Category Archives: Economics

Miscellaneous economy stuff

Funny Thing

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…about competition and private cost control.

The Saudis and their OPEC colleagues, at the start of the shale and fracking revolution last year, made an overt decision to keep their own production up, which would allow prices to drop (much of OPEC—especially Saudi Arabia—had lots of cash reserves with which to handle the drop), which would kill American deep drilling and put those competitors out of business, restoring price control to OPEC.

However.

The US shale industry is by necessity becoming more efficient than ever. Low oil prices have become an opportunity. The Saudis have lit a fire under producers to trim the fat, deploy new productivity-boosting technologies and zero in on the most productive geology.

And

Just a year ago, popular opinion seemed to be that shale oil production was generally unprofitable if oil prices fell below $80 per barrel.

And

Statoil, for example, reported that just in a few months it cut its drilling time for new wells in Texas’ Eagle Ford formation from 21 days to 17. That kind of efficiency gain has helped “petropreneurs” reduce the cost of drilling wells from $4.5 million to $3.5 million.

Other companies are experimenting with new fracking fluids and different types of sand to create better shale-rock fractures. Some are effectively incorporating Big Data to better understand the sweet spots of geologic formations and optimal well-spacing to increase productivity.

The result is a rapid decline in the break-even price across shale plays. Already, analysts believe it is now $60 per barrel and before long will fall to $50.

Oops.

Local Charity

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There doesn’t seem to be such a concept at PS 120 in Flushing, NY. The grade school held a carnival for its kindergarten through fifth grade classes, around 900 of its students were allowed to go—and an additional 100 were kept cooped up in the school’s auditorium, instead, with the shouts of fun from the carnival just outside plainly audible to them.

The price of attendance was $10, and those 100 were poor students whose parents couldn’t afford the $10; not having paid, those kids were barred from the carnival. Contributing to the thing is the fact that many of those parents are Chinese immigrants who, perhaps, missed the fact that a fee was charged. Let’s discount that, though; there did seem to be adequate notice of the fee.

The rationale for singling out some kids and denying them their fun at the carnival? Principle Joan Monroe, according to Frank Chow, president of the parents association, said,

It’s not fair to the kids’ parents who paid.

The purpose of the fund-raising carnival? Pre-K, kindergarten, and fifth-grade moving-up parties—it’s all for partying. The carnival made two-three thousand dollars in profit, which will make for some pretty rich grade school parties. The money isn’t even going toward school supplies, school equipment, or its physical plant, apparently. Just partying, with no lasting results.

Not fair to the ones who paid? Will the kids whose parents didn’t contribute to the graduation party money be barred from those graduation parties, too?

Never mind that $1,000 of those profits would have covered the kids whose parents didn’t, regardless of the reason, pay.

Fairness depends on how the payments and the purpose of the monies were advertised. And it would have been an interesting experiment: how much money would have been collected with a different purpose presented? Could all the kids have attended on the funds raised?

This is the sort of thing local charity is about.

Government Imperative to Regulate

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This time in the commercial space industry. There is a bill slowly wending its way through the House that would limit—or not—regulation of the nascent commercial space industry. This is a bill that would

…extend and update federal protection for commercial launches from some potential liability involving property damage or personal injuries and fatalities on the ground. The legislation [also would bar] the Federal Aviation Administration from closely regulating fledgling space-tourism ventures for up to 10 more years….

There’s a hint about the wrong mindset there. The hint is clarified by the bill’s supporters’ attitude. They [emphasis added]

want to extend until the end of 2025 a so-called “learning period” during which companies and regulators are supposed to analyze operational data and consider the best way to create a regulatory structure.

Based on what theory do they think the commercial space industry must, of necessity, be regulated? What, even, is their limiting principle on government regulation?

The answers to these questions are, respectively, none and none. There is no need to regulate something just because someone wants to do it. Americans are not so stupid that our every action needs a rule to permit or prohibit it or to guide it. The lack of limiting principle is demonstrated empirically by the steady growth (and explosive recently, as that growth has reached the sharp bend in a typical growth J-curve) in the size of our government and the amount of regulation it’s committing on us.

What these guys don’t get is that a free market is a very fine regulator, and one that is both fast acting and flexible in all of its controls. A space company shows itself too dangerous? It goes out of business for lack of customers. It has no customer service worthy of the name? It goes out of business for lack of customers. Customers are reluctant to fly from concerns about recompense? Sounds like a market niche for insurers. Some other problem or reluctance? The market will fill the void, and quickly; it’s what competition does.

All government regulation does is protect the regulated companies from that competition, a function which achieves far more efficient regulation far more efficiently and without need of taxpayer-paid bureaucrats adding to the cost of the service.

The Congressional mindset is another argument for limited government. If it’s small enough, it can better be forced to keep its hands to itself.

What’s in Your Food?

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It’s not PC to ask or to know, according to the World Trade Organization.

The World Trade Organization (WTO) just ruled that America’s popular country-of-origin labeling law (COOL) enacted in 2008 violates global trade standards because it erects a trade barrier to US meat imports from countries like Canada and Mexico.

Japanese customers don’t get to know that the beef they’re thinking about buying came from the US. Nor do PRC diners. Nor do American customers get to know that their beef is coming from Canada.

Such knowledge constitutes a trade barrier, don’t you know.

What’s next? WTO ruling that food labeling generally is illegal? After all, if the food is known to be not halal or kosher, Jews and Muslims might not buy the food. Trade barrier.

Featherbedding?

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To paraphrase a Democrat’s remark, never let a tragedy go to waste.

The union for Amtrak’s locomotive engineers urged the railroad on Tuesday to put a second crew member at the controls of trains on the busy Northeast Corridor, where a derailment killed eight people and injured more than 200 others.

Of course. Never mind that an existing technology, cheaper than adding an unneeded employee, should have been in place, and will be in place after this accident.

The featherbedding contained in this union urging is made manifest in the union’s own statement:

Amtrak hasn’t had a second crew member in the locomotive of its Northeast Corridor trains since Congress ended the requirement in the early 1980s, the union said.

How many accidents caused by the lack of a second crew member has Amtrak had over those 30 or so years?