Ferguson is a hack. When he fails to deal with the mendacity of Conservatism, the criminality for the sport of it by Roger Stone et al, and Trump’s pardoning of Stone, Manafort, et al (while letting the snowflake tears pour from his eyes about a jury finding Trump guilty thirty-four times) it’s a waste of time taking him seriously. Corruption? Not a mention of the Republican appointment dominated US Supreme Court, which is a cabal of men, a cowed woman, who proclaim themselves above the law. Ferguson can keep pretending his accent gives him weight, but a hack is a hack is a hack.
Yes, this. "Sir" Niall's descent from interesting economic historian who writes gracefully to fully paid-up member of the wingnut-welfare ecosystem is one of the sadder and more remarkable recent intellectual transitions. One is never quite sure what put him over the edge - islamophobia? Silicon-Valley-induced IQ-essentialism? It is a mystery.
I’m sorry but any comparison between Trump’s trials and Soviet Justice is idiotic. Please name one right or protection enumerated in the 4th thru 8th amendments to the constitution that any accused person in the Soviet Union ever had. Now name any of those rights and protections that Trump has been denied.
Prof. Ferguson may not like how most of the judges in Trump’s trials have conducted matters, but any comparison with Soviet judges is laughable. He may not like censorious academics and ‘progressives’ on social media. Neither do I. But no, the FBI is not the KGB, the DC jail is not the Lubyanka, and Steve Bannon and J6 convicts are not transported to the GULAG.
I’m sure many Trumpists have never read Solzhenitsyn, but it is impossible to believe that Ferguson hasn’t.
Yeah, Ferguson is clearly a smart guy and a great writer but that was a tough read. The the US is the late Soviet Union because some members of the Democratic Party subscribe to DEI? What? Ferguson is clearly someone who’s been captured by his audience, which will only get worse since he’s now officially a free press regular. Pretty embarrassing stuff for such a brilliant guy.
He never does a direct US-China comparison on any metric. Wherever he does compare USSR and USA, he notes that USA's numbers are much better, but worse than expected(no mention of China).
There's almost no attempt to prove Chinese superiority on any of the criticisms he makes.
He never tries to show any similarity between 80s USA and modern China.
Everything he says about foreign policy is built on false premises.
Even if one agrees with the title, that was a terrible article.
How did we get to where people who are living longer, healthier, safer, richer, freer, and smarter lives than their ancestors could have ever dreamed of are so convinced that everything sucks and it's only getting worse? And what can we do about it?
One of the hidden costs of progress is that once society loses collective memory of a solved social challenge, we fail to appreciate the conditions of adversity in the before times.
We've seen this just in the past four years with COVID vaccines. Interestingly, people with lived experiences of being alive before the 1950s and remembering polio were less likely to be anti-vaccine and more likely to take the vaccine. Paradoxically and tragically, the success of the COVID vaccine engendered an anti-vaxx mindset that has now undermined all previous immunization and inoculation efforts. Not only are the descendant strains of SARS-Cov-2 endemic, basically with us forever like the flu, but we're also making measles, polio and tuberculosis great again.
The steady drumbeat of doom-and-gloom stories from the mainstream media. Everything's a "crisis", every day there's something new that's killing us, one more thing to worry about. Coral bleaching! Microplastics!! Ultra-processed foods!!!
The only good news that gets in the paper is on the order of "someone found their lost dog". Bully for her, I guess, but I don't know her so I don't care.
The media does what they do because it sells. It sells because it's what We the People are choosing to buy. It's disingenuous to blame the Evil Media for shoving it down our innocent throats.
On the health point it really depends on what periods in time you’re comparing. Chronic illness has risen to 50% in the United States (2018). Life expectancy is actually decreasing now (in the US). Our food system is poisoning us with the “progress” we’ve made in making processed foods (esp. oils) so cheap and prevalent.
“And as Matt Yglesias writes, progressives really need to stop thinking of infrastructure and industrial policy chiefly in terms of the jobs these policies create, and start thinking about them in terms of the actual physical things they create.”
