Wednesday, November 22, 2006

THE REAL THANKSGIVING ( FROM NOV'05)

Thanksgiving was not about the Pilgrims embracing diversity and thanking the Indians (otherwise known as Native Americans) for helping them survive. The celebration was about thanking God for the abundance which ultimately resulted from a move away from socialism ( imposed on them by the Colony’s Sponsors) to free market capitalism.

As governor William Bradford commented on the dreadful conditions of 1622:

" . . . the young men . . . did repine that they should spend their time and strength to work for other men's wives and children without any recompense. The strong . . . had not more in division . . . than he that was weak and not able to do a quarter the other could; this was thought injustice. The aged and graver men to be ranked and equalized in labors and victuals, clothes, etc . . . thought it some indignity and disrespect unto them. And the men's wives to be commanded to do service for other men, as dressing their meat, washing their clothes, etc., they deemed it a kind of slavery, neither could many husbands well brook it.""For this community of property (so far as it went) was found to breed much confusion and discontentment and retard much employment that would have been to their benefit and comfort . . . all being to have alike, and all to do alike . . . if it did not cut off those relations that God hath set amongst men, yet it did at least much diminish and take off the mutual respects that should be preserved amongst them."

In the Spring of 1623, they moved away from Socialism and embraced the incentives of Private Property and Capitalism:

"All their victuals were spent . . . no supply was heard of, neither knew they when they might expect any. So they began to think how they might raise as much corn as they could, and obtain a better crop than they had done, that they might not still thus languish in misery. At length . . . the Governor (with the advice of the chiefest among them) gave way that they should set corn every man for his own particular, and in that regard trust to themselves. . . . And so assigned to every family a parcel of land . . . "

"This had very good success, for it made all hands very industrious, so as much more corn was planted than otherwise would have been by any means the Governor or any other could use, and saved him a great deal of trouble, and gave far better content. The women now went willingly into the field, and took their little ones with them to set corn, which before would allege weakness and inability, whom to have compelled would have been thought great tyranny and oppression."

Thanksgiving is therefore about freedom, private property and the unrestrained ability to worship and show thanksgiving.

Monday, November 13, 2006

A RELIGIOUS THANKSGIVING

(reprint from Nov '06)
George Washington certainly felt that the celebration of Thanksgiving could not be divorced from any religious connotation, as indicated in the following Thanksgiving Day proclamation:

"It is the duty of all Nations to acknowledge the providence of Almighty God, to obey his will, to be grateful for his benefits, and humbly to implore his protection and favors."

Although certainly not as revered as the Birth of Christ, it is as much a religious holiday as Christmas, Easter or Passover. Unfortunately this aspect of Thanksgiving has been downplayed in our schools and replaced with teachings about tolerance and ethnic diversity. They have been so successful at this there is no wonder that when it comes time to talk about Thanksgiving in the classroom, virtually no one opposes. This is because the celebration has become completely divorced from its true meaning, and hence is uncontroversial to the secularists.

They have not been so successful with Christmas, however the attempts to divorce this holiday from all historical meaning are well underway. We are seeing 'Christmas' replaced with 'Holiday.' It is done in the name of tolerance and diversity awareness.

It was in 1789 that George Washington gave the above Thanksgiving Day Proclamation. By 1989 its celebration has already lost much of its true meaning as taught in the schools and celebrated by many. I wonder what will be the fate of Christmas in the year 2089?

Thursday, November 09, 2006

WHAT'S SO GREAT ABOUT AMERICA

In the book "What's So Great About America" Dinesh D'Souza points out that the three truly western institutions of science, democracy, and capitalism are responsible for the hegemony of western culture.

This blog primarily has a focus on science and economics (in sorts a study of capitalism), which certainly are influenced by government. In light of this and the upcoming Thanksgiving Day holiday (which is a celebration of the triumph of providence, capitalism, and agriculture) the next few series of entries will carry this theme- taking a brief rest of the previous focus on organic foods.

Friday, October 27, 2006

STEM CELL SCIENCE

With approaching elections, debates about embryonic stem cell research have been given lots of attention. While issues of ethics have been brought up, weighing the destruction of embryos against possible medical breakthroughs, no one seems to have given much attention to related advancements in stem cell science.

Recently, a team of researchers at Advanced Cell Technology reported in the journal Nature that they have been able to remove singe cells from human blastomeres (cell groupings that result from mitotic divisions of the embryo) and coax these cells into forming embryonic stem cells with no harm to the embryo. If this procedure can be replicated successfully, then one side of the ethics argument may become irrelevant.

