Absurd Energy Imbalances

on Mar 5, 2010

We are in the midst of two energy crises. The strange part is that in one crisis, we are running out of energy, while in the other, we have too much energy. The former, obviously, is the global crisis involving oil and renewable energy and yada yada yada. We’ve heard it a million times. We’ve also heard of the other energy crisis as frequently, though not worded as such. It’s the country’s (and beyond’s) ever-growing weight problem! Our fat deposits are really just [very large] pockets of stored energy. There’s constant talk on burning more calories as if it’s an incessant problem that never ends (in a way, it is).

Isn’t it completely outrageous that we face one problem regarding a very limited supply of energy alongside another problem with a seemingly endless supply of energy? Perhaps a good solution would be to wire stationary bikes to the electrical grid and have overweight people pedal all day. I’d advise against that, not because it’s silly (I personally enjoy such silly things) but because that would be approaching the problem backwards.

Rather, there is a way to partially alleviate both problems since a lot of energy usage goes into our food system. Without a doubt, we need to reduce the amount of food produced as the country creates about twice the calories needed by people (some of this is wasted or thrown out but quite a lot ends up in people’s stomach). We ended up with this predicament because players in the food industry have an interest in getting us to buy more and more of their products. And this isn’t an easy problem to tackle as there’s no way to swim up the raging river of interest. Still, it’s something that can go a long way in bettering our health and reducing our demand on energy.

The Financial Crisis and How We Understand How Things Work

on Mar 3, 2010

The 2008 financial crisis was especially rough because it was so unexpected. This fact raises a couple of interesting points. One is that those within the industry that understood what was really going on were keeping mum as it was in their interest to do so. The other is that so many of our economics experts and whatnot didn’t see this coming. This latter point tells us a lot about how we understand how stuff works.

There are two approaches to understand how any part of the world works. The initial and more accessible manner is to discern patterns from observations without necessarily having an understanding of the underlying mechanisms. This was pretty much the only way humans made sense of the world for most of history. This top-down approach is quick and dirty – immediately useful – and a required process to eventually, if ever, build another method of understanding how something works.

The bottom-up approach is to understand basic mechanisms and build more complex mechanisms from more simpler ones. This approach is very powerful because it works on a system of rules which allows us to make testable predictions. Empirical data, instead of coloring the model, determines whether or not the rules (and their predictions) are valid. This is actually another way of expressing the scientific process.

So a top-down understanding of the workings of a car could mean that you understand that the pedals and steering control the motion of the vehicle and that it requires gasoline to run. This is sufficient knowledge to operate the vehicle. But this doesn’t help you if you’re car begins to malfunction. A bottom-up understanding of machinery inside a car would aid greatly in this case. However, for the sake of efficiency, most of us put trust in specialists that understand cars (auto mechanics) so that we don’t need this knowledge ourselves. Which is fine for this circumstance.

How does this work for understanding something complicated than a car, like the economic system? Surely we have specialists (the “experts” I mentioned in the first paragraph) but what is their approach? For most economists (if not all) it is top-down. They build models from empirical data (and they really do an incredible job of gathering this data). Their models are probably generally accurate but not all the time. The financial meltdown is a very clear, and costly, example of when it is not. So what happened? Well, because top-down understanding is built from empirical data, it possesses the danger of being colored by the data. Over time, the model is tweaked to fit new information, which can bring about even greater surprise if it’s wrong.

So what would be a bottom-up understanding of economics? It’s most certainly difficult to approach it this way; it’s doable though. Since economics is really just social exchange between humans, we can determine a good theory of it if we understand human social behavior. I’ll be sure to discuss this in a future post.

As for our approaches in understanding how things work: each method has its strengths and weaknesses. We should use the top-down approach whenever it is sufficient, as it is very sleek. But we should be mindful of when its disadvantages may spell trouble. Otherwise, a bottom-up approach, if available, proves to be essential.

The Way We Live Will Sabotage Health Care

on Feb 11, 2010

Whatever new healthcare changes we have are ultimately doomed. It’s not that the reform ideas are bad ones; they’re actually outstanding and much needed changes. It’s just that the American way of life is very incompatible with this system. We Americans are health destroying machines and there’s no way our healthcare system can pick up the slack. We put very little means into taking care of ourselves and that has very serious, painful, and expensive consequences. Imagine if every unhealthy person in the country, which is to say most of the population, was covered by insurance. There’d be no way to pay for all of their medical expenses.

Unless we start eating better and doing more physical activity, among other things, we’re heading for a total disaster. We could very well bankrupt the country in trying to pay off health bills or fees for insurance. So take care of yourself. In doing so, you build your own “insurance” – one of your own wellbeing. I know it’s not easy as it does have its own costs, including time. But it’s one we’re better off paying now than the huge costs we’d incur in the future instead. We also need to approach our food system as we’re doing our health system, as food writer Michael Pollan has stated. With this, we will make eating healthier easily attainable goal.

Irony and Deception in Super Bowl Ads

on Feb 8, 2010

While much advertising in general is chock full of irony and deception, a high profile event such as the Super Bowl deserves some special attention.