This should be pitched in a long-term, big-picture perspective. The infrastructure built-out today is what will make for a more-efficient labor force and reduce costs/raise productivity in future enterprises -- both private and public. The dams built in the previous millennium were the dams that cheaply power the first server farms for Google, et alia. The internet made the cost of a bank transaction drop from $1.00 to $0.1, the cost to process an airline ticket from $10.00 to $1.00. E-commerce, shopping without driving from store to store. If you’re saving money, you’re making money. What other innovation could reduce overhead by these percentages? The Interstate Highway System, built for military logistics purposes: imagine Amazon, UPS, FedEx, et alia without this infrastructure. Before this it was railroads, which are still the cheapest way to ship goods/commodities either direction when they come off or are loaded on a container ship. This list goes on.
Alon Levy's done great work exploring the USA as the Build-Nothing Country. Read the essays on pedestrianobservations.com and the problems are technical, political and cultural -- all mutually reinforcing.
Like the failure of USA to build high-speed rail is all three. The technical failure is that historical antipathy toward railroads reached a crescendo in the Progressive Era and innovation basically stopped a century ago. Europe and Asia continued to innovate while America turned its back on railroads. This is where the political and cultural dimensions come in. In order to even catch up to European and Asian standards, America basically has to let European and Asian railroad managers show us how to do our jobs. This would pierce the armor of American exceptionalism, and this is a bridge too far for both elected officials and American culture as a whole.
On Pedestrian Observations, you come to realize that the answer to the question "Why is American infrastructure so bad?" is revealed in another question: "Why is bad infrastructure so American?"
Levy does a lot of cross-country and cross-continent comparisons of costs and techniques. As far as construction and operations, he does note that Italy and Spain have low costs for Europe, while Japan is somewhere in the middle. Taiwan, I think is high. Anglosphere countries have been trending the wrong way toward American costs and practices.
Niall Ferguson is my idea of an unreliable source. A dispeptic conservative always pushing his ridiculous agenda. Should Trump win, expect lavish praise from him of Protect 2025. Nevermind that implementing it would amount to a revolutionary takeover by a minority scarcely larger than the Bolsheviks of 1917.
I would question why rural broadband is a goal worthy of pursuing. We should discourage rural living and encourage people to move to suburbs if not cities. At the very least, we should not incentivize it with free government goodies.
This whole idea is a terrible one when it takes two weeks to get a Starlink kit and a few hours to set it up.
Because our cities and suburbs are getting overrun, driving up housing costs and the cost of everything else. Giving rural areas access to broadband incentivizes remote workers to leave the cities and makes a large swath of the country available for industry. There is a lot of room for people in this large country. We need to spread out the people and the jobs. Burdening the broadband expansion with liberal utopian regulations is criminal. If you wonder why so may people support Trump, it has to do more with hating that crap than a cultish following of Trump himself. All across the country, you see Buc-cee’s popping up along the interstates with hundreds of gas pumps. Why aren’t there charging stations there?
It’s not cost effective to provide services far from the populated areas in terms of per capita spending. I have no issues with people living off the grid in rural areas but they should figure out their utilities instead of getting handouts from the government. US is not nearly as densely populated as Europe or Asia and suburbs are almost certainly not very dense. If people still hate living among other people, they are free to make other arrangements but I don’t want debt financed tax dollars to subsidize their lifestyle. A lot of MAGA folks think they are going to stick it to libs or city folks or whatever. No, he’s going to give me a tax cut and screw you over. If you’re not worried about a second Trump Presidency, neither am I.
The RMI chart shows Vietnam solar and tries to present it as an exponential increasing thing.
As someone who lives in Vietnam this is the kind Gell-Man Amnesia type thing that has me questioning all the other data they present.
The reality is that there was ZERO progress on solar and wind in Vietnam after 2020 because the law authorising feed in tariffs expired and there was no way for new solar or wind to be paid. It wasn't until November 2023 that the Ministry of Industry and Trade finally issued new feed in tariffs for new projects. And then in March 2024 a new draft framework was put into place ending all by-laws tariffs and saying they needed to be negotiated with EVN, the state power company.
All of which has basically all solar and wind at a standstill for years. With no clear roadmap to starting things up again. The complete opposite of the exponential arrow they draw on their chart.
"A proposed decree is set to say individuals’ rooftop solar systems can connect with the grid but EVN will not pay them anything for their electricity.
They are not allowed to sell to any other buyer either.
