Unpleasant Facts

The only way to solve problems is to be willing to think about them first

Evidence of innovation

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A lot of people have been talking about the need for innovation.  It's easy to think about about inventions that haven't been made yet, and new trends that have a noticeable impact on industry sometimes get looked over by people who are worried about the lack of innovation.  The extraction of natural gas from shale is an important new technology*. Extraction of natural gas from shale has increased 14 fold over the last decade.  Before this widespread implementation, natural gas in the US was going to get very expensive. Now, projections by the EIA find that the United States' net imports of natural gas will shrink to 1% in 2035 from 11% in 2009.


This isn't necessarily the innovation that people want. At the 2011 Ira Sohn conference, Jim Chanos discussed how cheap natural gas was killing the ideas of wind and solar power as economically viable enterprises.  Natural gas will be seen as an old technology, and people complaining about the lack of technological innovation might opine about how alternative energy hopes are mere pipe dreams. If they do, it should be pointed out that these pipe dreams are being crushed by innovation in an older sector setting too a high a bar for the newer technology.

There are still concerns about this method of extracting natural gas.  James Hamilton at Econbrowser points out how these natural gas wells are getting methane into drinking water. These negative externalities need to get worked out, but overall the new production technology has been driving down the price by enough that the benefits should vastly outweigh the costs.

The chart above gives some idea of the benefits.  The orange line is crude oil, while the white line is an average of the first 12 natural gas contracts.  Natural gas has seasonal price movements, so it is better to look at the average of the contracts over a year rather than a generic front month contract.  Note how the new supply coming online from shale gas helped natural gas decouple from crude oil and prices stayed low despite the economic recovery.  

*It was developed a while ago, though the technology is still relatively new. There has been some learning by doing, and perhaps more importantly, new reserves found where the technology is applicable.

Dictatorial Incentives

When it comes to running a country, non-hereditary dictators already have among the worst incentives. They are there to get what they can from their country while they still have control. They are going to be more short term oriented than a monarchy and much less responsive to the immediate well being of the people than a democracy. When it looks like they might lose control their incentives are even worse.

The recent news about Mubarak sends a powerful message to dictators.  "Don't publicly kill your citizens. Don't enrich yourself too much at their expense.  But if you have already done these things, you might as well fight to the death of your citizens and yourselves because it isn't likely that there will be a safe way for you to give up power."

These people have done horrible things, and from Egypt's perspective this prosecution makes a lot of sense. It attempts to quell the recent surge in unrest by bringing people who have done very bad things to justice.

But if Mubarak, a leader who voluntary stepped down, is being treated like this then other dictators are going to think twice before following his lead. They have very little incentive to surrender. Assad and Gaddafi probably don't see any way out at this point*, so they have no choice but to dig in. In Yemen Ali Abdullah Saleh might have changed his mind because he wanted to keep power over the promise of immunity, but it is also possible that he didn't think that he would have real immunity.

Before extending this simplistic analysis too far it should be noted that many dictators are crazy and won't always respond to changes in incentives (and even if they were sane, one particular person will not always respond significantly to a change in incentives). Still, systemic policies that stack the deck further against a good outcome are not desirable.

We can just be thankful that none of these misaligned incentives are immediately significant in the countries run by dictators who have nuclear weapons. 

*At this point it is questionable whether they should even be offered a way out. Preventing future bloodshed needs to be weighed against bringing past wrongs to justice.

Do normal Bloomberg users not use data?

These days, people who buy new PCs running windows will be purchasing a machine running Windows 7 64-bit. I don't have strong opinions on operating systems so this seems fine, except Bloomberg's excel API does not support 64-bit applications. When asked they don't give a data at which they'll start supporting it either.  So either no one in finance is buying top end new computers that benefit from the 64-bit architecture or only a very small percentage of users actually download Bloomberg's data into excel files for more complex analysis so Bloomberg hasn't felt enough customer pressure to make sure that their product is fully compatible with the majority of new computers.

Either way, it's really weird.