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Economists have long been saying that fat people weigh on taxpayers’ finances. A 2005 study estimated that the federal government pays for roughly half the total annual medical costs associated with obesity, resulting in an average annual $175 in per-capita taxpayers’ costs to pay for obesity expenditures among Medicaid and Medicare recipients.
And a study released today revealed that the overall cost of obesity-related health-care treatment doubled in a decade to $147 billion, growing faster than obesity rates, which went up 37% during the same time period.
The new evidence fits well with what Bhattacharya, Bundorf, Pace and Sood argue: Health insurance isn’t simply a transfer of wealth from thin taxpayers to overweight ones, but a “true economic subsidy for obesity.” According to the study, health-care coverage literally encourages obesity, because people tend to become less careful about weight-gain when they know that insurance will cover at least some of the weight-related health costs in which they may incur.
Though the study found weak evidence that more generous insurance encourages greater weight gain, or that risk-adjusted premiums discourage it, there was “strong” statistical evidence that being insured increases body mass index and obesity. So, will expanding health-care coverage to drive up U.S. obesity rates to new record-setting heights? [More]
The infamous Gulf of Mexico dead zone looks smaller than predicted this year, but scientists say the reprieve is just temporary, and barely even a reprieve. Some worry that more pollution could cause the Gulf’s ecosystem to collapse.
“We’re in a condition in the Gulf of Mexico that indicates we might be near some sort of tipping point, but you don’t really know it until it happens,” said Nancy Rabelais, director of the Louisiana Universities Marine Consortium.
The federal National Oceanic and Atmospheric Administration released the dead zone data Tuesday. Caused by farm fertilizer runoff that feeds algae that in turn feeds oxygen-gobbling bacteria, the dead zone has covered an area the size of New Jersey for the last several years. This year, unexpected weather patterns — rather than a drop in pollution — have cut its surface area by half. [More]
My personal opinion might be different from the average NFL fans, seeing as how I am more than happy to give Vick a second-chance. I am not a zealous-Christian/PETA activist, screaming for his head over killing a few pit bulls.
Was it wrong of him to have a bunch of dead, murdered dogs buried in his backyard? Without a doubt. I currently own a two-year old beagle whom I take care of and spend time with every single day. For me to say I wasn't sad to hear that an NFL player had done this would be a lie.
At the same time, I have a number of friends who live either in or below the Maryland-Virginia state line. Some of them have been involved in dog-fighting at one time or another. This is not to say that the average 'southern' inhabitant is out to break laws and doesn't care about their pets.
It just means that things are different, the way of life and the way they do things are often different in Virginia and the other states below the Mason-Dixon line then they are in other states.
To make a long story short, yes, I believe Vick should have been punished. The magnitude of his first-time offense was so severe that he definitely deserved some jail-time, a lengthy suspension or both. Did he get that? Again, yes he did. [More]
Private health insurance spending on illnesses related to obesity has increased more than tenfold since 1987, according to the first research to quantify the trend.The growth in obesity has fueled a dramatic increase in the amount spent treating diabetes, heart disease, high cholesterol and other weight-related illnesses, says the study, which is published today in Health Affairs, an online journal of health policy and research.Overall, employers and privately insured families spent $36.5 billion on obesity-linked illnesses in 2002, up from an inflation-adjusted $3.6 billion in 1987. That's up from 2% of total health care spending on obesity in 1987 to 11.6% in 2002, the latest year for which data are available.On average, treating an obese person cost $1,244 more in 2002 than treating a healthy-weight person did. In 1987, the gap was $272.
And the obesity problem is "only going to get worse," says lead author Kenneth Thorpe, chairman of the department of health policy and management at Emory University in Atlanta. "The costs are up because so many more Americans are obese and because they're being more aggressively treated for weight-related illnesses." [More]
While the CDC is not a regulatory agency and has only a $43 million budget this year for nutrition, physical activity and obesity programs, it is now stepping up its efforts to combat obesity. Last week, the agency released a set of recommendations to help communities prevent and combat obesity. They include discouraging the consumption of sugar-sweetened beverages, instituting smaller portion-size options in venues such as government facilities, and requiring physical education in schools.
