The Plugin Hybrid

As a technology nerd, I am excited about the prospect of plug-in hybrid electric vehicles (PHEV). General Motors recently sponsored a Society of Automotive Engineers task force to develop a standardized power connector for recharging electric vehicles.  Several major auto makers have agreed to adopt the technology.

Beyond standardization within the industry, environmentalists and techno-nerds alike have reason to be excited about a bright future for cleaner transportation.  First, one can expect that PHEV's won't single-handedly overload the power grid: the Energy Information Administration's 2009 annual energy outlook predicts "Plug-in electric hybrid vehicles are not expected to reverse the trend of slowing growth in electricity demand, which increases by only 0.1 percent for every 1 million PHEV-40 vehicles in operation." Second, batteries from PHEVs will minimally impact the environment.

However, one long-term issue could diminish the environmental benefits of PHEVs. These vehicles shift most emissions from gasoline to electric power plants.  The US needs to make its electricity sources look more like this, instead of this.  Coal provides the U.S. with half of its power, and no, clean coal is not a viable solution. Strip mining and the disposal of coal ash wreak havoc upon the environment.  Society must not trade its problems, but one can hope that the mass adoption of PHEVs encourages a cleaner power generation.

Global spread of swine flu

The Guardian has a handy interactive feature on the spread of the new swine influenza strain, which the WHO warns could become a global pandemic.

What would shareholders do?

An interesting profile of how shareholder driven capitalism plays out in China.

I have to think there are many parallels in Japan as well. I wonder whether Asian leaders have had a chance to sit down with the new Jack Welch.

(Photo from World Business Forum)

Please, one at a time

Just in case you thought the financial calamity fulfilled our quota of global crises, remember, the food crisis isn't over yet.

If you didn't believe us back then, maybe you will now - Conceicao and Mendoze, two UN economists, have crunched the numbers. Guess what? They concluded that we're only one supply shock (drought, tsunami, you name it) away from encountering a serious global famine.

A drop in the ocean

$100 million here, $100 million there - Paul Krugman

I was surprised that Obama really tried to pass this off as a legitimate money-saving exercise. I was pleasantly surprised that just about everybody called him on it. That presidential honeymoon is pretty much over before Obama has 100 days under his belt...

Climate change legislation

EPA moves toward climate change regulations: "This decision is a game-changer," said Rep. Ed Markey, D-Mass. "It is now no longer a choice between doing a bill or doing nothing. It is now a choice between regulation and legislation. EPA will have to act if Congress does not act."

Financial Journalism Shut out of Pulitzers

Financial Journalism Shut out of Pulitzers - Megan McArdle

I'd be inclined to agree with her assessment... how could they NOT give a Pulitzer to a financial journalist this year? And not one, but TWO sex scandals? COME ON!

Debt to GDP ratios

Which countries have high debt to GDP ratios? Datablog has a handy visualization.

We need a book deal

I (and my mountain of student loans) really need international political economy to go viral.

I can has liberal democracy and economic liberty, right?!

(Photo from Philonoist)

Lehman Brothers: Nuclear power?

Bloomberg broke the story this week that Lehman Brothers Holdings Inc. is sitting on a nuclear bomb's worth of yellowcake uranium. Apparently, the bank physically acquired the uranium after a futures contract matured. It now sits in a secure storage facility in Canada. Which begs the question:

How the hell did Lehman allow this to happen?

Actively traded futures contracts are typically closed out before the contract expires. This absolves the trader/firm from having to take physical delivery of the underlying commodity. It is remarkable that Lehman failed to close such a massive contract. DealBook wonders if the contract simply slipped through the cracks amidst all the chaos of the Lehman bankruptcy.

However it happened, the bankrupt bank is reportedly sitting on the uranium until prices rise; uranium has fallen for five straight months as traders expect delays to nuclear power projects in China and India, and under the expectation that Lehman could dump its stock on the market. Essentially, by holding tight Lehman depresses the very market it needs to recover.

I highlight this story because it underlines just how disastrous, and far-reaching, the Lehman bankruptcy has been. Lehman was an active commodities trader in the broker-dealer and exchange markets, and it got caught on the wrong side of a massive trade that continues to depress an illiquid market. The ripple effects of Lehman's failure haunt us in the most improbable of areas.

(photo source)

Efficient institutions

Non-profit and development institutions have long been (fairly) critiqued for their inefficiency. Seemingly guaranteed funding tends to breed employee complacency and supplant any urgency or incentive to perform beyond expectations.

We've all heard the (impossible) assertion that government should be run like a business. Can one man actually make non-profits run like a business?

