generation, transmission & use. After I list the challenges, I'll list possible ways of meeting these challenges:

1) Returning the USA, Canada, Europe & Japan to a positive rate of return of investment, i.e. growth in real GDP.

2) Including environmental externalities into the price of electricity and transmission in all countries. This includes deforestation, greenhouse gas emissions, acid gas emissions, ozone forming emissions, particulates, etc...

3) Accomplishing electricity deregulation in such a way that the average price of electricity decreases with time while encouraging efficient investment in electricity generation, transmission and distribution.

4) Implementing demand-response into the electricity market, i.e. allowing residential electricity customers to lower their electricity bills by giving them or their appliances information on the minute-to-minute price of electricity. This requires knowledge of the price of electricity and the ability to raise the temperature of one's house in the summer when the price of electricity is high. (This will lower the price of electricity you pay and help prevent a black out.)

5) Implementing a currency that maintains a zero percent inflation on the average price of mechanical and electrical work. I like to call this an electricity-backed currency. It provides feedback as to which parts of the economy need to grow and which parts need to shrink. Your dollar would have constant purchasing power over time. The government wouldn't be able to take away your purchasing power by inflating its currency.

Wednesday, August 3, 2011

What is the economic impact of greenhouse gas emissions?

Discussing the topic of global warming is bound end any polite dinner conversation. It's like discussing politics at a's bound to get people really angry.

With that being said, check your ego before reading on, and only leave a comment if you've thoroughly digested everything below. I don't want to turn this into a 'he said, she said' or 'Red vs. Blue' dispute that I see in a lot of blogs (CNN for example).

What I'm about to say will probably annoy both the climate change alarmists and the climate change deniers. But those of you who have some training in economics (i.e. the science/skill/art of making a cost-benefit analysis under uncertainty) will find what I have to say to be pretty middle of road and boring.

1) Human emissions from the exhaust products of burning fossil fuels are causing an increase in the concentration of greenhouse gases: CO2, CH4 and CFC's.

2) You can prove that the increased concentrations are increasing the radiative forcing function on the Earth by looking at the the amount of IR radiation leaving the atmosphere at the frequencies where CO2, CH4 & CFCs absorb. There is plenty of satellite data showing there have been decreases in the amount of infrared light leaving the Earth at the frequencies where these gases absorbs. And the decrease in the amount of IR leaving at these frequencies is as expected from the rise in GHG concentrations. For example, see the link below:

3) Particulate emissions from coal power plants (in the 50's/60's in the US), and now in China, have a negative effect on the radiative forcing function. This is part of the reason why global temperatures have only slightly increased over the last decade, and actually decreased somewhat in the 50s.

4) There is still some amount of uncertainty in going from a change in the radiative forcing function and an increase in global temperatures. Models are getting better with time, and this uncertainty is decreasing with time as we collect more data and add more details to the global climate models.

5) The largest area of uncertain (as far as making public policy decisions) is the economic impact of increased temperatures. There needs to be a lot more work in this field. As I've mentioned before, it would be a good idea for an independent agency like RAND Corp or the US DOE to estimate the economic impact of increased temperatures. As of 2009, there have only been 14 studies that calculate the impact on global GDP as a function the Earth's mean global temperature. That's not a lot of studies, given the amount of money that has already gone into trying to solve what people assume is a problem, but without having actually done their homework to see if it really is a problem. I've plotted the data from the 14 studies below: (the data point can be found at the following site. Along with the much prettier graph made by Tol, which includes error bars.)

Monday, August 1, 2011

Selling Government Assets: How much money could we get? What's the advantage?

By almost any measure (such as deficit to GDP or debt to GDP),  the US is faced with a major problem. Our current yearly deficit is on the order of 10% of the GDP. Our federal government is spending roughly 30% of the GDP and only bringing in tax (or other) revenues at roughly 20% of GDP. The yearly deficit is roughly 1.3 trillion dollars, i.e. 10% of our roughly 14 trillion yearly GDP, and roughly 10% of gross federal debt. This is unacceptable, and most people recognize this fact. Hoping that the problem will go away is no longer an option for politicians because the voters are starting to become knowledgeable about the size of the debt and the inflationary methods that the government has tried so far to fix it (such as QE2...i.e. printing money while the commodity price index was rapidly increasing.)