As New York City’s health commissioner for more than seven years, Dr. Frieden was known for measures such as banning artificial trans fats in some foods and requiring certain chain restaurants to post calorie counts on their menus. In an article published in April in the New England Journal of Medicine, Dr. Frieden and Kelly Brownell, a professor at Yale University, proposed a penny-an-ounce tax on sugar-sweetened beverages, arguing that those drinks “may be the single largest driver of the obesity epidemic.”
In his speech Monday, Dr. Frieden said measures that had worked to control tobacco, such as taxes and reducing exposure, could help control obesity, too. Those could include a tax on sugar-sweetened beverages. A 10% price increase on sugared beverages could reduce consumption 7.8%, he said. [More]
Now the final link is the emergence of some sort of cost-controlling body in health care reform negotiations.
The Finance senators were considering a tax of as much as 35 percent on very high-cost insurance policies, part of an attempt to rein in rapid escalation of costs. Also likely to be included in any deal was creation of a commission charged with slowing the growth of Medicare. [More]
Start with an original but memorable phrase. For this exercise, let's use these two sentences: I like to eat bagels at the airport and My first Cadillac was a real lemon so I bought a Toyota. The phrase can have something to do with your life or it can be a random collection of words—just make sure it's something you can remember. That's the key: Because a mnemonic is easy to remember, you don't have to write it down anywhere. (If you can't remember it without writing it down, it's not a good mnemonic.) This reduces the chance that someone will guess it if he gets into your computer or your e-mail. What's more, a relatively simple mnemonic can be turned into a fanatically difficult password.Of course, I'm hoping the wrong way on this one.
Which brings us to Step 2: Turn your phrase into an acronym. Be sure to use some numbers and symbols and capital letters, too. I like to eat bagels at the airport becomes Ilteb@ta, and My first Cadillac was a real lemon so I bought a Toyota is M1stCwarlsIbaT. [More]
What’s especially ironic abut a lot of the commentary on the post is that lots of people take assertions of uncertainty in climate forecasts as undercutting the case for emissions mitigation, so those on the Right argue for uncertainty, and those on the Left argue the opposite. In the sophisticated AGW debate, the economic justification for mitigation is seen as, conceptually, an insurance premium. If the expected warming takes place with expected effects, it is very difficult to justify the economic costs of mitigation, and therefore it is a hedge against much-worse-than-expected effects. Therefore, the greater the uncertainty in climate prediction, the stronger the case for mitigation – uncertainty is not our friend. So before you accuse me of intellectual dishonesty, recognize that in pointing out limitations in the current practice of climate model validation, I am actually arguing a point that cuts against my stated policy preference. [More]
A huge swathe of farmland spanning central Saskatchewan and Alberta, and angling northwest into British Columbia’s Peace River valley has suffered its driest winter and spring in at least 50 years (and 70 in some districts). Rainfall has been less than 40% of its normal level. Ranchers are staring at dry water holes and desiccated pasture, forcing them either to sell cattle or buy feed. Farmers are kicking at shrivelled crops. Heavy rains in late June and early July may make some fields worth harvesting but many are already lost. Some 900 farmers around Kindersley, south-west of Saskatoon, have ploughed their crops under and claimed insurance, according to Stewart Wells, the president of Canada’s National Farmers Union. He foresees losses of up to 30% in wheat, barley, rapeseed and hay, and more if the drought continues.While I resist pointing to this as evidence of climate change, since I refute contrary claims of the same sort, the oil-shale-water linkage is a known issue in the Canadian water management problem.