Monday, October 23, 2006

A QUIET REPEAL

A colleague, who certainly carries views of the more liberal and left wing flavor commented on how out of bounds our state’s concealed carry laws were. He certainly is of the opinion that these laws do more to endanger the populace than protect it. He criticized the politician who introduced the bill. The politician I’m sure took the opposite view.

Both individuals are confused about where they should focus their criticisms. The 2nd amendment of the constitution makes clear that all people are to have an unfettered right to bear arms, with no exceptions mentioned regarding concealment or otherwise.

While the politician may have felt that he won a victory for the 2nd amendment, the fact that a bill had to be introduced at all is testament of our government not recognizing protected constitutional rights. He should have taken his passion to the Supreme Court, who should simply side on the basis of a literal interpretation of the constitution. My colleague, while disgusted with the politician, should realize that his true focus should be on amending the constitution to restrict the use of guns.

Of course, to the disgust of all of us, this is not likely to happen. It is in the best interest of each legislature to push through every bill necessary to maintain power, and our courts do not have a reputation of standing in the way. This process has been coined ‘ the quiet repeal of the American Revolution’ by economist Thomas Sowell in his book ‘The Quest for Cosmic Justice.’

Why is this relevant to this blog? This blog is devoted to science and economics, and both are heavily influenced by the way we are governed. In fact, many of the things that I have written about are in response to potential governmental and political behaviors.

Friday, October 20, 2006

QUOTES

"Would I prefer that the world was nothing but organic agriculture? Yes. But on the other hand GM crops have a much higher yield per acre and use less pesticides."
-Leslie Hoffman, Director, Earth Pledge

" Over the next 10 years. I predict the mainstream of the environmental movement will reverse its opinion and activism in four major areas: population growth, urbanization, genetically engineered foods, and nuclear power."
-Founder, The Whole Earth Catalog

"You couldn't feed more than 4 billion people on an all organic diet."
-Norman Borlaug, Winner, Nobel Prize for accomplishments in agricultural advances benefiting the 3rd world.

Wednesday, October 11, 2006

ORGANIC FACADE

While organic foods provide us with a sense of nostalgia for 19th century agriculture, its claims of safety, sustainability, and ‘greenness’ can be distracting. Case in point, the recent recall of E. coli infested spinach, traced to a major organic producer, Earthbound farms. According to the Center for Global Food issues, organic foods are 8 times more likely to be recalled than conventional food. Although organic food makes up less than 1% of diets in the US, it accounts for 8% of all food E coli cases.

According to a University of Minnesota study, researchers determined that produce grown with manure aged 6-12 months was actually 19 times more likely to be contaminated with E. coli than foods grown with manure aged more than a year. USDA organic rules allow manure to be applied after just 3 days of composting—right up to harvest time and raw manure can be applied until 90 to120 days prior to harvest in most cases.

It’s true that conventionally growers may also use manure as part of their fertility program, but in a recent study published in the Journal of Food Protection, organic produce was 6 times more likely to be contaminated with E. coli than conventional produce. Conventional growers always have the option of reducing manure use and supplementing with synthetic alternatives that offer the same nutritional value with less risk and increasingly less damage to the environment as genetics and technology improve.
Perhaps that’s why the founder of The Whole Earth Catalog believes the environmental movement will soon reverse its trend of aversion to GM foods.

Saturday, September 16, 2006

ROUNDUP READY GM & ENVIRONMENTAL HEALTH

Roundup Ready technology (GM) has allowed for 5.4 million pounds of glyphosate herbicide to substitute for 7.2 million pounds of other chemistries (ex: imazethapyr,pendimethalin,trifluralin ). What are the public health implications of this?

Let’s look at the properties of these chemicals as they relate to environmental health.

PERSITENCE: Roundup (glyphosate) has a half-life of 47 days vs. the much longer periods of those chemicals it has displaced.

TOXICIY: The chemistries roundup has displaced are 3-16 times more toxic.

So we have a GM crop that enables producers to use chemicals that are less toxic and less persistent in the environment than conventional crop production systems.

Perhaps this is why 73% of consumers say they are willing to accept GM products because of their potential for improving safety and environmental impact.

Source: Agricultural Outlook ERS/USDA Aug 2000

Friday, September 01, 2006

GREEN GOUGING

Many pundits try to characterize global warming as a golem created by greedy corporations. Much environmental policy is developed under this guise. Unfortunaltey, giving the federal government the power to regulate commerce in the name of soaking the rich leads to ‘rent seeking’ that in the end benefits large corporations and hurts the poor. In the name of ‘green’ and responsible refining, Unical successfully lobbied for tight restrictions on refining in California during the 90's. Once the standards were passed it was revealed that noone could refine gas and remain compliant without violating Unical’s patented refining technology. This resulted in windfall profits for Unical, restricted gasoline supplies, and higher prices at the pump.

