Let Them Drive Electric

I’m not overly fond of the Tesla automobile. It’s publicly-supported rich man’s toy that hasn’t made huge technological strides but likes to pretend it has. And I’m dubious that it will ever be anything other than a curiosity. The last decade has seen big leaps in fuel efficiency in our automobile fleet. Part of this is because people are demanding and buying more efficient cars. A little bit of it is hybrids. And much more of it just good engineering:

When many people think of fuel economy, they think hybrids or electric cars. But that’s only part of the story. The chart above shows various efficiency technologies that have become more prevalent since 2008.

As it turns out, improvements to the existing combustion engine has been a huge source of innovation over the last five years. There’s gasoline direct injection, which is a more efficient technique for delivering fuel to the engine. Or there’s cylinder deactivation to save fuel. These get less attention than electric cars, but they’re key advances.

I was recently in Montana and my in-laws had an SUV that got as good mileage as my old Ford sedan. Direct injection, a continuously variable transmission, variable valve timing — all of these combined to make it a reasonable vehicle.

But despite my distaste for the Tesla, this is ridiculous. Tesla is being banned in many states from selling cars directly to the consumer.

This week, the Georgia Automobile Dealers Association filed a petition with the state’s Department of Revenue in an attempt to bar further sales of Tesla sedans. Such battles have erupted in numerous states, from Missouri to New Jersey. In the latest issue of Regulation, University of Michigan Law professor Daniel Crane argues that dealer distribution restrictions are based on faulty ideas of consumer protection. Traditional dealers claim that competition among a brand’s dealers prevents the manufacturer from “gouging” consumers and extracting monopoly profits. Crane argues that standard economic theory demonstrates that these claims are nonsense. Firms with market power will be able to claim monopoly profits, regardless of whether middlemen, such as dealerships, are involved.

Moreover, by restricting competition among business models for auto sales, laws such as those in Georgia stifle competition among automakers. When companies such as Tesla seek to lower costs through innovative business designs, they face costly regulatory hurdles and legal challenges such as the sales ban in Georgia. These laws protect existing dealers and hurt consumers.

This is about more than Tesla, which is filling a niche market at best. Indeed, that’s a big reason they want to sell direct instead of through dealers. What this is about is other companies, companies that have not been born yet but could potentially compete with the big automakers. Imagine if, instead of having a handful of huge automakers, you had a hundred Teslas out there, all upending the market in their own way. Won’t someone please think of the unions?

Similar laws protected wine distributors in various states until the Supreme Court struck it down for violating the interstate commerce powers of the federal government. Of course, several states — including my own — have refused to comply with the ruling in the nine years since that decision hoping they can rope in enough Congressmen to re-institute the shipping restrictions. In light of SCOTUS’s precedent, I can’t see that the auto dealer cartels can possibly be legal. But I don’t expect anything to be done.

All Your Channels Belong To Us


Comcast said Thursday it had agreed to buy Time Warner Cable for $45 billion in a deal that would combine the two biggest cable companies in the United States.

If the deal is approved, the combined group will be the country’s dominant provider of television channels and Internet connections, reaching roughly one in three American homes.

If this deal goes through, Comcast will control one-third of the cable market, dwarfing any other provider and having virtual monopoly in parts of the country (that’s one estimate; I’ve seen other figures as high as 42%).

There’s some question about whether the Administration will seek to scuttle this deal, as they did the AT&T/T-Mobile deal. Despite my libertarianism, I think they should.

Here’s why: cable is not a free market in this country. It is a controlled market where certain cable companies are given fiefdoms in most cities. They are regulated to some extent, but the consumer really doesn’t have a choice. I have Comcast. In Texas, I had Time Warner. In both instance, I had no real alternative.

If cable were a free market, then I would have a lot less of a problem with this deal since small cable companies would be able to out-compete the leviathan that Comcast/Time-Warner is going to be. But that’s not the case. If this deal were to be approved, it would have to come with a gigantic overhaul of telecom law that allows — or in some cases forces — markets to be open.