Worse, such conditions may become the norm. David Schindler, an ecologist at the University of Alberta, says that evidence from tree rings and ancient algae suggests that the prairies were drought-prone in the past and that the 20th century was unusually wet. The prairies lie in the eastern rain shadow of the Rocky Mountains. Almost all their rivers flow eastward from the Rockies. As global warming melts mountain glaciers, the rivers’ summer flow has dwindled by up to 60% (more in one case) of their historical average. But more water is being drawn from them for cities, irrigation and the processing of oil from tar sands. Mr Schindler fears that unless these trends are reversed, the prairies risk becoming semi-desert.[More]
Development of oil shale resources will require significant quantities of water for mine and plant operations, reclamation, supporting infrastructure, and associated economic growth. In 1980, the US Office of strategic assessment estimated water requirements of 2.3 to 5.7 barrels of water per barrel of oil.[21] More current estimates based on updated oil shale industry water budgets suggest that requirements for new retorting methods will be 1 to 3 barrels of water per barrel of oil.[22] For an oil shale industry producing 2.5 million barrels per day, this equates to between 105 and 315 million US gallons of water per day. These numbers include water requirements for power generation for in-situ heating processes, retorting, refining, reclamation, dust control and on-site worker demands. Municipal and other water requirements related to population growth associated with industry development will require an additional 58 million gallons per day. Hence, a 2.5 MMBbl/d oil shale industry would require 180,000 acre feet (220,000,000 m3) to 420,000 acre feet (520,000,000 m3) of water per year, depending on location and processes used. [23]
The largest deposit of oil shale in the United States is in the Green River basin. Though scarce, water in the western United States is treated as a commodity which can be bought and sold in a competitive market.[23] Royal Dutch Shell has been reported to be buying groundwater rights in Colorado as it prepares to drill for oil in the shale deposits there.[24] In the Colorado Big-Thompson project, average prices per share (0.7 acre feet/share) increased from some $2,000 in 1990 to more than $12,000 in mid-2003 (constant 2001 dollars).[25] CBT Prices from 2001 to 2006 has had a range of $10,000 to $14,000 per share, or $14,000 to $20,000 per acre foot. [26] In August 2009 asking prices in Utah (ex-salt lake city) ranged from $8,000-$15,000/AF.[27] At $10,000 per acre foot, capital costs for water rights to produce 2.5m bbls/day would range between $1.8 bn-$4.2 bn. [More]
2) SILVER BULLETBecause it's not a game.
No more silver bullets, please. Apparently they are really only meant for werewolves, witches and the occasional monster. While we’re at it, magic bullets can go into the black hole as well. They attract too many angry conspiracy theorists. In a Google search, the two together, along with science terms, get you 1.7 million hits. And because Alexis Madrigal hasn’t read his werewolf texts very closely, he occasionally tries to put golden bullets into his stories, so we’ll toss those as well.
A lot of these bullets are aimed at medical targets. The LA Times asks if there’s A magic bullet for pandemic flu?. And I can’t tell if this instance, Scientists to Tackle Illness with ’silver Bullet’, is made better or worse by the fact that the thing being called a silver bullet is actually silver.
Things that are not silver or magic bullets: antioxidants, carbon capture, disk encryption, GM crops, vitamins, and carbon dioxide mosquito traps. At Wired Science, there is no magic or silver bullet for: cancer, the energy crisis, and cloning endangered turtles.
And as long as we’re tossing all the bullets, we might as well send the smoking gun in after them. [More]
The ironic thing is that I'm married to a public-health nurse whose career mission is to promote healthier lifestyles. You could wallpaper our house with the healthy lifestyle literature she's brought home. Low-fat cookbooks overflow from our shelves. I have a drawer full of Healthy Heart T-shirts (size XXL – more irony there). I can recite the seven benefits of broccoli. Still, I ate like I owned Frito-Lay stock. Clearly it's not lack of information that kept me from proper eating.
Personally, I blame the low-fat yogurt ads. You've seen them – women doing high kicks in swirly skirts while sipping yogurt from ever-so-pretty containers and dancing, always dancing. These cute and colourful health-conscious messages are clearly not aimed at your average guy.
By contrast are the fast-food ads in which two men feed burgers into their mouths like steel billets through a rolling mill while discussing the merits of seared cattle flesh. Eat like a man is the message here, and saturated fats are the medium. [Great short essay]
The Obama administration announced Monday that it would seek to ban many routine uses of antibiotics in farm animals in hopes of reducing the spread of dangerous bacteria in humans. In written testimony to the House Rules Committee, Dr. Joshua Sharfstein, principal deputy commissioner of food and drugs, said feeding antibiotics to healthy chickens, pigs and cattle — done to encourage rapid growth — should cease. And Dr. Sharfstein said farmers should no longer be able to use antibiotics in animals without the supervision of a veterinarian. [More]
Caught in the discussion of antibiotic resistance is the prophylactic use of antimicrobials as growth promotants in food animals. Included in this scrutiny are ionophores (such as monensin, lasalocid, laidlomycin, salinomycin and narasin) — antimicrobial compounds fed to ruminant animals to improve feed efficiency.