Analysts warn that this policy will discourage people from investing in clean energy.
"When people invest they expect to recoup their investment," Ngoc Duc Lam, former deputy head of the ministry’s Institute of Energy, said.
The Electricity Law requires any person or business selling even 1 kilowatt of electricity to the government must acquire a license and report their revenues to the government."
Everything I wrote except the final segment applies to utility solar here. I probably should have included some segue text for the final segment "Rooftop solar is also completely paralyzed by this dysfunctional state of affair as this December 2023 article from the local news shows" to make it clearer.
I find it quite interesting that in the FT graph, the big divergence between EU and USA starts when Europe started a strong austerity policy. Noah, I would love to read an article on your opinions about the European austerity policy of the 2010s!
What I’m really curious about, in an incredibly self- interested way, is when ordinary people will/did start seeing dividends from the green energy revolution in their bills. Take me for example. I use a lot of AC because it’s comfy and I can afford it, but my PG&E bill for cooling an 1800 square foot house is still about $650-700 a month (we also have an EV and a PHEV). And the rates for delivery and generation keep going up. Probably a lot of this is California dysfunction, so I’m also interested in the trends in other states.
The other poster mentioned Australia so let me give an anecdote from a friend of mine who lives on the coast a few hours north of Sydney.
He's got rooftop solar. A fair amount of it, due to have a large workshop on his property.
Not only does it mean he pays no electricity bills ever. But when I was there visiting I mentioned his terribly leaking single paned louvred windows and how drafty and cold it must be in the winter. Whether he was going to replace them.
He said since heating is free he doesn't see a pressing need to improve the windows or insulation of his house.
So in a sense, solar has saved him tens of thousands of dollars by removing the need to care about energy efficiency (which is mostly what insulation is about).
The other thing to keep in mind is how incredibly mild the climate is in that part of the world. If a winter day has a maximum below 60 (Fahrenheit) they break out the puffer jackets and gloves.
Certainly something I've been thinking very hard about. My house was built in 2016, and it's already wired for solar. The problem is the upfront cost is pretty significant and honestly a lot of solar providers have poor reputations, like SunRun and even Costco. Also I live in a six-plex, so I don't have nearly as much roof as your example.
Some of you will have repeatedly heard this, but rooftop solar in Australia really is a poster child for showing how renewable energy- and specifically solar energy- can save consumers money.
Getting solar is now the default option for single-family housing in much of the country, as the unsubsidised payback time is about 5-7 years.
What shocks me about debates on rooftop solar is that reliance on "payback time". If you simply run the numbers, the ROI (return on investment) is better than one can achieve with almost any other investment (stocks, bonds, etc) you can buy.
I have solar and live in the high desert…so decent sun but I’m pretty far north. Our area is considered good for solar but not great.
All of that said, our payback time is about 15 years….however, an under rated benefit is inflation protection. Barring something destroying the system/panels that is not insured my energy costs are capped at what my loan costs to service. In this day and age that is a nice benefit
Green energy is going to win for simple economic reasons. Noah describes this as “Human ingenuity finds a way. Technology is the ultimate resource …”. In a model of the real economy production has two channels, physical and intellectual. They have completely different time constants for the decay of the new physical or new intellectual production. New physical production involves the consumption of physical capital with physical labor and stored intellectual capital. The Real Physical capital channel has a loss terms for consumption in other processes and an entropic loss term (e.g. food spoils, buildings decay, …). The Intellectual production channel has a loss term for new knowledge correcting incorrect prior knowledge but no entropic loss channel. The Physical Sciences provide crucial intellectual production which accumulates with little loss. However all channels eventually decay unless we figure out fusion.
The discussion of the TCJA misses evaluating the impact of the critical component in increased capital investment: The full expensing of capital investment vs. The reduction in the corporate rate. I’ll postulate that nearly all the impact was from full expensing of capital investment. I find no compelling argument for depreciating capital investments. It makes understanding companies far more difficult. In one of my efficient tax models I consider no corporate tax, dividends taxed as income more progressively than wage income for individuals, capital gains on stocks for individuals taxed as income more progressively than wage income. And get rid of the stepped up basis (which I and many of my boomer friends who grew up on the Peninsula have benefitted from). With that change, and progressive individual tax on realized capital gains, with a complementary individual tax on dividends (required channel balancing) would have multiple benefits. It would remove the relative opacity of evaluating a companies multiple depreciation schedules and make the market far more liquid and responsive. Individuals would be evaluating a relatively simple situation: No stepped up basis for heirs; No delaying taking regular capital gains to manage the progressive taxes on capital gains and the complementary dividend tax channel. A company would have to balance growth through capital investment with paying a steady stream of dividends and stock buy backs to individuals to minimize their aggregate taxes.