Restrictive environmental laws that decrease the incentive for oil exploration, the building of refineries, and expanding our electrical grid all lead to ( at least to some degree) increased market power for incumbent corporations. If anyone complains about ‘price gouging’ and ‘abnormal profits’, these are the polices that help make it possible.

Free markets, growth, and investment are perhaps the best solutions for achieving energy stability that is in the interest of everyone as opposed to just politicians and big business.

Monday, August 21, 2006

GLOBAL WARMING POLICIES

Just as many of the models that are predicated on anthropogenic global warming are built on poor assumptions, many of the policies proposed to mitigate the effects of global warming are also based on bad assumptions.

It is assumed that the benefits we will reap from ‘preventing’ global warming will outweigh the costs of the polices themselves. If it were possible to stop global warming via human oriented policies this might be true in theory. Because human influence on the climate is likely trivial, policies that try to subvert human behavior to prevent global warming are not likely to be successful. Once this is realized, the costs to economic growth and human welfare really stand out.

According to a researcher at Wesleyan University, stabilizing emissions at 1990 levels could reduce US per capital growth by 5% per year. ( an entry on the importance of economic growth soon to follow). The infrastructure problems that currently are causing high gas prices would only be exasperated by piling on more regulations that can only restrict supply and exasperate the problem. While research and development of alternative energy sources may be a better alternative, technology development and adoption is made possible in conjunction with investment and economic growth. Policies that impede this in the name of preventing global warming will certainly minimize private sector incentives in this area despite any funding from government.

The best solution for dealing with climate change is to develop resilient economies that are able to invest in the technology necessary to adapt to ever chaining resource constraints.

Wednesday, August 16, 2006

GLOBAL WARMING: MODELING FARCE

Many of the projections that the media, rock stars, and grant greedy academics are using to build a ‘consensus’ on human influenced (lets call it anthropogenic global warming) global warming are based on mathematical models. As a student of economics I have a great appreciation of mathematical models. They are very compact and precise ways to express ideas with logical consistency. However, they are not necessarily scientific, and like any logical argument, they are only as good as their assumptions.

Many of the models that ‘predict’ or ‘explain’ anthropogenic global warming include parameters that are essentially assumptions about which we have little firm data to be certain about. These include the effects of cloud formations, precipitation, the role of oceans, and the sun.

Inherent in almost all dialogue and reporting about what these models imply is the assumption that human behavior is a large contributor to global warming. Although the climate has been warming over the last century, most of the warming occurred before 1940 (when temperatures in the arctic were actually just as warm or warmer than they are today). This was in the very early stages of modern industrialization and hence human production of greenhouse gases and CO2 on a large scale. This assumption about human influence is not supported by any empirical evidence, despite its widespread use as anecdotal support for what is implied by mathematical models.

Tuesday, August 08, 2006

GLOBAL WARMING LEGENDS

With the sweltering heat this summer, while many don’t take it as direct evidence of human influence, it at least brings the topic of global warming to the forefront of their minds. I don’t know how many times I have seen good morning America do a story on recent weather events and link them to global warming caused by human progress. The media, MTV, and academics all love to share the stories and legends of global warming.

Legend 1: The warming earth is causing the polar ice caps to melt. – Real data stands behind the fact that the arctic temperature was just as warm in the 1940’s as it is today and possibly warmer. A recent issue of Science indicated that in some areas ice sheets are actually growing.

Legend 2: The recent increase in major hurricanes has resulted from global warming. –The truth is while hurricane activity may be picking up; it is due to the ordinary multidecadel time cycles that govern sea surface temperature and hurricane intensity.

Global mean surface temperatures have increased by about 1 degree over the last century, however satellite data indicate that there has been no increase of atmospheric temperature since 1979. While the green house effect is an accepted phenomenon, and while levels of green house gases have increased over the last 100 years, there is no way to prove that human activity is causing global warming. Making this assumption is pretty bold, but the increased speculation about hurricanes and melting ice caps really pushes credulity to the limit.

Tuesday, July 25, 2006

WHAT'S UNNATURAL ABOUT GM

According to the European Union, food classified as GM contains genetic material that has been altered in a way that does not occur naturally by mating or recombination.

Their premise is that it is not natural to take genes from one organism and implant them in another. What are we talking about when we say 'genes'? Heuristically speaking, genes consist of a specific sequence of DNA base sequences (guanine,cytosine,adenine,and thymine) that lead to the expression of traits.