Democracy and accountability

Megan McArdle has a very interesting piece addressing the legitimacy of the Fed's aggressive, central role in the policy response to the ongoing financial crisis:

But here's the problem: the Fed has performed vastly better on any
metric except "being elected" than the Congress. There's little doubt in
my mind that if we had not had an independent central bank, unemployment would
be many percentage points higher, GDP would have contracted much more strongly,
and we wouldn't now be making optimistic noises about the thing bottoming
out...

I think that the political process will hopelessly screw up the
management of this crisis (something which libertarians are perfectly able to
see when the government screwing things up is a left-wing populist one in Latin
America). But maybe The People, God bless them, deserve to screw up their
economy if they want. On principle, I am opposed to saving people from
themselves. And anyway, maybe I'm wrong and the wisdom of crowds will
prevail.

On the other hand, do they have a right to screw things up for everyone
else? Should a populist 60% be allowed to plunge their neighbors deeper
into crisis? In the case of America, to plunge the whole
world deeper into crisis?

The uncomfortable conclusion I'm coming to is that yes, they
should. Ben Bernanke should be hamstrung even though it's likely that this
would make everyone worse off. And people who advocate for ending the
independence of the central bank should be willing to accept all that this
entails: inflationary monetary policy (the people love inflation!), bad
and unpredictible banking policy, the collapse of the US economy. I just
wish I didn't have to go along for the ride.

Huh? I don't follow her logic at all. A modern democracy is a sophisticated political system. For some specialist functions like monetary policy, undemocratic actors do a much better job. In such cases, democratic lawmakers can voluntarily cede authority to an institution that's insulated from political pressure.

But here's the catch. No one's saying they couldn't take that power back if they wanted to. The Fed's only independent because elected lawmakers chose to make it so. They did this because they judged it to be in the long-term interests of the country.

So do we still have to hamstring Ben Bernanke? I'm just asking. He seems like a pretty nice guy.

Update: By sheer coincidence, Dave writes almost the exact same post at IPE Journal. Really, it's kind of spooky how similar they are.

About that money under the mattress...

Via Bloomberg: "The London interbank offered rate for three-month dollar loans is dropping at the fastest pace since January." This is one positive indicator that credit is starting to flow again in financial markets. At the same time, Goldman Sachs announced that it would sell stock to facilitate repayment of $10 billion in TARP funds to the US government, ostensibly to avoid some of the more prickly (compensation-related) strings attached to the government funds. Goldman Sachs also posted a $1.66 billion profit in Q1.

Good news is welcome news, but two happy stories do not make a turnaround. The Goldman Sachs development may even be counterproductive if other banks rush to pay back their own TARP funds so as not to appear weak, in what would amount to a very public stress test. There is also a danger that Congress, already suffering from bailout fatigue, will become even less inclined to authorize more financial stabilization spending. That's worth keeping in mind, because not everyone is as optimistic as this.

Rags to rupees

India wants its own currency symbol.

The rupee is certainly a strong, and storied, currency, but if China doesn't even have a standardized keyboard and the euro sign isn't yet really universal, what chance does the rupee have of making it as a globally recognized symbol?

The development of a common market (Pakistan, Sri Lanka, and Nepal) would certainly help; bringing together more than a billion people using the same currency in a volatile region would promote greater market integration and freer trade within South Asia. Though not very likely, if implemented, such a momentous change would help to ensure a little more political stability in the 'hood and it just might make for a lasting rupee (and symbol).

(Photo from 8en)

Game Show Network: Your days are numbered

As media providers like Hulu continue to offer highly customized and unbundled entertainment options, Rob Pegoraro writes a timely article on a la carte cable pricing.

I agree with Pegoraro, and his argument for a flexible cable pricing model highlights an important trend that affects many industries.

The decomposition of a product or service into discrete parts, or what many call the “great unbundling,” developed recently in modern business. We have all witnessed traditional bundles: a music CD, a newspaper with many sections, and a cable package with hundreds of channels. Implicit in these bundles is the decision about what gets bundled together in the first place. Rob rightly notes one bundle does not fit all. I don’t like the style section in the newspaper, I don’t like the game show network, and I don’t like the 13 songs on a CD that aren’t the hit single. Fortunately, successful enterprises such as Apple’s iTunes have discredited this anachronistic approach to product bundling.

Unbundling has a powerful implication: personalized aggregation. Examples of personalized aggregation include Google reader for news, Boxee for media consumption, and Amazon MP3 and iTunes for music. With these tools the consumer assembles a custom package of content, cobbled together from a variety of sources. Personalized aggregation empowers the consumer to pay for only what one chooses to consume. The cable industry should note that companies which honor this philosophy will ultimately thrive.