Interesting point about the US having the highest “Actual Individual Consumption” in the world, but is that truly a strength? For example, if you’re forced to pay hundreds of dollars in gas to commute from your suburban home to work every day, is that consumption making you or the nation better off? If you have to pay thousands a year in copays and deductibles and other fees for basic health consultations and normal medical care, is that consumption reflecting a “lavish” life style?
> renewables aren’t leading to reliability problems, as many had predicted
Unfortunately, no. They absolutely are.
Blackouts are the worst possible outcome because a sudden voltage sag can cause equipment to trip offline, including generation plants. In the worst case scenario of total loss of frequency stability everything disconnects to protect itself from physical damage, and the grid requires a black start. Most countries have never done a black start in their history and it's generally believed it could easily take days to bring power back online. Grid operators have a variety of ways - currently - to prevent such a catastrophic event in the event of a sudden generation shortfall. This is hard-wired into the grid. In a sudden shortage gas turbines can spin up, industrial users can be cut off automatically (and compensated for that), and of course spikes in spot prices force others to shut themselves down. The shortages caused by renewables are typically not instant in the same way a station tripping is instant, but can be predicted a few hours in advance.
In this context reliability problems surface first as deindustrialization, not blackouts, so the graph Noah presents is not terribly informative for the early stages. What we actually see in countries that genuinely tried an energy transition (the USA has not) is like this:
> Germany is losing important sectors of the economy and industry. Those who still survived the Corona measures are now facing massive increases in energy prices. Many businesses, the self-employed and companies can no longer bear the cost explosions. In addition, there is the danger of blackouts due to a power shortage. The consequences are insolvencies or the migration of companies abroad. This does not only affect the manufacturing industry. An overview of which companies want to leave Germany – or stop production here – you will find the current list further down in the article.
Deindustrialization is certainly one of the outcomes predicted by those who pushed back against forced renewables transition.
But blackout risk is also real and has never gone away:
> the German transmission system no longer handles the "n-1 error" in every case. This means that if, in a tense situation, one of the large transmission lines suddenly fails due to a lightning strike, long-wave conductor cable vibrations in strong wind and snow, sabotage or a transformer/high-voltage switch fault, " the power grid could become unbalanced " - in other words, collapse in a domino effect. The result, translated, is that there could be a partial grid failure or, in the worst case, a blackout. This time it is not me who is saying this, but the team leader for system behavior in the strategic grid planning department at TransnetBW. I wrote this on the axis years ago and was insulted for it.
There's a couple of other technical problems with the transition that is generally overlooked by all except grid operators:
1. Inertia. Existing power grids rely on the rotational inertia of the turbines in large thermal or hydro power plants to keep the system frequency locked, especially in the event of a sudden trip or load block. Other generators like solar and wind are asynchronous and converter based, because they have either no or nearly no rotational inertia of their own. They follow the frequency set by the thermal plants. This works OK when there aren't too many of them and they can rely on nuclear, coal and gas to act as a frequency buffer. But nobody knows what a grid looks like without turbines to act as wave-formers though. Some new fully electronic solution would be needed, yet no such solution presently exists. Politicians aren't aware of this problem because it's too technical for them, and have been ploughing ahead with mandates regardless.
2. You can't black start a grid with only wind and solar.
There's a good article on the problem with loss of rotational inertia here:
> Without this stabilising force, the grid could face a greater risk of frequency excursions that could force generators offline or cause outages like the 2019 blackout that affected about 1 million consumers across Southern England. While a variety of factors contributed to the blackout, the loss of inertia was a critical element in the system failure.