With traditional plant breeding, we develop plants with superior arrangements of DNA base sequences via the transfer of thousands of genes from one plant to another. These arrangements represent drastic changes in plant characteristics that would not have occurred naturally. (for example, modern corn scantly resembles its ancestor teosinte) Since the 1960's scientists have also been engaged in what is referred to as mutation breeding. In this procedure plant cells are attacked with gamma rays inducing ‘unnatural’ new combinations of DNA base sequences. Much of the pasta consumed in the world today is derived from wheat developed via mutation breeding. These changes to plant DNA are much more extreme than what molecular biologists are doing in the laboratory today.

Unlike traditional plant breeding methods, the laboratory techniques of molecular biology that are used to create ‘transgenic’ or GM plants induce very specific and precise changes in plants. The rearrangement of DNA base sequences is known and controllable. While these combinations would not have occurred naturally, the base sequences are common to all organisms and are as natural as can be. One could argue that the risk associated with these modern techniques is much less than with traditional crop improvement methods.

Wednesday, July 19, 2006

FALSE DICHOTOMIES

The debate over president Bush's possible veto of legislation regarding federal funding of stem cell research has been falsely characterized as a conflict between those who are ‘pro science’ and those who are ‘religious’ and ethics centered.

In this case it is the position of the media and other critics is that we should divorce ethics from science with regards to public policy. Science is a pure and objective standard upon which public policy decisions should be based, while ethics (especially Judao-Christian ethics) are equated with irrational biases and ignorance.

This hypocrisy, inconsistency, and intellectual dishonesty becomes apparent when the debate shifts from stem cell research to genetically modified foods. In this case science is equated with corporate greed and exploitation. It follows that science has been corrupted by the profit motive and is no longer objective, so we must rely on ethics or theories of environmental justice and social justice to guide our decisions.

Scientific solutions to problems always have implications for human welfare. It follows that in every case questions of ethics (often influenced by religious beliefs) arise. An honest media will portray these issues as two separate debates and steer away from the false dichotomy of science vs. ethics. One debate should be framed in terms of empirical facts regarding the soundness of the science involved. The other should encompass ethical considerations whether they involve theories of social justice, religion, or normative economics. It is irresponsible for the media, academia, or politicians to choose sides in a debate and then present it as a contest between enlightened scientists and religious nuts.

Thursday, July 06, 2006

BIOTECH SAFETY

Why are groups like CSPI and Green Peace so opposed to transgenic crops? Perhaps the most egregious perception that they try to perpetuate among the public is that GM crops are unsafe. We have been consuming foods derived from what most people consider to be GM crops(GM referring to gene-spliced or transgenic crops in laymen's terms) for over 10 years without any adverse effects to human health. Currently more than 70% of the products we find on the grocery store shelves are derived from GM crops. 90% of all enzymes used in large scale food processing result from using gene spliced microorganisms. Most people fear the laboratory techniques involved in producing GM foods. What we must remember is that the same free market incentives and regulatory system that has ensured that our water and air have been clean (with improving numbers) over the last 30 years provide no exception with regards to biotechnology.

We have more than a 40 year track record for safety with regards to more drastic crop improvement techniques such as chromosome doubling and mutation breeding. Some believe that we have taken our concern for safety too far, leading to hampered long term advancements in public health.

Wednesday, June 21, 2006

BETTER LIVING VIA BIOTECH

CSPI and groups like them are very hypocritical to go after agribusiness the way they have KFC. Our food would be much healthier if these groups did not instill fear and ignorance in the population regarding transgenic/GM foods. Just as GM crops with altered fatty acid profiles can provide healthier cooking oils there are GM potatoes that have altered protein solids that absorb less saturated fat during cooking. McDonalds refuses to use these potatoes because of the GM factor.

Transgenic/GM crops must go through multiple layers of testing before they can be approved for production and especially for human consumption. This costs millions of dollars, and creates a barrier to entry for new biotech startups and universities- all of which could be producing the science necessary for improved and sustainable healthy living.

The same regulatory agencies involved in ensuring that our food is free from pathogens, allergenic, mad cow disease, and that our medicines are safe as well- are responsible for the safety of biotech crops. The opportunity cost to our health and the world that we are bearing in the name of 'safety' in nutrition is huge.

Wednesday, June 14, 2006

BETTER LIVING VIA LITIGATION

The Center for Science in the Public Interest is after KFC for using hydrogenated oils in their food products (resulting in trans-fatty acids). Hydrogenation makes polyunsaturated fatty acids ( like linoleic acid) more stable food ingredient.

Of course the resulting trans-fatty acids are unhealthy. And of course CSPI is once again behind on their awareness of the current state of science and technology. "The beans are already in the ground." Low-lin beans that is. PioneerHi-Bred International, Inc( a subsidiary of DuPont) is now marketing and farmers are now planting soybeans with altered fatty acid profiles with lower levels of linoleic fatty acids that obviate the need for hydrogenation.