P.S. – Let's not be rash and unbundle the Oxygen channel. Hidden Gem.

Failsafe finance?

Dani Rodrik agrees that the IMF is changed, but does not agree that the Fund is now a true lender of last resort. 

Mr. Rodrik's call for stronger national regulation is, in my eyes, (somewhat) correct. Context requires nuanced solutions beyond those that a blueprint framework can provide: this applies from everything from finance to film. His skepticism is healthy, but I remain more hopeful than he that these reforms are at least a step in the right direction. International finance may not be safe, but was it before this mess?

The Associated Press takes on Silicon Valley

A interesting debate:

http://www.politico.com/news/stories/0409/21136.html

and 

http://www.techcrunch.com/2009/04/06/behind-the-aps-plan-to-become-the-webs-news-cop/

The politics of geoengineering

In an interview this week, John Holdren, Director of the Office of Science and Technology Policy in the White House, indicated that “the Obama administration is discussing radical technologies to cool Earth's air.” They probably are talking about it, but it was a huge mistake for Holdren to mention so publicly, for three reasons.

The "radical technologies" that Holdren references are collectively known as geoengineering. In a nutshell, geoengineers propose to purposefully manipulate the environment to counteract the effects of global warming. The idea has gained traction as a relatively painless way to fight climate change without taxing carbon or raising the cost of doing business. However, there is disagreement over whether it is actually possible and whether it risks making things much worse. Modern climate science is still relatively primitive – there are many things that we simply don’t yet understand. Geoengineering is the scientific equivalent of a Hail Mary pass.

By acknowledging it as a viable option, Holdren risks undermining international negotiations on combating climate change. Currently, the best solution available to climate change is to reduce carbon emissions, most commonly through some form of cap-and-trade system. But by pricing carbon, you raise the cost of goods and services at least in the short run. This is a tough enough pill to swallow, and geoengineering gives naysayers more ammunition to lobby against it. Negotiations are going to be hard enough as is – remember that it’s been seven torturous years of Doha Round negotiations that would produce a net economic gain, and we’re still not done.

Finally, geoengineering does not eliminate international coordination challenges. As a global problem, climate change requires a global solution. There are significant collective action problems to address. But even if we decide to geoengineer our way out of this mess, these problems will remain. Who gets to pick which geoengineering scheme gets used (there are many)? What if different nations choose to go forward with different geoengineering strategies? And most importantly, who pays for it?

I am somewhat of an international cooperation sceptic, and I worry that the global community won’t reach a consensus on climate change. For that reason, President Obama really ought to be exploring every contingency plan, geoengineering included.

But he and his team need to keep it to themselves.

Holbrooke's heroes

Obama's Afghanistan policy review and the following talks at the Hague are being praised for the inclusion of Iran. I've long advocated the inclusion of Iran in Afghan dealings; but a regional solution will only work if every country is involved in shaping strategy. Instead of opening the table to debate, Holbrooke and his team are essentially dictating policy. Apparently, they expect India to accept the notion that Pakistan is a victim of terrorism and a trustworthy partner. Guess what? They're not buying; nor should they be.

The fact that the Obama administration is still supporting Pakistan and now talking with Iran, without any significant conditions, is a huge slight in the eyes of India. Prime Minister Singh has essentially banked his career on the new strategic relationship with the US he helped usher in with the nuclear deal. India, after reorienting their entire foreign policy to align with the US, is being cornered into supporting their enemy, who have still not pursued the planners of 26/11 or even shared evidence.

Treating our strongest ally and partner in South Asia as an afterthought is a huge mistake. Indian elections are this month; the economy is obviously the central issue, but if Mr. Holbrooke continues to talk to India instead of with it, you better believe we will have a much less sympathetic ear in Delhi. Replacing a centrist, liberalized government with a nationalist, populist alliance hostile to most US activity isn't exactly a good change.

(Photo from Politics and Meetings)

A false dawn

April is the cruelest month - if you're an economist. Seriously, the dismal science has outdone itself in the past week. Here are some graphs charting the collapse in trade flows. (Bonus: here are some related statistics and graphs tracking the slowdown of bilateral US-UK trade). Here are some measuring the even faster disintegration of capital flows. Here are some which show that by every indicator, the global economy is tracking or doing worse than during the Great Depression. And here is the impossible (to paraphrase Felix Salmon) list of things we would need to do to avoid another Black Swan like this occuring in the future.

I am most troubled by the argument that current aggressive policy responses may eventually end the recession without addressing the fundamental problems which caused it in the first place. Green shoots? Try cold snap.