I don’t know if the Obama Administration will scuttle this. You may remember that the Most Transparent Administration Ever Which Has Totally Ended the Revolving Door approved Comcast’s acquisition of NBC. Then one of the commissioners who approved the deal got a high-paying job with Comcast immediately after approving the deal. So it’s possible that if Comcast waves enough money and future jobs around, this will go through even if it completely hoses the consumer.

When Is A Cut Not A Cut?

When it’s a program we like. A couple of Republicans have proposed a change to the budget — eliminating the sequester on the military in exchange for chained CPI for Social Security. It’s not going anywhere, but it does serve to highlight the cognitive dissonance that defines the Left:

Reps. Jim Bridenstine (R-Okla.) and Doug Lamborn (R-Colo.) are introducing the Provide for the Common Defense Act on Tuesday. The legislation would cancel out the next two years of sequestration cuts for the Pentagon by putting a heavier burden on senior citizens and federal workers.

Even without the sequestration, military spend will go down under the BCA. But notice that HuffPo gets its math right here: these are actual cuts in defense spending and the Republican are, well, making the cuts smaller — in real dollars. Sequestration is real cutting. In my own work, I’ve seen NASA closing down programs or canceling new ones in response to it.

Now let’s go a paragraph earlier:

A pair of House Republicans have a new bill that would spare the military from sequestration by cutting the Social Security benefits of many Americans who already experience painful federal budget cuts.

Emphasis mine.

These are not cuts. They are changes in the rate of growth of Social Security benefits. Many economists believe these changes reflect actual spending patterns. You can disagree with you want* but you can’t change the language life that.

(*Many fools on the Left want Social Security massively expanded despite its current and swelling fiscal shortfalls. Krugman says that Social Security is the only part of the retirement system that’s working well. All Ponzi schemes work well … until they collapse. My 403b would be working great too if my bank could stock up an imaginary portfolio against expected future investments.)

If the Republican proposal were to increase military spending very slightly, HuffPo wouldn’t call those cuts. But slow the rate of growth of their pet program and it’s “cuts!”.

We Are Big Oil


The United States has overtaken Saudi Arabia to become the world’s biggest oil producer as the jump in output from shale plays has led to the second biggest oil boom in history, according to leading U.S. energy consultancy PIRA.

U.S. output, which includes natural gas liquids and biofuels, has swelled 3.2 million barrels per day (bpd) since 2009, the fastest expansion in production over a four-year period since a surge in Saudi Arabia’s output from 1970-1974, PIRA said in a release on Tuesday.

It was the latest milestone for the U.S. oil sector caused by the shale revolution, which has upended global oil trade. While still the largest consumer of fuel, the rise of cheap crude available to domestic refiners has turned the United States into a significant exporter of gasoline and distillate fuels.

I’m sure Obama’s defenders will be rushing to credit him for this while his detractors will be rushing to … I don’t know, claim the numbers are skewed. But Obama’s primary role in this has been to stand out of the way. The truth is that this revolution has been more than a decade in the making as rising oil prices spurred innovation and made shale oil economically viable.

The thing is that this is exactly what conservatives and libertarians predicited. When oil prices spiked many years ago, the usual suspects blamed evil Arabs, evil oil companies, evil oil refineries, evil government and the evil Bush Administration with its evil ties to Big Evil Oil. Had we pursued the path of price controls, the result would have been shortages instead of a boom. People who understand economics pointed out that this was simply a surge in demand and that the demand would create new supply — either through new oil resources or energy tech innovation. That’s exactly what happened. And considering that the energy industry is the only thing propping up our economy, the Great Recession would still be going on had we listened to the naysayers.