> the synthetic inertia offered by battery storage is an ultra-fast response time; any response time at all is a spike on the mains otherwise known as a RoCoF event. It was this reliance on synthetic inertia rather than real inertia that caused the 2019 blackout in Southern England. While synthetic inertia is excellent for recovering from faults, it cannot prevent them occurring in the first place.
I would like to disagree with the conclusion that lower corporate tax rates increase investment. My direct observation and experience over 45 years says no they don't. Why?
Who invests when tax rates are cut, but demand is not there?
Who buys a $75,000 new truck at $69,000 when you have a good one and you really just do not need the truck? You don't have a need for, also called demand.
Do lower tax rates increase existing capacity expansion? Not unless demand or speculation says so. Think over built housing and commercial buildings.
Financial companies, Private Equity, Investment Banking don't make greater equity investments do they? I think they already have low tax structures. Buying a company doesn't mean hard P&E investment.
So, I think lower corporate tax rates do not increase capacity, create capacity without identifying demand. Once demand is identified ,invest.
I would imagine an analyis since WW2 supports my observations.
For any given amount of demand, capital costs will affect how much of that demand you can meet.
Suppose if you bought a new truck you could scale up your moving business to serve a bunch of customers who currently can't quite afford your services. But right now trucks are too expensive, so it isn't worth the cost to serve those customers. But then the government passes a tax cut, so now your financing is cheaper and you can afford to buy a truck and serve those customers. So you buy the the truck and now more people can get moving services.
The demand was already there. All that was needed was the cheap financing.
Noah has tried to explain this to me once before and he clearly understands taxation theory better than I do, so I apologize for asking this again. But:
Isn't the optimal policy not to abolish the corporate income tax completely, but to make dividends tax-deductible, so that only retained earnings are taxed?
It seems to me there's a clear market failure when retained earnings finance a large share of new corporate investment. The CEOs can't all be right when they think their own firm has investment opportunities with above-market expected returns... it's like all the children in Lake Wobegon being above average.
If you assume this is a principal-agent problem, with managers systematically biased in favor of growing firm size at the expense of shareholder value, then it seems as if the right policy would be a zero tax rate on distributed profits and a positive tax rate on retained profits. You could bring that in just by leaving the marginal rate schedule alone and making dividends fully deductible. Am I wrong about this?
This is how it works in Australia -- dividends come with franking credits -- and I wouldn't say it has any massive material differences in investing or business culture from what I can tell.
There's also a fair amount of research that the stock price of companies simply gets bid up to account for the tax deductibility of dividends making them, in practice, not actually all that deductible since the value of the dividends then simply gets taxed as capital gains.
Australia has a similar interesting system of wage boards which is ruined by how they've given everything related to wages and retirement an impenetrable silly name.
Try to guess what "casual" "super" and "award" mean.
Noah, I have consistently said that the word “transition” is actually the proper word. The problem is that the rhetoric has never taken into account the actual problems of building in America.
Nobody wants to address that. Instead of being in the “yes” mode to a planned project, everybody involved in the approval process seems to come from a no position.
Federal, State, and local governments have been larding on social goals like DEI or environmental markers or, in some cases, requiring other construction projects that have nothing to do with the original project. One of my clients had to pay for a new stoplight and new fire department piping. It was straight-up blackmail by those on the planning board.
In any event, there has been no plan for the transition. If you want to put up charging stations along America’s Interstate system, little to no state or local involvement should be required. DEI should not have to be the goal of the construction company. You make a plan, then implement it. Instead, there is no plan that I have ever heard of, and all the usual suspects for slowing down construction still exist.
As for Taxes or Tax Cuts, we are entering the world of fantasy. Revenue to the federal government has been fairly steady for many years. It is about 17.5% of GDP. Spending is about 19% of GDP. Currently, we are spending 24% of GDP. Our current budget is about 50% higher than pre-pandemic.
Even if we allow for the scared political class worried about shutting America down and the economic concerns. Overspending on economic mitigation was wasteful. While there might have been justification for the initial mitigation packages, Biden and Democrats saw a chance to add massive government spending.
There has been little talk of reversion to the mean. When the economy and employment are good, spending should be retracted to lower the annual deficit, not added to it. I think it was Admiral Mullen who, when asked what the biggest threat to America is, said the debt. With interest on the debt the second largest item in the budget, and in a short time, becoming the largest item on the budget all this talk is a fantasy.
