Streetwise Professor

August 26, 2015

Donald Trump Can Only Aspire to Match Obama’s Economic Ignorance

Filed under: Climate Change,Economics,Energy,Politics,Regulation — The Professor @ 8:00 pm

Yesterday I said Trump and O’Reilly were in a cage match to determine the world champion of economic ignorance. There is another contender of course, the current occupant of the office to which Trump aspires. Actually, I would say that Obama is the undefeated reigning world champ, and that the O’Reilly-Trump set-to was merely to see who might contend for the title in the future.

Obama’s gobsmacking ignorance-served up with a heaping side of superciliousness-was on full display at the “Clean Energy Summit” in Las Vegas on Monday. Time is finite, and my energy is only intermittently renewable, so I can’t possibly deconstruct these vaporings in detail. So I will limit myself to a few high-level comments:

  1. Obama’s claims that his policies on renewable energy and carbon will make a meaningful impact on climate is a massive fraud that would land you or me in jail. Obama’s own EPA acknowledges that the policy will reduce global mean temperatures by an imperceptible and irrelevant .02 degrees by 2100. Farenheit? Celsius? Who cares? It matters not. It is rounding error on any scale.
  2. Obama’s mantra is all about the jobs that his renewables policies are creating and will create. Jobs are costs, not benefits.
  3. Further, Obama is clueless about the seen vs. unseen. To the extent that these policies raise the cost of electricity, they will have adverse consequences on wealth and income in consuming sectors, and in sectors that could produce electricity more efficiently, but for the subsidized competition from renewables.
  4. And yes, these policies will increase costs. Renewables are intermittent and diffuse and therefore require backup resources to ensure reliability; there is often a long distance between renewable sources and demand, meaning that new investments in icky transmission are required; and there is often a negative correlation between renewable production and electricity demand (e.g., the wind usually stops blowing when it’s really hot). Just look to Germany, with its Energiewende fiasco if you have any doubts. There is a strong correlation between electricity costs and fraction of electricity from renewables, and although this could be due in part to an endogeneity issue (those with more costly electricity sources utilize more renewables), this does not explain the entire effect.
  5. Obama and other boosters of renewables boast about falling costs of solar. Wind is conspicuously absent from this discussion, even though it represents the bulk of renewables generation. Further. Fine! When these inexorable efficiency gains make solar economical as a large-scale source of electricity, it will be able to compete without subsidy. This is no reason to subsidize now. This technical progress in solar argument is a non sequitur of the first magnitude.
  6. Obama and other boosters rave about capacity additions attributable to renewables. Well, due to the intermittence issue, capacity utilization is very low. It takes a lot more than 1MW of renewable capacity to replace 1MW of thermal or nuclear capacity. Indeed, if the wind ain’t blowing, all the windmills in the world can’t replace one conventional plant.
  7. Obama’s ignorance is on full display when he claims that conventional electricity generation was not characterized by “a lot of innovation.” This is just a crock. Compare heat rates of plants 20 years ago to those of today: in California, for instance, thermal efficiency has improved by 17 percent over the last 13 years. Heard of combined cycle, Barry? There has been considerable innovation in electricity generation. Well, not at the light switch plate, which is probably the extent of Barry’s familiarity with the electricity value chain.
  8. Obama mistakes opposing subsidies with being anti-free market. Welcome to bizarro world. And, as is his wont, he did so in an Alinskyite fashion, demonizing his opponents (the always handy Koch Brothers) in a very personal way.

I could go on, but that would be an S&M exhibition, and this is (usually!) a SFW site.

Suffice it to say that in Las Vegas Obama gave a demonstration that proves that when it comes to economic illiteracy, Trump can only aspire to fill Obama’s shows.

And yeah. Take a moment to absorb just what that means.

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  1. To put Obama in the same ballpark, let alone ring, with Trump and O’Reilly is preposterous. Obama may not be a trained economist, but his intellect and economic instincts far surpass Bush II and most of the clowns running for the Republican nomination. Please remember that renewable energy is only secondarily about jobs and economics – unless of course you put yourself in the small minority of non-reality-based people and academics that denies climate change is real and largely driven by human use of fossil fuels. Obama is forced to frame the debate around jobs because the absolutely unambiguous science is rejected by most Republicans in office. Your arguments amount to “do nothing” re: fossil fuels. Really? Guess what: the vast majority of scientists, academics, experts, US citizens and global citizens disagree with you. Jobs are costs? Really? When the labor participation rate for working age adults is as low as it is? Only a part of that is demographics, as I am sure you know as a labor economist. Unless of course you also are a Freshwater economist, who denies Keynes was right about anything, thinks the deficit is our biggest problem, and we need more belt-tightening austerity because sovereign nations with their own fiat currency and no foreign-denominated debt must behave exactly like individual households . . . We subsidized the cost of building weapons systems when we faced the threat of WWII. We subsidized the cost of the space race. We to this day subsidize the cost of basic medical research, because health care companies are unable to justify the large, risky, upstream investments in discovery and mechanisms of action to their shareholders. If you think we live in a world where subsidies have no place, you are gravely mistaken . . .