I’ve quoted Lee before on this subject but it’s always worth repeating his insight:

Oil will never run out. Ever. There is too much money to be made in the technology industry for the world to keep relying solely on oil. We don’t need nightmares, we don’t need screaming histrionics, we don’t need end of the world scenarios. What we need are smart people taking the problem seriously, and finding workable, reasonable solutions to transition the world from a petroleum economy into the next generation.

One day, the oil industry will die. We probably won’t run out — proven reserves are gigantic (and that’s not even including natural gas and methane clathrate). But oil will fade because we’ll make some breakthrough on nuclear fusion or vacuum energy or whatever that makes cracking open the Earth to extract a mineral slime un-economical. When that happens, we’ll be fine. Fossil fuels are a fraction of our economy. But petro-states like Saudi Arabia will collapse.

In the meantime, technological progress is producing an economic goldmine. Mainly because we let it do so.

The Collapse of Detroit

This went out a week ago, but you really should read this article from the Detroit Free Press about the implosion of the city. Complete with animated graphs, it documents how, especially in the last decade, Detroit was the author of its own decline. Contra Krugman, this didn’t “just happen”. It was made. And the people who made it were Democrats.

A few choice quotes.

The total assessed value of Detroit property — a good gauge of the city’s tax base and its ability to pay bills — fell a staggering 77% over the past 50 years in today’s dollars. But through 2004, the city cut only 28% of its workers, even though the money to pay them was drying up. Not until the last decade did Detroit, in desperation, cut half its workforce. The city also failed to take advantage of efficiencies, such as new technology, that enabled enormous productivity gains in the broader economy.

Pension officials handed out about $1 billion in bonuses from the city’s two pension funds to retirees and active city workers from 1985 to 2008. That money — mostly in the form of so-called 13th checks — could have shored up the funds and possibly prevented the city from filing for bankruptcy. If that money had been saved, it would have been worth more than $1.9 billion today to the city and pension funds, by one expert’s estimate.

Contrary to myth, the city has not been in free fall since the 1960s. There have been periods of economic growth and hope, such as in the 1990s when the population decline slowed, income-tax revenue increased and city leaders balanced the budget. But leaders failed to take advantage of those moments of calm to reform city government, reduce expenses and protect the city and its residents from another downturn.

One event that that precipitated the current crisis was a complex debt deal that Kilpatrick engineered. Praised at the time, the deal ended up putting Detroit nearly three billion in the hole. I’ve commented before about cities and municipalities engaging in these complex financial deals that end up bankrupting them, particularly here in Pennsylvania. As I mentioned before, the city also negotiated lucrative deals to lure businesses to Detroit, which both drove non-rent-seeking businesses away and cost them. Chrysler’s Jefferson North Assembly Plant, funded by taxpayers, ate up $250 million all by itself.

This didn’t have to be. Pittsburgh survived the collapse of the steel industry by reinventing the city. It’s now one of the vibrant cities in America. But Detroit failed to see the problem coming, made decisions that made a bad problem worse and has now completely imploded.

Ah, I’m sure there’s nothing to learn there. Things like Detroit “just happen”. Why here’s the Krug himself, comparing Pittsburgh and Detroit and deciding that Pittsburgh taking “better care of its core” was the difference. Detroit was just a victim of people fleeing the city, which has absolutely nothing to do with crony capitalism, out of control spending and skyrocketing taxes. No sir. It had nothing to do with Pittsburgh having one public employee per 94 residents compared to Detroit’s one per 60 (and even that is misleading, since Detroit pays out more to retirees than to current employees). No, sir. It all has to do with protecting your core, whatever that means.

(In his full article, Krug hilariously states that Detroit is a result of the creative destruction of capitalism. But cities are generally large enough that the creative destruction balances out — new businesses thrive as the old ones fail. When “creative destruction” is that widespread, it’s usually a different kind of destruction.)

Yeah, I know the Free Press has done their research, poring over 10,000 first-hand documents to reach their conclusions. But the Left thought really hard about this one night and came to different conclusions. So who you gonna believe? The excuse-makers? Or the facts?