Trump's tax cuts should expire except for the corporate tax and 100% expensing of business investment. I also prefer to tax income rather than capital. I could argue that taxing loans against your stock portfolio is, in reality, income if you are using it to pay for personal items like jets and watches, yachts, and the like. I have no issue with taxing the wealthy who use this scheme to avoid taxes.
In reality, taxes or spending will have to change...and as usual, our political class will need a crisis to do anything. Having to do so will only anger Americans more than they currently are.
The only reason to lower corporate taxes is that higher tax rates put local businesses at a disadvantage over multinationals who are better at shielding profits from getting taxed. I would lower corporate tax rates to 10% in exchange for treating all kinds of personal income as the same - long term capital gains, qualified dividends, etc.
Seconding one part of this - there is so much in the overall legal and tax and economic system that disadvantages local businesses (starting with how many major sectors are oligopolies). The big companies can simply afford to play more "games" with taxes and other tricks (and extended legal fights), etc. And have the money to adjust the system to their benefit (see Doctorow and enshitification)
One of the things Cory Doctorow wrote in a Pluralistic piece a few months ago was the proliferation of private equity firms colonizing a lot of family-owned and otherwise locally based small businesses: veterinary practices, paint and body shops, mortuaries, medical testing labs, optometrists, and the like.
I think one of the pressures is that private equity is mimicking the buy-or-bury approach of Big Tech. A lot of the independent businesses are owned by retirement-age boomers who either don't have children willing to take over the businesses or would just rather give their families a trust fund and cash out before the PE-owned businesses drive what they don't own out of business.
Ferguson is a hack. When he fails to deal with the mendacity of Conservatism, the criminality for the sport of it by Roger Stone et al, and Trump’s pardoning of Stone, Manafort, et al (while letting the snowflake tears pour from his eyes about a jury finding Trump guilty thirty-four times) it’s a waste of time taking him seriously. Corruption? Not a mention of the Republican appointment dominated US Supreme Court, which is a cabal of men, a cowed woman, who proclaim themselves above the law. Ferguson can keep pretending his accent gives him weight, but a hack is a hack is a hack.
Yes, this. "Sir" Niall's descent from interesting economic historian who writes gracefully to fully paid-up member of the wingnut-welfare ecosystem is one of the sadder and more remarkable recent intellectual transitions. One is never quite sure what put him over the edge - islamophobia? Silicon-Valley-induced IQ-essentialism? It is a mystery.
I’m sorry but any comparison between Trump’s trials and Soviet Justice is idiotic. Please name one right or protection enumerated in the 4th thru 8th amendments to the constitution that any accused person in the Soviet Union ever had. Now name any of those rights and protections that Trump has been denied.
Prof. Ferguson may not like how most of the judges in Trump’s trials have conducted matters, but any comparison with Soviet judges is laughable. He may not like censorious academics and ‘progressives’ on social media. Neither do I. But no, the FBI is not the KGB, the DC jail is not the Lubyanka, and Steve Bannon and J6 convicts are not transported to the GULAG.
I’m sure many Trumpists have never read Solzhenitsyn, but it is impossible to believe that Ferguson hasn’t.
Niall is a thin-skinned bigot. What they do when no one is looking tells you all you need to know. https://www.vox.com/policy-and-politics/2018/6/1/17417042/niall-ferguson-stanford-emails
Yeah, Ferguson is clearly a smart guy and a great writer but that was a tough read. The the US is the late Soviet Union because some members of the Democratic Party subscribe to DEI? What? Ferguson is clearly someone who’s been captured by his audience, which will only get worse since he’s now officially a free press regular. Pretty embarrassing stuff for such a brilliant guy.
Ferguson's article is much worse than you let on.
He never does a direct US-China comparison on any metric. Wherever he does compare USSR and USA, he notes that USA's numbers are much better, but worse than expected(no mention of China).
There's almost no attempt to prove Chinese superiority on any of the criticisms he makes.
He never tries to show any similarity between 80s USA and modern China.
Everything he says about foreign policy is built on false premises.
Even if one agrees with the title, that was a terrible article.
How did we get to where people who are living longer, healthier, safer, richer, freer, and smarter lives than their ancestors could have ever dreamed of are so convinced that everything sucks and it's only getting worse? And what can we do about it?