In a few years time, with more genetic and supply chain improvements they will likely be the norm for food ingredients. This is the market's response to both consumer desires and the uncertainty created by frivolous litigators like CSPI. Why waste everyone's time and money with a long drawn out lawsuit, or worse a government intervention, when we have the technology and incentives to correct the problems through institutions and forces already in place.

Of course the low-lin trait is stacked with other positive environmental health traits like glyphosate resistance. (i.e. Genetically Modified), which I am sure CSPI or other anti science and anti freedom gainsayers will oppose.

Friday, June 09, 2006

TEACHING THE WRONG LESSON

Currently there is a school in Pennsylvania that is entertaining making it against the rules for parents to have lunch with their kids on the school premises if they bring in unhealthy fast food.

Of course, their logic is that schools should teach students to live healthy lifestyles and make healthy choices. But this is not what is being taught by example. By example, this ruling would be showing children that the state defines what a good choice is and has the power to ensure that we make that choice. It teaches that experts are better able to decide what is better for the lowly pedestrian subject who claims ownership to his own body. (and by extension his family and property)

This approach would however work better teaching a subject like mathematics. Even though math is a very important subject, in my high school they did not force everyone to learn algebra. Instead they re-invented pre-college mathematics through storytelling and arts and crafts. How can we give students a free hand to make their own choices about the correct answer to a math problem through creative writing( which many modern high school math courses emphasize opinion over fact as mine did), and then act like tyrants when it comes to personal choices where opinion actually matters.

The role of the school in this matter should be EDUCATION. Teach mandatory courses about nutrition and the possible consequences of lifestyle choices. Maintain a mandatory year-round physical education curriculum. Let the life they live be the final exam.

Monday, May 01, 2006

Oil Profits

According to Energy Secretary Samuel Bodman, oil and gas prices have increased because supply has been unable to keep up with demand. He also said that it might take a couple of years before they can close the gap. He has sighted increased worldwide demand, Middle East instability, and environmental compliance as chief reasons for the shortfall.

Ultimately these firms need to invest in increasing their capacity. The high costs of environmental compliance have reduced profitability and have acted as barriers to entry, resulting in decreased supply, competition and higher prices.

Now both republicans and democrats have entertained the idea of ‘recapturing’ big profits by windfall profit taxes or repealing tax credits for ‘big oil.’ Part of their rationale is that oil companies have done nothing to ‘earn’ these profits and therefore do not ‘deserve’ them.

They forget the role of profits is not only to reward those producers who do the best job filling our most urgent needs, but they also have an essential role in directing resources to where they are in need most. And to relieve the oil markets we need those profits to encourage investment, competition, and ultimately increased supply of oil and gas. Recently Shell has proposed plans to build the biggest refinery in the US.

The idea that oil companies have done nothing to ‘earn’ high profits is farce. It is fuel that makes it possible to get our food safely to the table, provide medical care, deliver goods and services, and exercise our greatest freedom to come and go as we please. By definition profits represent the net contribution a firm makes to society. When it comes to energy, oil companies have a lot to contribute.

Smoking Ban - Cat’s Paw (University of Kentucky)

If individuals do not want to be exposed to cigarette smoke, then they have the choice not to patronize places that allow smoking. This is no different than avoiding hard rock concerts if you don't want to expose yourself to the potential threat of wild fans, possible fights, bottle throwing etc.

If workers don't want to be exposed to cigarette smoke, then they can choose other work. This is no different than avoiding other hazardous jobs in agriculture, mining, or high rise construction.

If consumers and workers are willing to bear these costs at first and if the choices of FREE individuals (the market) dictate then smoke free facilities will arise to meet their needs. We have already seen this with restaurants like McDonalds and many other family restaurants.

With each choice there is a cost that must be borne by the consumer or worker. They may have to choose a different restaurant or job. . The effort to ban smoking is a pusillanimous attempt by such interested parties to force others to bear these costs, and to get quick results overnight. Also if you assume that the air in the restaurant that you own is part of the bundle of property rights associated with owning the establishment, then such a ban on smoking should be considered a "taking" of this property. The owners of these establishments should be compensated for the loss of property rights and financial damages that result.

If our own well being and safety in such small matters are reason enough for such an intrusion on our liberty, then such government policies will not stop with cigarettes. They are only the most obvious starting place. Fast foods, buffets, baking goods, and genetically modified foods could be next.

As Thomas Jefferson said long ago: “The issue today is the same as it has been throughout all history, whether man shall be allowed to govern himself or be ruled by a small elite.”