Because of the complexity and high degree of specificity of ionophore resistance, it appears that ionophores don't contribute to the development of antibiotic resistance to important human drugs, says T.R. Callaway a member of the USDA Food and Feed Safety Research Unit, Southern Plains Agricultural Research Center, College Station, TX.
“Therefore, it appears that ionophores will continue to play a significant role in improving the efficiency of animal production in the future,” he says.
Callaway says these antimicrobials specifically target the ruminal bacterial population and alter the microbial ecology of the intestinal microbial consortium. This results in increased carbon and nitrogen retention by the animal, increasing production efficiency.
The feeding of ionophores to cattle decreases the feed needed for growth and increases feed efficiency, agrees Gary Weber, director of regulatory affairs for the National Cattlemen's Beef Association (NCBA).
NCBA maintains a strong stance that ionophores are not a concern for antibiotic resistance in cattle or humans. During the Cattle Industry Summer Conference in Dallas, TX, this year, NCBA members resolved to strongly urge the FDA and other appropriate agencies to reclassify polyether ionophores to reflect their true function as modifiers of rumen fermentation and coccidian prevention compound; and to discontinue classification of polyether ionophores as antibiotics. [More]
There’s all this talk in the United States, mainly from conservatives, about how woeful a public health care insurance option would be in the United States. They talk about “socialized Medicine”, and use “Canada” and “France” as curse words.
And they speak of the government getting between you and your doctor. The government paying a proportion of my fee in no way “gets between me and my doctor”. I have lived in the US with really good quality health care coverage*. But I have never, ever had a doctor like my current one. She knows me, she cares about my health in a holistic way, not just in diagnosing a particular problem. She wants to know about my past, and my lifestyle, and integrate it into her understanding of my health. On my third visit to her, I broke down into tears about something not directly related to my health, and she listened, and said that it was probably affecting me more than I realised. She gave some advice about how I might deal with me problems better, and assured me that any time I needed her, she was there.
We have a wonderful balance here in Australia. If you need health care and can’t afford it, you can get it. Everyone can get it. There are a multitude of doctors who bulk bill. And you can use the public hospital system. But if you have a little more money, you can choose the extra cover. The government doesn’t decide what access I have- they just set a level of access, and everything beyond, I have to pay for.
Is that “rationing”? Perhaps. But at least we all have access to pretty good basic cover. At least a major illness will not bankrupt us. But, at the same time, if we have access to the extra funds, we can use them and pay for extra cover. Oh, and if a particular treatment isn’t available here, the government will pay for us to have it overseas- a fact Glenn Beck grossly misrepresented in his recent rant (Do Australians go to the US for certain treatments? Yes. But he neglected to mention the fact the federal government provides funding for that).
I am thankful for a system in which I can access a basic level of care regardless of my income, where I can choose to spend additional funds if I have them available, and where I have both public and private hospital options. For that, I’m happy to pay an extra $1.50 tax for every $100 I earn. It’s worth it. [More]
Few would support the idea of only having private schools, allowing the free market to decide who gets education or not. This analogy holds for me in that a parallel private system should always be an option while basic needs are guaranteed by the public purse. I would suggest health care falls into the same fundamental rung of the economic and social mobility ladder as education.Competition and freedom of choice would be tonics for the health system, the thinking goes. But there may be a problem. Findings from a survey of individual insurance shoppers show that 15% of people looking for insurance online were deemed “uninsurable” for standard coverage by most insurance carriers.The survey, conducted by Norvax, an online service for health insurance, analyzed data from 446,500 online insurance shoppers who either requested a quote or to be contacted by an insurance broker this summer. The people deemed uninsurable either had a pre-existing medical condition or provided height and weight information that produced a body mass index of 39 or higher, indicating serious obesity.The report’s authors point out that the findings don’t necessarily mean the uninsurable will never get health insurance. But if they do, it would be extremely expensive and probably wouldn’t cover the pre-existing condition at issue. [More]
But the coldest and hardest of facts is NAIS is a breakwater issue; one that, frankly, most opponents would rather pass water on. [More]
If NCBA is to be the “umbrella” organization for the beef industry, it should devise a system that would respect minority opinion. If I thought, for instance, that NAFTA was the reason my calves are so cheap, you’d have to forgive me for not supporting an NCBA that is fully committed to free trade. If I were an Iowa corn farmer, you’d have to forgive me for resenting an NCBA that opposes federal ethanol subsidies.