One of the hidden costs of progress is that once society loses collective memory of a solved social challenge, we fail to appreciate the conditions of adversity in the before times.
We've seen this just in the past four years with COVID vaccines. Interestingly, people with lived experiences of being alive before the 1950s and remembering polio were less likely to be anti-vaccine and more likely to take the vaccine. Paradoxically and tragically, the success of the COVID vaccine engendered an anti-vaxx mindset that has now undermined all previous immunization and inoculation efforts. Not only are the descendant strains of SARS-Cov-2 endemic, basically with us forever like the flu, but we're also making measles, polio and tuberculosis great again.
The steady drumbeat of doom-and-gloom stories from the mainstream media. Everything's a "crisis", every day there's something new that's killing us, one more thing to worry about. Coral bleaching! Microplastics!! Ultra-processed foods!!!
The only good news that gets in the paper is on the order of "someone found their lost dog". Bully for her, I guess, but I don't know her so I don't care.
The media does what they do because it sells. It sells because it's what We the People are choosing to buy. It's disingenuous to blame the Evil Media for shoving it down our innocent throats.
On the health point it really depends on what periods in time you’re comparing. Chronic illness has risen to 50% in the United States (2018). Life expectancy is actually decreasing now (in the US). Our food system is poisoning us with the “progress” we’ve made in making processed foods (esp. oils) so cheap and prevalent.
https://www.cdc.gov/pcd/issues/2020/20_0130.htm
Expectations rise faster than material wealth, and household sizes shrink faster than increases in individual living space.
“And as Matt Yglesias writes, progressives really need to stop thinking of infrastructure and industrial policy chiefly in terms of the jobs these policies create, and start thinking about them in terms of the actual physical things they create.”
This should be pitched in a long-term, big-picture perspective. The infrastructure built-out today is what will make for a more-efficient labor force and reduce costs/raise productivity in future enterprises -- both private and public. The dams built in the previous millennium were the dams that cheaply power the first server farms for Google, et alia. The internet made the cost of a bank transaction drop from $1.00 to $0.1, the cost to process an airline ticket from $10.00 to $1.00. E-commerce, shopping without driving from store to store. If you’re saving money, you’re making money. What other innovation could reduce overhead by these percentages? The Interstate Highway System, built for military logistics purposes: imagine Amazon, UPS, FedEx, et alia without this infrastructure. Before this it was railroads, which are still the cheapest way to ship goods/commodities either direction when they come off or are loaded on a container ship. This list goes on.
Alon Levy's done great work exploring the USA as the Build-Nothing Country. Read the essays on pedestrianobservations.com and the problems are technical, political and cultural -- all mutually reinforcing.
Like the failure of USA to build high-speed rail is all three. The technical failure is that historical antipathy toward railroads reached a crescendo in the Progressive Era and innovation basically stopped a century ago. Europe and Asia continued to innovate while America turned its back on railroads. This is where the political and cultural dimensions come in. In order to even catch up to European and Asian standards, America basically has to let European and Asian railroad managers show us how to do our jobs. This would pierce the armor of American exceptionalism, and this is a bridge too far for both elected officials and American culture as a whole.
On Pedestrian Observations, you come to realize that the answer to the question "Why is American infrastructure so bad?" is revealed in another question: "Why is bad infrastructure so American?"
I think Alon is pro-Asia specifically not pro-Europe: it ties in with how he was a fanatical Zero Covid advocate 3 years ago.
Levy does a lot of cross-country and cross-continent comparisons of costs and techniques. As far as construction and operations, he does note that Italy and Spain have low costs for Europe, while Japan is somewhere in the middle. Taiwan, I think is high. Anglosphere countries have been trending the wrong way toward American costs and practices.
Niall Ferguson is my idea of an unreliable source. A dispeptic conservative always pushing his ridiculous agenda. Should Trump win, expect lavish praise from him of Protect 2025. Nevermind that implementing it would amount to a revolutionary takeover by a minority scarcely larger than the Bolsheviks of 1917.
I would question why rural broadband is a goal worthy of pursuing. We should discourage rural living and encourage people to move to suburbs if not cities. At the very least, we should not incentivize it with free government goodies.