As a society, we need to be producing more things of actual value and spending less until we bring the deficit and the debt back into a manageable size.

The general options available:  cut spending, raise taxes, print money, or sell government assets. Some of these options are better than others.

For me personally, I tend to favor the following options in this general order:
1) Sell government assets  (gold, silver, Postal Service, TVA power plant, Amtrak, and Federal Reserve owned assets)

2) Increase the retirement age and link the retirement age to life-expectancy. (There should of course be exceptions made for hazardous professions, such as fire-fighting or steel mill laborers.)

3) Tax pollution   (municipal solid waste going to landfills, acid gas emissions, and perhaps greenhouse gas emissions.) Ideally, we would lower income tax by however much we raise taxes on pollution, but we are so far in debt that we need to get back into fiscal sanity before we seriously discuss lowering income tax levels. I hate the idea of income taxes, but I hate the idea of borrowing money from China even more.

4) At the state level, increase luxury/sin taxes...but probably not at the federal level, or else we might cut into the tax that could be raised at the state level.

Wednesday, July 27, 2011

Cherry-picking 'figures of merit' to suit your argument: On "Power Hungry" By Robert Bryce

This post is a critical (but humorous) analysis of the book Power Hungry by Robert Bryce. My goal with this post is to remind people that:   books like Power Hungry are what happen when we all can't agree on a meaningful figure of merit by which to judge electricity generating power plants. In the words of the Walter Sobchek, "This isn't 'Nam. There are rules, Smokey." There would be a lot more clarity in Robert Bryce's book if he used one simple figure of merit by which to judge all of the competing technologies discussed in this book. Instead, he uses different criteria throughout the book.

I started reading the book because of the catchy title "Power Hungry: The Myths of Green Energy and the Real Fuels of the Future." I thought that it might do a good job attacking the problems of intermittent energy technologies like wind power. However, I feel like I was taken on a roller coaster ride through the land of energy misinformation. Bryce included just enough good points to keep me interested, and just enough junk to make me feel bad for even picking up the book from the library. I feel like I've just been abused by a lot of facts. Like he put a bunch of heavy facts in a sack, and then beat me with the sack repeatedly. Then after the first beating, he stuffed a bunch of 'figures of merit' into another bag, and then hit me with this bag until I was bloody and unconscious. There are over ten different 'figures of merits' that Bryce discusses depending on whether he wants you to 'like' or 'hate' the particular technology he's discussing at the moment. And he often changes his mind on a technology from chapter to chapter. In some chapters, he's pro-solar and, in some chapters, he's anti-solar. He confuses the reader because he cherry-picks his favorite figure of merit from chapter to chapter.

Is the correct figure of merit we care about the 'energy density'?  Or is it the power density?  Or perhaps it's the price/kW-hr? But the price today or the price tomorrow? Or perhaps it's the amount of steel and concrete used? Or perhaps it's the amount of birds killed? Better yet, perhaps it's the ability to scale up the technology in the next decade? Or perhaps it's the efficiency?

Sunday, July 24, 2011

Intro to Economics for Physicists Part 3: GDP, Velocity of Money, and Money Supply

In a previous post, I discussed how printing money can be inflationary, if all other things stayed the same in our society. However, as with everything in macroeconomics, nothing stays the same. So, I'll discuss the relationship between the Gross Domestic Product (GDP), the Velocity of Money, and the Money Supply. In a work- or electricity-backed currency, the units for these terms are:   Power [GW],  Frequency  [1/yr], and Work [GW-yr], respectively. In these units, it's fairly easy to see the relationship between the terms.

There is a rather famous equation used by economists to describe the relationship between Price, Quantity, Velocity of Money, and Money Supply. This is sometimes called Fisher's Equation. In simple terms, the equation is:

GPD = SUM(P x Q) =  M  x  V

where GPD = the gross domestic product   [$   or  kW-hr  ]
P = the price of a final product                    [$/unit    or   kW-hr/unit ]
Q = the quantity of a final product               [unit]
M = money supply                                    [$       or  GW-hr ]
V = velocity of money                                [1/yr]

Friday, July 22, 2011

Electricity Regulation and Deregulation: The Past and Future

Buried at the end of a previous post, I included a few links to free training on electricity grids and electricity markets that have been graciously placed on online by the PJM, which operates the world's largest competitive wholesale electricity market and North America's largest power grid. For those of you looking for an exciting job in the electricity business, the PJM has job opening at its HQ in Valley Forge, PA. [Note that PJM stands for Pennsylvania, New Jersey and Maryland, but the actual area covered by this Independent System Operator (ISO) is now much larger than the three states listed in its name.]