So what if NCBA only adopted policy that is agreed upon by a supermajority? Maybe two-thirds? If you can’t get that supermajority on an issue, then drop it and concentrate on the issues in which do have an industry consensus. They could get consensus on things like estate taxes and public lands issues and animal rights. Put the lobbying team to work on those issues and don’t drive off half your members because 49% of them think you’re working against their best interests. [More - and read the comments for responses equally as insightful]
Handling chicken waste has long been part of doing business in this watershed. For decades, farmers took clumps of bird droppings, bedding and feathers from the houses and spread them on their land as an inexpensive fertilizer for other crops. The two states sanctioned this by issuing the farmers permits, and the industry says no individual companies or farms have been accused of violating environmental regulations.
But Edmondson says the sheer volume of the waste spread on the land — estimated at 345,000 tons per year — has wreaked environmental havoc. Runoff carries bacteria into lakes and streams, where it threatens the health of tens of thousands of people who boat and camp in the valley every year. He says the industry took the least expensive way out when it could have burned the litter as energy, processed it into pellets or even composted it until the pathogens died. [More]
The farm lobby is backing bipartisan legislation that would put into law the agriculture industry’s guidelines for farm animals’ health and welfare, and require audits of livestock farms. A 10-member council would review and possibly update animal care standards at least every five years and local governments would be pre-empted from setting their own rules.Still, at least the meat industry is deploying new tactics. Regardless of where you stand on these issues, there is a communications development for which the livestock industry has little defense: viral video.
Upset by what it calls the industry’s “blatant power grab” in the debate, the Humane Society of the United States is threatening a 2010 ballot initiative to give farm animals in confined spaces more room. Voters passed similar proposals in Arizona, California and Florida. Governors and lawmakers also enacted measures in Colorado, Maine and Oregon. [More]
Take the issue of digestion. Wrangham makes the case that our ability to heat food and thereby soften it spares our bodies a lot of hard work. And the calories saved in easy digestion reserve energy for other types of physical and intellectual activity. To understand why, simply consider how you feel after eating a light meal versus a heavy one. That shrimp salad demands less work from your intestines and makes you feel energetic afterwards; the 16-ounce steak makes you want to take a nap while your body attacks and breaks down the meal. The same differences apply to softer, cooked food versus raw, unprocessed food.
Our ancestors instinctively understood these benefits. Even when cooking wasn't possible, they found ways to soften or tenderize food. Steak tartare, for example, is thought to get its name from the Tartars who rode in Genghis Khan's army. Moving swiftly and without time to make camp or cook a hot meal, the riders would put slabs of meat under their saddles, riding on them all day until they were tender enough to eat. Softer food can be eaten more quickly than raw food, and that fact has allowed the human species to reallocate the way it spends its time. In the Western world, men and women each spend an average of five percent of their time chewing, about 36 minutes in a 12-hour day, Wrangham reports. Raw food, in contrast, must be chewed longer. For a human being to eat the same diet as a great ape, researchers estimate that we would have to dedicate 42 percent or five hours simply to breaking down our food. [More]
After a lifetime of studying — and eating — le pain francais, he says that he has witnessed with despair the slow death of the crust.
“This is a significant and catastrophic trend,” Kaplan told The Times. “The crust is what stands between France and the Armageddon of soft, mushy, repugnant loaves that we get in the US and you get in Britain, too.”
A baguette de tradition should be a “voluptuous pleasure and an exulting moment that speaks to all our senses,” he says. “But I am getting hacked off because the basic quality is essentially being thrown away.”
According to Kaplan, bakers are cutting cooking time — usually between 18 and 22 minutes at 250C to 260C — by 60 seconds or more in search of a less crusty crust.
The upshot is the loss of the Maillard reaction, a chemical process occurring at high temperatures and leading to browning and crispiness, that Kaplan says is vital to the production of a good loaf.