    Comment by JB — August 26, 2015 @ 8:38 pm

  2. The previous comment was a parody, right?

    Comment by LL — August 26, 2015 @ 9:03 pm

  3. Dear friends,
    I have one single word for Mr. Trump: Capitalist.

    You have to watch this very critical video on about Trump made in the 80’s.
    You will see the good and bad facets of Trump, why people love and hate him.


    Comment by simon jacques — August 27, 2015 @ 12:11 am

  4. “…the vast majority of scientists, academics, experts, US citizens and global citizens disagree with you.”

    JB, you’re not supposed to *drink* the bong water.

    Comment by SD3 — August 27, 2015 @ 5:36 am

  5. @JB
    There is more of gravy than of gravely about you.

    Soooo…assuming global carbon dioxide emissions do not decrease materially how long do we have? Where is the new hockey stick of uncontrollable global temperature increase?

    Comment by pahoben — August 27, 2015 @ 11:27 am

  6. Interesting Professor:

    Donald Trump has made some incredible deals but not this one.

    We are in the late 80s Former Patriots owner Billy Sullivan approached Trump with the team being $104 million in debt.

    Sullivan instead sold the Pats to entrepreneur Viktor Kiam for $84 million.
    Robert Kraft bought them later for $192 million.

    Now, Forbes estimates the Patriots are worth around $2.6 billion today and are the second most valuable NFL franchise.

    Trump said he passed on the offer, saying debt “too much for him to handle.”

    Comment by Simon Jacques — August 27, 2015 @ 11:51 am

  7. Jobs are costs to a guy with a tenured job.

    Comment by d — August 27, 2015 @ 3:51 pm

  8. Well, with the Secretary of Energy busy rallying his troupe of scientists to come out in public support of the Iran deal, no wonder there was no one left to write a speech for Obama that makes sense.

    Comment by aaa — August 27, 2015 @ 4:15 pm

  9. “Please remember that renewable energy is only secondarily about jobs and economics – unless of course you put yourself in the small minority of non-reality-based people and academics that denies climate change is real and largely driven by human use of fossil fuels.”

    Appeal to authority argument – logical facility! Btw, that “97% consensus on climate change” by Cook et al is a complete crock:

    “When the labor participation rate for working age adults is as low as it is? Only a part of that is demographics, as I am sure you know as a labor economist.”

    So you’re admitting that the 62.4% (lowest since 1977!) labor participation rate is not due (mostly) to demographics? Interesting – this is probably the only true statement you’ve made in your whole screed.

    Furthermore, you didn’t negate the Professor’s point about subsidies, only confirming that you are a low-information person.

    Comment by AspiringThrawn — August 27, 2015 @ 6:19 pm

  10. If you believe Obama is so ignorant and stupid about energy policy, can you name at least one major politician especially of republican variety, and by major I mean someone who someday can and may make an impact on policy in this country, be it either on energy or global warming. By the way, do you believe or not in that human activities , current and past, if unchanged has been and will cause drastic change(s) in the climate patterns of the earth ?

    Comment by linhtu — August 28, 2015 @ 4:36 pm

  11. Hey Rocket Scientist JB:

    The Earth’s polar caps are shrinking probably for the same reason they are shrinking on Mars.

    And it ain’t got nuthin’ to do w/ capitalism, fossil fuel burning or dim Republicans.


    PS Please pardon Vlad’s Russian.

    PPS No, LL. Unfortunately, folks like JB are serious. And too educated (as opposed to smart) to realize how ignorant their arguments are.

    Comment by Vlad — August 28, 2015 @ 11:13 pm

  12. @JB-initially I was with @LL, because I can’t imagine anyone using the terms “global citizen” and “reality-based people” except ironically or satirically. But after reading your comment several times, I am convinced you are serious. It’s probably a waste of time, but here is a serious reply:

    1. Courts will often state in decisions that “there is no need to address argument X, because the claim fails because of fact Y.” My ridicule of Obama’s renewables policy stands regardless of whether the anthropogenic global warming hypothesis is true or false, so I do not even need to address this issue. The truth of the AGM hypothesis is necessary, but not sufficient, to justify Obama’s policies. By the EPA’s own reckoning, based on global climate models, these policies will have a trivial effect on global temperature. Obama can’t make the argument for renewables primarily on the basis of climate change, because the effect is risibly small.

    Put differently, Obama’s renewables policy *is* doing nothing insofar as climate change is concerned. I can do nothing a helluva lot cheaper.

    2. Matters of degree matter (no pun intended). There is no doubt that CO2 or methane raise temperatures: there is considerable doubt as to the magnitude. Global climate models estimate temperature sensitivity based on hypothesized positive feedback mechanisms that are highly conjectural and not empirically supported or accurately measured. They also tend to ignore negative feedback mechanisms. These models have greatly overestimated temperature changes for going on 20 years, and even the IPCC has reduced substantially its estimate of temperature response to a CO2 increase. There is a legitimate controversy about the quantitative impact of GHGs on temperature, and saying the science is settled is both unscientific and wrong. Moreover, since (a) EPA relies on prevailing measures of climate sensitivity to estimate the impact of its new rules, and (b) these measures are likely overstated, then (c) the EPA’s already risibly small impact estimate is biased upwards.