Monday, April 24, 2006

PRICE GOUGING III

Review: In my first article regarding price gouging I discussed how fuel markets are characterized by a Nash Equilibrium strategy that prevents long term 'price gouging.' In the second article I discussed how the Clean Air Act has increased capital expenditures by nearly 400% and reduced ROI by 42% between 1996 and 2001. This I explained has reduced investment and production capacity.

What happens when we take both of these effects into account? The decreased profitability acts as a barrier to entry preventing competitors from entering the market or increasing capacity. In fact there hasn't been a new refinery built since 1972. When demand exceeds supply, prices rise but there is very little supply response. As a result prices remain high for longer periods of time.

With barriers to entry, there are fewer 'players' in the price gouging game. With fewer players, it takes longer for the market to converge to the lower priced Nash Equilibrium.

Although environmental regulations have reduced return on investment, the resulting barriers to entry have increased the market power of existing firms. In essence, it is environmental regulations that make it possible for firms to ‘price gouge’ because of the increased market power that these laws create for oil companies.

Wednesday, April 12, 2006

PRICE GOUGING II

Are oil companies really that profitable? Not when it comes to refining. Between 1977 and 2002 net margins per barrel have averaged about 2.00. In 2001 they reached 2.78, then fell back to .19. From 1988-1992 environmental compliance costs went from an annual 560 million to 2.69 billion (400%).

As result return on investment dropped 42% per year between 1996 and 2001. With reduced ROI, refining capacity is severely limited, and the profitability of expansion is greatly reduced.

The recently hailed 'record profits' that oil companies have posted since last summer are in effect an anomaly. Instead of being an indication of future profitability and expansion, they simply are a reflection of scarcity produced by increased usage, instability from hurricane Katrina and the Middle East, and environmental policy.

In essence, what policy makers should focus on are policies that will allow refining to become a more profitable venture. Profits help direct resources to where they are needed most, and we are in desperate need for refining capacity.

PRICE GOUGING

Are oil companies price gouging? If you can define price gouging as charging a price greater than what competitive market fundamentals would support, then I wish I could say YES!

Ologopolistic markets (like fuel markets) are characterized by a non-cooperative Nash Equilibrium for defection. This means that if all of the oil companies are 'price gouging' now then there is a revenue increasing incentive for discounting.

The previous analysis indicates that with price gouging, the high prices at the pump are unsustainable, and cannot be maintained for long.

However, if the high prices we are now experiencing are related to fundamentals, like increased demand from China and India, Middle Eastern instability, reduced refining capacity due to EPA standards, and hurricane setbacks, then it is likely that we will see gas prices remaining near 3.00/gallon and oil at 70.00/barrel.

Of course, much of the 3.00/gallon is still artificially inflated. (the real price of gas since 1950 not adjusting for tax differences across time has ranged 1.90-2.00) While our gas prices are not artifially inflated nearly to the extent as in Europe, we still pay a significant portion of taxes at the pump.

In addition, provisions of the Clean Air Act make it impossible to reduce shortages in one market with surpluses from others. As a result supply fluctuations lead to price spikes.

While technological progress will lead to alternative fuels in the future, a more immediate solution can be found via changes in tax and regulatory policy.

Tuesday, April 11, 2006

BIOTECH A BOON TO 3RD WORLD

MYTH: Biotechnology only benefits wealthy western economies.

Currently there are over 21 countries with major biotech production. For the last 10 years we have seen the percentage of biotech crops planted double each year.

In fact >90% of farmers that plant biotech crops are in developing countries-many of which would be considered at the subsistence level.

Biotechnology is actually a size neutral technological advancement. Unlike advances in mechanization, GPS, or inputs that may require a large scale of production, biotechnology can be adopted by the smallest of producers.

Drought resistance, disease resistance , and insect resistance are all examples of traits that are size neutral. Advancements in genomics, quantitative genetics, and molecular biology will only perpetuate this trend.

Monday, March 27, 2006

Anti-Agricultural Agenda

Some of the top reasons that people offer for choosing organic food is their belief that it is safer, better for the environment, and some go as far as to say that it is more nutritious. Others feel that it helps promote the family farmer. Through this blog I will continually resound the theme that these notions are incorrect.

Why? First, for scientific accuracy. Second, because aside from being a fad, and aside from those organic patrons genuinely seeking health and well being, there are those cohorts of an organic movement that are motivated by an anti-capitalist and anti-agriculture agenda.

Because modern technology makes agriculture an information driven and capital-intensive industry, because this is made possible by economic growth and capitalism, and because it works so well, the modern farmer makes a difficult mascot for any socialist or interventionist agenda.