Bakers say that they are merely responding to market forces, determined by the growing proportion of customers who demand a baguette pas trop cuite (not too cooked). They argue that they cannot impose a crunchy surface on a society that has grown accustomed to the notion that food should melt in the mouth . [More]
The study examined how chewing almonds may impact physiology includingI am beginning to suspect we're going to be focusing much more on food and eating as the obesity rates rise. Depending on how the health care cost situation progresses, novel social and economic signals could develop to help us change what appear to be some bad eating habits and unhelpful food trends.
appetite and hunger, hormone response and the efficiency of fat absorption.(1)
The study revealed that those who chewed two ounces of almonds longer, 25 or
40 times before swallowing, absorbed significantly more good, unsaturated fat,
than those who chewed the almonds only 10 times before swallowing.
The study also explored the implications of thoroughly chewed almonds on
satiety, measuring the effects on hormones and hunger scale ratings. Increased
fat in the small intestine often stimulates secretion of several hormones
associated with feelings of fullness. Researchers measured these hormones and
also required participants to fill out an appetite questionnaire before and
after eating almonds. Although overall there were only significant effects on
the hormone insulin, subjects who chewed almonds a greater number of times,
reported feeling significantly less hungry and more full than when they chewed
the almonds less. [More]
Forests, in comparison, appear to be growing in size. A century ago, woodland covered about a quarter of Vermont. Today that figure is three-quarters — the third-highest percentage in the nation. [More]
John, the one question I have for you is this: How rotten does legislation for the reduction of carbon emissions or income inequality has to be for you to be against it? I am not saying that these problems do not exist or not need to be addressed. (Fwiw, I would have a piglovian carbon tax paid back towards payroll taxes.) I am saying that some cures can be very counterproductive and worse than the problems themselves. Let us not rush in pell-mell into "having to do something" that we lay waste to many of the things we do right.The idea of a deal-breaking point is a good one, but now let's insert the political developments to date. For example, the push for even more ag concessions continues in the Senate.
Attempts to broaden opportunities for farmers and corn-based ethanol could lose some support for the bill from environmental groups, which have been critical of the fuel for the land, pesticides and water pollution involved in its use.
But at least some concessions for agriculture may be necessary to secure the bill's passage. The Senate Agriculture Committee includes some key members that Boxer will need to win over if she is to get the crucial 60 votes needed to pass the bill, including fence-sitters on the bill like Sens. Kent Conrad (D-N.D.), Blanche Lincoln (D-Ark.) and Debbie Stabenow (D-Mich.). [More]
The world’s climate is getting warmer, and that could have a profound impact on U.S. agriculture, says Jerry Hatfield, supervisory plant physiologist with USDA’s National Soil Tilth Research Laboratory at Iowa State University.
While right-wing pundits and even some Democrats, such as Collin Peterson, may scoff, Hatfield says the world can expect warmer temperatures for the next 30 to 50 years, rising carbon dioxide concentrations and increased variability in temperature and precipitation.
Hatfield isn’t some off-the-wall environmentalist with an agenda. He’s a respected scientist who shared the Nobel Peace Prize in 2007 and chaired last year’s USDA Greenhouse Gas Symposium. He also says the phenomenon is not new.
“Climate has changed, climate is changing and climate will change. There is no such thing as having consistent climate around the globe. The real question is what sort of magnitude of change we’re going to see in the next few years.” [More]
Imagine that you're taking a test in a large public hall. Obviously, your knowledge and confidence will determine your score, but could the number of people around you have an influence too? According to psychologists Stephen Garcia from the University of Michigan and Avishalom Tor from the University of Haifa, the answer is yes. They have found that our motivation to compete falls as the number of competitors rises, even if the chances of success are the same.To be sure the headcount dwindles, but I also think the non-local nature of so much land competition (widespread operations) affects practices even more. In other words, competing against a neighbor at least prompts some concerns over long term consequences of having to live together. Competing against a guy two counties over doesn't make that issue seem too relevant, IMHO.