While I've talked a lot about electricity-backed currency, I've specifically not discussed the question of regulation vs. deregulation of electricity markets. Mostly, I've avoided this topic because there's already been a lot of discussion on this topic because there's a lot of real world examples of the pro's and con's of electricity deregulation. There are success stories, like England/Wales, and then there are horror stories, like in California. Most countries have tried some form of electricity deregulation by now, and there are a few 'best practices' that are starting to rise to the top. A good review article on this topic can be found online at Paul Joskow's MIT website, and it's called Lessons Learned from Electricity Market Liberalization.

This post is intended to highlight some of the 'lessons learned' in Joskow's article as well as those given by Rothwell & Gomez in their 2003 book Electricity Economics. Some forms of regulations are better than others, so I'll summarize what I can glean from Joskow's article and Rothwell&Gomez's book.

Tuesday, July 19, 2011

The Everyday, Ever Changing Social Contract

What is the Social Contract? Is there an unwritten social contract? What are the best forms of government?
These are some of the questions that have bothered philosophers throughout the ages, and in particular, Jean-Jacques Rousseau. While most of my posts have avoided questions of politics, there is no way to avoid questions of politics. It's impossible to avoid politics because we make political choices everyday...not just ever two or four years. In my opinion, politics is an everyday things that we all do, regardless of whether we vote in an election. Politics is the term to describe all social interactions that are related to questions of forming human relationships. This includes all of the secular and religious organization we form. Without relationships, there are just the individual humans trying to survive on their own. We are all constantly making guesses about whether to join into new relationships, such as friendship, love, work, location community organizations or national organizations.

In every relationship, there are advantages and disadvantages. We can't predict the future, so we can never know the benefit of joining into a new relationship or in leaving a current relationship. (And this is why I'm interested in this subject. The reason that we can't predict the future of the universe is that the laws of physics are not reversible, and this leads to the second law of thermodynamics. There is an element of uncertainty in any large system. And now getting back to this post...) Humans, like all other living creatures, are ever-changing, naturally-selected life-forms whose goal is to consume as much exergy as possible (such as sunlight, wind, coal, geothermal, oil, biomass, etc...). The question is: how do we consume as much exergy as possible if we can't predict the future?

Monday, July 18, 2011

Popping the Gold Bubble by Selling US Gold Reserves

In earlier posts, I've discussed the topic of backing a nation's currency with something of universal & measurable value, such as electricity. However, nearly every week there are calls for a return to the gold standard (and even Congressional hearing by Rep. Ron Paul on the subject.) Gold does not have a universal value. While I respect the calls to move away from a fiat money supply, returning back to the gold standard would be artificial and potentially dangerous. Here's the problem: gold has very little value in our society, besides as jewelry.

Buying gold and hoping that it will gain value is much like the bubbles we're seen in the past. Examples of bubbles in the past were: the Dutch tulip bubble in 1637, the South Sea Company bubble of 1720, and the housing bubble of pre-2008, to name just a few.

I don't want to speculate on future bubbles, but I want to point out that I think that buying gold and hoping that the price of gold will increase is a very bad idea. Why? I'll take a few sentences to explain the problem of treating gold as an investment.

The US stores on the order of 300 million troy oz of gold in its two main depositories, roughly 140 million troy oz in Fort Knox, and roughly 160 million troy oz near Manhattan. This is roughly 6 years worth of production of gold, given that the world produces ~50 million troy oz of gold each year. And 300 million troy oz is roughly 2.5% of the total world's gold that has already been mined. Using a current estimate of the price of gold of $1600 $/troy oz, this means the the US is storing roughly $480 billion in gold. Some of the stored gold is for other countries or organization, so let's estimate that the US has $400 billion in gold stored at Fort Knox and below Manhattan. Considering that the US currently spends over $2 trillion each year and is over $14 trillion in debt, even if the US were to sell all of its gold reserves, it would barely help the current deficit, let alone help the debt. However, if the US were to sell its reserves, then the price of gold would most likely start plummeting. And here's why.