These people prefer an agriculture of the past. I’m not talking about the strong work ethic and rural values that they try to romanticize in their cause, I’m talking about mules and pitchforks. For their mascot they want the `family farmer` that milks two cows and grows sweet corn for the local market. And they want the government to subsidize that way of life. They want us to believe that only this type of organic production is healthy and sustainable.

The modern farming operation then becomes a `factory` farm and livestock management is deemed cruelty.

The truth is that this is an anathema to modern agriculture, and the most anti-agricultural stance one could take. This vision promotes the stereotype of an ignorant rural America devoid of education and technology. It then stigmatizes the modern producer that takes advantage of better education (High School FFA or College) and technology like herbicide resistant crops and improved livestock genetics.

While organic foods can offer us a fad choice and possibly a sense of nostalgia, modern agriculture will provide us with food, fiber, medicine, and perhaps energy for years to come.

Thursday, March 23, 2006

FARMERS' MARKETS

Do we need local governments to subsidize the development of farmers’ markets? Farmers in fact already have developed markets for their products-the CBOT (Chicago Board of Trade). More and more farmers are utilizing the risk management tools offered via futures markets. In addition direct contracting with buyers allows other firms to share market risk traditionally associated with agriculture.

According to the USDA, 40% of total agricultural production in 2003 (vs. just 11% in 1969), and 47% of livestock production, was accounted for by contract marketing. For small operations this accounted for 20% of their production and more than 50% of production with regards to larger operations.

Of course this mostly comprises major food staples like livestock, corn, wheat, and soybeans as opposed to produce. More so than farmers, city and local governments have stronger interests in local ‘farm’ produce markets for the sake of local tourism and to promote so called ‘green’, ‘sustainable’, or ‘organic’ agriculture (see also 'Is Organic Better').

The truth is, as agriculture has evolved into a heavily capitalized information driven industry, there are too many other profitable investment opportunities for producers to engage in as opposed to tomatoes and carrots. Investments in RTK (real-time-kinetics) technology or a GPS consulting service can save enough in production and energy costs to pay for itself sometimes within one season -and is a free market solution to environmental pollution (see 'Free Market Agriculture-Green Profits').

Livestock markets have overcome the equivalent to the age-old ‘lemon’ problem by using micro chip inserts. This technology can guarantee the identity, health, and genetics of livestock, allowing producers to receive a premium for better livestock.

It's likely that many of the ‘roadside pickup truck’ marketers are the weekend gardener types. Local governments and fad enthusiasts may be trying to capitalize on the romanciticism of old fashioned agriculture to promote tourism via pork barrel spending. I think this undermines those legitimate producers interested in transitioning from tobacco to produce, and tarnishes the image of the modern producer and the self-reliance that modern technology makes possible.

Friday, March 17, 2006

GM TOMATOES

Myth: The reason the tomatoes on my salad are so pale and tasteless is that they are mass-produced or genetically engineered.

Many consumers have a negative attitude about Genetically Modified (GM) foods because they think that their perceived bad experiences with them in the past only confirm the bad press that they may have heard.

One example includes GM tomatoes. When tomatoes ripen certain enzymes begin to degrade the fruit’s cell wall (because breakdown of the fruit is necessary for seed dispersal). While this makes ripe tomatoes tender and juicy, it also makes them very susceptible to damage and disease.

There are many ways that producers try to avoid this. With organic produce you can harvest early. Buyers can then ripen them in the window seal. Conventional producers harvest early and then treat their produce with the ripening hormone ethylene. Genetically modified varieties have altered enzyme systems that allow early harvest and delayed ripening.

In every case, the end product is typically a chewy, pale, tasteless tomato. There is no way to distinguish a GM tomato from any other based on taste or appearance. Nor is there any difference in safety or nutritional quality. In fact, GM tomatoes can be produced with fewer herbicides and pesticides than conventional tomatoes ( see also 'Green Profits' and 'Is Organic Better?' ) making them much safer.

Thursday, March 02, 2006

Free Market Agriculture II

It is easy enough to recognize that when it comes to issues regarding production and the environment that free markets and agriculture go hand in hand (see ‘Free Market Agriculture:Green Profits’ post ). But, how does one approach the issue of government funding and farm programs?

There are two things that I would like to point out regarding this issue.

1) Total spending on agriculture comprises 1% of the federal budget. Of that amount, less than half is allocated to the producer. The bulk of the rest is spent on aid to the poor and school lunch programs.

2) Despite that the funding is a small proportion of total federal spending, there are still market distortions that result from these programs.

One Iowa State University economist has pointed out that up to 1/3 of the price of farmland can be attributed to government payments. In fact many producers have expressed that government programs have increased the price of land and impeded their ability to expand their operation and remain competitive.