The simple act of comparing yourself against someone else can stoke the fires of competition. When there are just a few competitors around, making such comparisons is easy but they become more difficult when challengers are plentiful. As a result, the presence of extra contenders, far from spurring us on by adding extra challenge, can actually have the opposite effect. Garcia and Avishalom call this the "N-effect" and they demonstrated it through a number of experiments. [More]
On Tuesday, Texas oilman and energy security proselyte T. Boone Pickens announced that he will delay, and likely permanently scuttle, plans for a 687 turbine wind project in the Texas panhandle.I have the uneasy feeling we could have thousands of turbines free-wheeling if we are not careful.
The demise of the project, which was supposed to be the largest in the world at a rated generating capacity of 1,000 megawatts, came when Pickens discovered he couldn't raise money to build transmission lines to carry wind energy from his remote 200,000 acres to big cities that would consume the power. [More]
The recovery from the Depression is often described as slow because America did not return to full employment until after the outbreak of the second world war. But the truth is the recovery in the four years after Franklin Roosevelt took office in 1933 was incredibly rapid. Annual real GDP growth averaged over 9%. Unemployment fell from 25% to 14%. The second world war aside, the United States has never experienced such sustained, rapid growth.It could be we have an economic transient that can neutralize even enormous stimuli. To be fair, the stimulus is only slowly being deployed, but its size is prodigious. So maybe I'm simply early?
However, that growth was halted by a second severe downturn in 1937-38, when unemployment surged again to 19% (see chart). The fundamental cause of this second recession was an unfortunate, and largely inadvertent, switch to contractionary fiscal and monetary policy. One source of the growth in 1936 was that Congress had overridden Mr Roosevelt’s veto and passed a large bonus for veterans of the first world war. In 1937, this fiscal stimulus disappeared. In addition, social-security taxes were collected for the first time. These factors reduced the deficit by roughly 2.5% of GDP, exerting significant contractionary pressure.
Also important was an accidental switch to contractionary monetary policy. In 1936 the Federal Reserve began to worry about its “exit strategy”. After several years of relatively loose monetary policy, American banks were holding large quantities of reserves in excess of their legislated requirements. Monetary policymakers feared these excess reserves would make it difficult to tighten if inflation developed or if “speculative excess” began again on Wall Street. In July 1936 the Fed’s board of governors stated that existing excess reserves could “create an injurious credit expansion” and that it had “decided to lock up” those excess reserves “as a measure of prevention”. The Fed then doubled reserve requirements in a series of steps. Unfortunately it turned out that banks, still nervous after the financial panics of the early 1930s, wanted to hold excess reserves as a cushion. When that excess was legislated away, they scrambled to replace it by reducing lending. According to a classic study of the Depression by Milton Friedman and Anna Schwartz, the resulting monetary contraction was a central cause of the 1937-38 recession. [More]
As the mood turns increasingly negative (even if warranted) we fulfill our expectations. Rather than detecting price increases on the horizon, we still can't seem to find a bottom for some goods - like houses. So my memories of the 80's are serving me poorly again. Like my father, I could be preparing for the wrong threat.This all boils down to timing. Will Washington be able to stomach the Fed tightening the monetary supply early enough to control inflation? Let's think about that timeline.Can the Fed begin to tighten in 2009? Since unemployment will likely continue to increase to or hover at double digits through the end of the year, I find that doubtful. Until unemployment is clearly getting better, Washington won't allow the Fed to tighten.What about 2010? In February, Bernanke's term is up. After that time, Obama can decide if he wants to replace him. He probably will do so, and that replacement will probably be the President's favorite economic guru Larry Summers.With one of his own advisors as Fed chief, that will make it even harder for the Fed to resist Washington's political pressure. So imagine it's early to mid 2010. Midterm elections season is in full swing. Can you really see Congress and the President allowing Summers to tighten monetary supply and risk an economic recovery just in time for voters to head to the polls? I know I can't.That leads me to believe that the Fed will be under serious political pressure to keep money supply loose until at least early 2011 -- after the elections. I think with a new Obama-selected Fed chief in there starting in 2010, that political pressure becomes even more relevant.Will 2011 be soon enough? Time will tell, but if the economy starts improving in early 2010, I worry that may be too late to prevent a greater rate inflation than what we've seen in several decades. [More]
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This is the kind of error that technological utopians make. They assume that their particular scientific revolution will wipe away all traces of its predecessors—that if you change the fuel you change the whole system. Strauss went on to forecast “an age of peace,” jumping from atoms to human hearts. “As the world of chips and glass fibers and wireless waves goes, so goes the rest of the world,” Kevin Kelly, another Wired visionary, proclaimed at the start of his 1998 digital manifesto, “New Rules for the New Economy,” offering up the same non sequitur. And now comes Anderson. “The more products are made of ideas, rather than stuff, the faster they can get cheap,” he writes, and we know what’s coming next: “However, this is not limited to digital products.” Just look at the pharmaceutical industry, he says. Genetic engineering means that drug development is poised to follow the same learning curve of the digital world, to “accelerate in performance while it drops in price.”