    3. Appealing to authority, and citing consensus opinion actually weakens your case. It is quite clear that there are strong social forces inducing excessive conformity on this issue. Indeed, this conformity, and the necessity of using insult and ostracism to enforce it, betrays a deep insecurity about the reliability of the science. Read Kuhn.

    4. Jobs are a cost. Human resources deployed to build windmills and solar panels could be used to make other things and provide other services. The question of whether those costly resources are best deployed in those particular uses. Arguments on the basis of jobs created are intellectually defective. You’ve told me the cost. What’s the benefit received in exchange?

    5. I don’t know where you get the idea that I think the deficit is our biggest problem, or that that is a “Freshwater” position generally. The level of government spending, and the composition of that spending, is what matters to a Freshwater Economist, and to me. (Friedman was adamant on this point.) The means of paying for that is a secondary consideration. Further, there are strong Ricardian effects that undermine deficit spending as a stimulus measure. Tax me now or tax me later mainly matters to the extent that those paying the taxes later are not the ones who decide what to spend today, and this tends to lead to a bias towards excessive spending. The argument about deficits is mainly a matter of political economy.

    6. Re Keynesianism, I can see price and wage rigidity, and empirical evidence for it. What I object to is vulgar Keynesianism, epitomized by IS-LM, which is appalling on many levels. It is 1930s-1940s technology (do you drive a DeSoto?), and ignores many of the real margins on which people make decisions.

    7. Demographics explain some, but hardly all, of the decline in the labor force participation rate. This rate has fallen in the prime working age cohort as well. BTW, I am not a labor economist, but I can interpret basic data.

    8. I argued against specific subsidies for renewables. Your statement that subsidies are sometimes justified is totally irrelevant to my point. I am not an anarchist. Like Adam Smith, I recognize the role of government in, say, providing for national defense. The space race is a much more dubious proposition. Subsidizing basic research in health and other things can make sense. Subsidizing the creation of marketable technologies that embody the knowledge created by this research is much more problematic, and must be evaluated on a case-by-case basis: not all technology are created equal. Further, regardless of the merits of subsidies in a world ruled by a benevolent autocrat, knowledge problems and political economy considerations mean that the subsidies that emerge from the political process bear almost no resemblance to those that good economics could justify. Renewables policy-including Bush II’s, which I did criticize (it hyped ethanol, which I despise)-is a prime example. Just because some subsidies are theoretically defensible does not mean that these particular subsidies are. In fact, they are not.

    The ProfessorComment by The Professor — August 29, 2015 @ 6:07 pm

  13. You make the right kind of arguments but the wrong conclusion. To me, this is all very political rather than fact based arguments.
    Combined cycle plants was in place 20 years ago and right now their heat rates have not improved that much.
    Renewable’s technology has not improved that much either but due to mass production, their cost have declined dramatically.
    Sure renewable generation costs more and may raise cost but they are now affordable. Look at California. Yes, higher electricity prices but the question is whether it is worth it.
    US by itself cannot solve climate change but you have to start somewhere.
    I read your blog and enjoy it but I find this one very biased.

    Comment by Toby Shea — August 30, 2015 @ 7:11 pm

  14. Jobs are costs? Really?

    If they’re not, then be a good lad and go and wash my car for me.

    Comment by Tim Newman — August 31, 2015 @ 7:22 am

  15. “Renewable’s technology has not improved that much either but due to mass production, their cost have declined dramatically.”

    The cost of renewable energy hasn’t “declined dramatically”, rather, the bulk of the cost is being picked up by the government. This is the fallacy of thinking anything the government provides, whether it be a subsidy or a benefit, is “free”. There is no such thing as a free lunch.

    California has at least a third more expensive electricity prices compared to most other places in the United States, which drives up the cost of everything else. Combine that with other business-unfriendly policies and you see a state suffering from a mass out-flux of businesses and people to more accommodating places (such as Texas). And the electricity price increase is to combat the hypothesized temperature increase of less than 0.01 C, which even under best-case scenarios will be overshadowed by the growth of coal usage not only in China, but also in India. Thus, the costs are not worth it.

    btw, “climate change” is a misnomer. Looking back at the climate record for just the past 20,000 years will show not only an Ice Age, but also a Medieval Warm Period, a Roman Warm Period, and a Holocene. The climate on Earth, regardless of human activity, is not constant. To listen to extreme environmentalists, they seem to think the Earth’s temperature was idyllic and perfect until humans came along with industrialization. This notion is completely false and only fuels my suspicion that modern-day environmentalism is more akin to a religious cult than something generated from looking at the data scientifically and empirically.

    Comment by AspiringThrawn — August 31, 2015 @ 10:45 pm

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