It seems that while many producers favor maintaining a safety net, they are also utilizing technology, crop insurance, and marketing tools to manage much of the risk characteristic to their market. In addition since agricultural production is very much an export-oriented enterprise, free trade is essential to opening up markets for food and fiber.

With the amount of lobbying and rent seeking that goes on across the board in all industries, it is not accurate to characterize the agricultural industry as having a prominent interventionist overtone. It turns out that modern agriculture is very much a free market friendly industry.

Friday, February 17, 2006

Bush Bio-fuel

President Bush in his state of the union address made it a national goal to reduce our dependence on foreign oil by 75% by the year 2050.

Is this realistic? Lets look at the facts.

1) We currently produce 40 billion gallons ethanol (corn) out of a 146 billion gallon gasoline market, which is approximately 3%.

2) After this year estimates indicate that biodiesel production will be >100 million gallons out of a 55 billion gallon market for diesel fuel.

3) Current estimates based on current technology indicate that it would require 40% of cropland to replace just 10% of gasoline consumption.

We may not be able to replace 75% of our gasoline and diesel consumption with biofuels, at best we may only be able to pick up the slack in conjunction with improved fuel efficiency, hybrid fuel technology, and increased domestic production. It is estimated by the department of energy that we could replace 30% of gasoline consumption by the year 2030 with biofuels.

With technological change over the last 50 years, we produce twice the output per unit of energy than we did 50 years go. Even modest increases in biofuel production will help alleviate the volatility of our balkanized gasoline markets dictated by EPA rules. Biofuels are more than just a PR opportunity for modern agriculture; they are another example of how technological change will once again help markets triumph over 'limits to growth' pessimists.

Thursday, February 02, 2006

Minimum Wages = Minimum Opportunities

Recently there has been talk about raising the minimum wage in Kentucky.
Basic economic theory and empirical evidence tells us that increases in the minimum wage leads to increased unemployment (via decreased hours,decreased hiring,consolidation of duties) especially among the low skilled. It also increases the potential of discrimination.

By cutting off the potential for low skilled workers to develop human capital ( ability to follow directions, be on time, communicate with others etc.) these policies condemn many to a life of poverty. In addition they give larger corporations like Wal-Mart a competitive advantage over small proprietors.

The assumption that a third party could arbitrarily determine the value of one's labor is not only arrogant but logically confusing. It makes an assumption of a 'just price' for labor.

In the case of goods, when you pay $15 for a CD you do so because you value the satisfaction that it brings to be worth $15 or more . When the retailer offers to sell you the CD for $15 he believes that the CD is worth at most $15, but probably much less. When two people have completely different valuations for a good, there cannot be ‘one’ price that is just. Increase the exchange to include millions of others, and the problem becomes much more complicated. It therefore seems an impossible feat for a third party to be able to calculate a price that even closely approximates a ‘just price.’

This same logic also applies to the price of labor.

Tuesday, January 31, 2006

Organic Destruction

While organic production avoids synthetics, it introduces other hazards to our health and environment. Organic producers use 'naturally' derived substances such as copper sulfate and pyrethrum, which are just as toxic and carcinogenic as many conventional chemistries.

Organic cultural practices require tillage and the use of manures, which both contribute to erosion and pollution. Organic production also can have yields as low as 10-40% less than conventional methods. Thus feeding the world via organic methods would require more land i.e. destruction of habitat and biodiversity.

Tuesday, January 24, 2006

Is Organic Better?

The first myth or misunderstanding that I would like to address is that "organic foods are healthier and better for the environment than conventional and GM foods."

Health and Safety
Many people fear synthetic pesticides and herbicides. The media in its use of terms like "factory farming" and "frankenfoods" has helped create the perception that GM foods are unsafe as well. Since organic foods avoid chemicals and 'genetic engineering' people naturally think that they are safer. Since organic products are produced naturally on 'small' family or cooperative farms people feel that these foods are better because quality is lost with mass produced foods.
The Facts
1) Mass produced foods are able to be produced with great precision, getting each plant what it needs as accurately as technically possible using GPS technology.

2) Even organic and 'natural' foods are not 'natural'. They have been developed by plant breeding that involves bringing together thousands of unknown gene combinations with unknown functions. Seedless grapes and watermelons result exactly because these combinations have adverse effects on the plant embryo(seed).

3) Without herbicides, you get weeds that can host pests. In absence of pesticides, pests feed on plants, which can lead to disease and mycotoxins that are known carcinogens.

4) Transgenic crops will actually enable us to improve the nutritional quality of our food- on the market now we have 'Vestive' soybeans that have improved fats that obviate hydrogenation and unhealthy trans-fats.

Next I will discuss myths regarding environmental pollution and organic vs. conventional foods.