But, like Strauss, he’s forgotten about the plants and the power lines. The expensive part of making drugs has never been what happens in the laboratory. It’s what happens after the laboratory, like the clinical testing, which can take years and cost hundreds of millions of dollars. In the pharmaceutical world, what’s more, companies have chosen to use the potential of new technology to do something very different from their counterparts in Silicon Valley. They’ve been trying to find a way to serve smaller and smaller markets—to create medicines tailored to very specific subpopulations and strains of diseases—and smaller markets often mean higher prices. The biotechnology company Genzyme spent five hundred million dollars developing the drug Myozyme, which is intended for a condition, Pompe disease, that afflicts fewer than ten thousand people worldwide. That’s the quintessential modern drug: a high-tech, targeted remedy that took a very long and costly path to market. Myozyme is priced at three hundred thousand dollars a year. Genzyme isn’t a mining company: its real assets are intellectual property—information, not stuff. But, in this case, information does not want to be free. It wants to be really, really expensive. [More]
I suspect most practitioners in the SaaS industry will be surprised to learn that freemium is now their main business model, as Anderson asserts. That may be true for productivity software vendors — Zoho, Google Apps and Adobe all practice a freemium model — but I’d find it hard to identify any freemium in the business models of leading SaaS application vendors such as Salesforce.com, NetSuite and SuccessFactors. Freemium won’t work for everyone. But there are a couple of important trends described in Anderson’s book that we should all be conscious of.Free stuff could be a big part of our future. Not long ago, I sure didn't see the entertainment value of the Internet showing up essentially free as part of my future. But while reading about the implications of free stuff, I stumbled across this tidbit from Tyler Cowen in an interview with Free Exchange flogging his new book:
- The cost of distributing content and software online has fallen close to zero. This is highly disruptive for companies whose business model was designed for a prior era when distribution was more costly, such as print media, entertainment and software publishing. Software with mass market appeal — so long as it’s easy to develop, operate, support and maintain — now costs virtually nothing to deliver to customers, which means the high prices and comfortable margins vendors used to charge are now being wiped out.
- Certain classes of software, delivered as SaaS, will become free at the point of use. The virtual elimination of distribution costs will allow new vendors to enter markets with business models that rely on one or more of three alternative revenue sources to cover the cost of their free offering. The most disruptive of these competitors will be the ones that identify alternative revenue sources with high value and/or high margins, because this substitute revenue will fund low-to-free software pricing in markets where conventional vendors have traditionally charged high prices. [More]
FE: In a recent Fast Company piece, you wrote of Twitter, "It's not quite a perpetual-motion machine, but if other parts of the economy were equally efficient, we'd all be swimming in free or near-free stuff." Do you anticipate that an ever larger share of the economy will come to resemble the self-ordered online world people create for themselves that you describe there (and in your new book)? What will that look like?After flinching, I realized it kinda makes sense, but seems to violate some Adam-Smithy axiom or other. As the economy becomes more about inefficient industries, are the efficient ones headed for "free"?
Mr Cowen: An ever-larger share of our personal satisfaction will come from free or near-free sectors of the economy, as I explain in my new book "Create Your Own Economy". But those same sectors won’t comprise such a large chunk of gdp, just as agriculture is so efficient that it too is a small part of national income. Inefficient sectors such as health care and education are rising in relative size. This will mean more government, more inefficiency, less accountability, and more dissatisfaction with results. One key question is how much individual liberty can survive in these niche sectors or whether the inefficient sectors will have too large a role in setting the overall cultural tone. [More][My emphasis]