First up, we have a Snickers ad where taking a bite out of a candy bar transforms you from a weakly granny (literally) to a young man proper for tackle football. The ad is correct in stating that “you’re not you when your hungry” but what does this say about our society? That we should eat candy bars when going out to play football because we don’t have the understanding to eat a decent breakfast? And I’m sure that a candy bar will go a long way to power a football-playing body. It probably works as well as McDonald’s for a slam dunk contest.

Next is one of the several ads by Doritos where a man crams a handful of the chips (from the looks of it, about 1/2 a serving size which is 75 calories) in a gym! It’s just totally absurd. Now I know what you’ll tell me, that it’s just a commercial and one that’s supposed to be absurd. Still, the image is disgraceful to gym rats and I find it frightening that it doesn’t seem completely implausible.

The greatest irony goes to the CBS ad on women’s heart disease awareness. The ad itself is a good public service announcement. However, I find it outrageous to see this message from CBS after seeing ads from Snickers, McDonald’s, Taco Bell, and several by Coca-Cola and Denny’s. Those last ads, by the way, were to inform us that Denny’s is giving away free Grand Slam Breakfast meals (that’s two eggs, two sausages, two pieces of bacon, and two pancakes). I’m sure your heart will appreciate that. And thank you CBS for letting us know that you care about women’s heart health.

Am I reading too much into this? Or do you also see the ridiculous ironies present in these ads?

Industries and Interests

on Jan 29, 2010

Many of my posts (present and future) discuss the “insidious” things that those in the industry do. This gives the impression that everyone in the industry will only act in their own interests and there seems to be little hope out there for humaneness. From an economic perspective, each company should do whatever is in its better interest. This is especially important for them becuause it is a matter of survival. If they don’t behave selfishly, and potentially insidious to others, they’ll be put out of business by another competitor. This is what happens within industries and the consequence is that industries are full of companies that keep pushing their own interests even if it harms others.

Here is a simple example that drives home this point. Suppose there are two companies manufacturing a certain good. Suppose Company A is can make their product with lesser cost to themselves, but it pollutes a river (or exploits foreign land, or uses child labor); Company B refuses to be so heinous, and thus has a higher price to its product. Company A will likely be more successful than Company B, and in the high stakes of business, all companies like Company B will be put out of business while only Company A types will remain.

It is futile to try to convince companies to act outside of their interests. However, there is still a way to persuade companies to act differently. The key is to shift their cost-benefit ratio so that acting in the interests of others is also acting their own interests. One way is through enforceable laws. A strict punishment, like for polluting the river or exploiting others, imposes a cost on the company and thus the company’s best self-interested strategy is to not break these rules. Another is by social economic enforcement. A company can punished by its consumers if they do not agree with the manner by which it operates. This works well when reputations are very important (they usually are) and it’s especially crucial that there is transparency to the company’s actions. It’s difficult to punish a company when we’re unaware of its awful tactics.

I believe most companies out there really want to do the morally conscious thing. Unfortunately, this often does not bode well for survival in the economic world and companies are left with the choice to either stand by its principles (and suffer great economic consequences) or to play along with the immoral game. Do you see other ways we can persuade companies to act in the interests of our global world?

Absurdity in a Soda Tax

on Jan 21, 2010

There’s talk in NY to instate a tax on soda in order to combat obesity. I believe these efforts are commendable because they could realistically reduce soda consumption. But I think the idea is absolutely absurd. We already pay a tax on soda: one that lowers its cost in the first place. Our tax dollars subsidize the production of corn and this greatly deflates the cost of producing soda. The cost of soda is artificially low because of this.

Applying a tax ignores this root of the problem and is instead a superficial fix. We would be much better off if the true price of soda was realistically reflected on the market. This would likely produce a stronger impact than a soda tax. Approaching the root of the problem would be extremely difficult though primarily because industries have a stranglehold on our government and the industries would fight hard to protect their interests. Still, if one part of government has the guts to consider a soda tax, there is hope that it can stand up for its people and not for the industries.

What do you think of the idea of a soda tax?

Democratic Government?

on Jan 13, 2010

(democratic in the sense of the principle, as opposed to the political party)

The purpose of a democratic government, such as that of the United States, is to represent the interests of the citizens – the population at large. Just as each individual specializes in some field be it engineering or plumbing, politicians [supposedly] specialize in standing for the interests of the people they are the proxy for. This government is also [supposedly] funded by the people through tax dollars.

Yet the government doesn’t always have its heart in our interests. They instead often hold up the interests of industries: like the corn industry or the pharmaceutical industry. This occurs because these industry aligns its interests with those of politicians. Industries provide funding to politicians. Also, lobbyists for industries fill political positions and vice versa, going back and forth. Clearly we have conflict of interest issues and the interests of the American people are disregarded.

This isn’t the fault of any single entity. Each actor must do what is best to survive. The ones that don’t get replaced by the ones that support this improper system. The system requires overhaul and it appears that some of the current political powers are making progress on this end.

I’ll post more regarding this topic in the future.

How else does the government not live up to the ideals of democracy?