This whole idea is a terrible one when it takes two weeks to get a Starlink kit and a few hours to set it up.
Because our cities and suburbs are getting overrun, driving up housing costs and the cost of everything else. Giving rural areas access to broadband incentivizes remote workers to leave the cities and makes a large swath of the country available for industry. There is a lot of room for people in this large country. We need to spread out the people and the jobs. Burdening the broadband expansion with liberal utopian regulations is criminal. If you wonder why so may people support Trump, it has to do more with hating that crap than a cultish following of Trump himself. All across the country, you see Buc-cee’s popping up along the interstates with hundreds of gas pumps. Why aren’t there charging stations there?
Interesting that you specifically mention Buc-ee's since they are making a big push to build more charging stations:
https://www.cspdailynews.com/fuels/buc-ees-mercedes-benz-creating-ev-charging-network
I hadn’t heard that. That’s great news. Perfect place to put them!
It’s not cost effective to provide services far from the populated areas in terms of per capita spending. I have no issues with people living off the grid in rural areas but they should figure out their utilities instead of getting handouts from the government. US is not nearly as densely populated as Europe or Asia and suburbs are almost certainly not very dense. If people still hate living among other people, they are free to make other arrangements but I don’t want debt financed tax dollars to subsidize their lifestyle. A lot of MAGA folks think they are going to stick it to libs or city folks or whatever. No, he’s going to give me a tax cut and screw you over. If you’re not worried about a second Trump Presidency, neither am I.
The RMI chart shows Vietnam solar and tries to present it as an exponential increasing thing.
As someone who lives in Vietnam this is the kind Gell-Man Amnesia type thing that has me questioning all the other data they present.
The reality is that there was ZERO progress on solar and wind in Vietnam after 2020 because the law authorising feed in tariffs expired and there was no way for new solar or wind to be paid. It wasn't until November 2023 that the Ministry of Industry and Trade finally issued new feed in tariffs for new projects. And then in March 2024 a new draft framework was put into place ending all by-laws tariffs and saying they needed to be negotiated with EVN, the state power company.
https://en.evn.com.vn/d6/news/Ministry-proposes-removing-FiT-for-more-competitive-renewable-energy-prices-66-163-4164.aspx
All of which has basically all solar and wind at a standstill for years. With no clear roadmap to starting things up again. The complete opposite of the exponential arrow they draw on their chart.
"A proposed decree is set to say individuals’ rooftop solar systems can connect with the grid but EVN will not pay them anything for their electricity.
They are not allowed to sell to any other buyer either.
Analysts warn that this policy will discourage people from investing in clean energy.
"When people invest they expect to recoup their investment," Ngoc Duc Lam, former deputy head of the ministry’s Institute of Energy, said.
The Electricity Law requires any person or business selling even 1 kilowatt of electricity to the government must acquire a license and report their revenues to the government."
https://e.vnexpress.net/news/business/economy/rooftop-solar-investors-unhappy-as-government-to-stop-buying-surplus-4688350.html
Is the chart not mainly about utility solar?
Everything I wrote except the final segment applies to utility solar here. I probably should have included some segue text for the final segment "Rooftop solar is also completely paralyzed by this dysfunctional state of affair as this December 2023 article from the local news shows" to make it clearer.
I find it quite interesting that in the FT graph, the big divergence between EU and USA starts when Europe started a strong austerity policy. Noah, I would love to read an article on your opinions about the European austerity policy of the 2010s!
Pretty sure he wrote many articles on it during the 2010s, though they are admittedly over at Bloomberg.
What I’m really curious about, in an incredibly self- interested way, is when ordinary people will/did start seeing dividends from the green energy revolution in their bills. Take me for example. I use a lot of AC because it’s comfy and I can afford it, but my PG&E bill for cooling an 1800 square foot house is still about $650-700 a month (we also have an EV and a PHEV). And the rates for delivery and generation keep going up. Probably a lot of this is California dysfunction, so I’m also interested in the trends in other states.
The other poster mentioned Australia so let me give an anecdote from a friend of mine who lives on the coast a few hours north of Sydney.
He's got rooftop solar. A fair amount of it, due to have a large workshop on his property.
Not only does it mean he pays no electricity bills ever. But when I was there visiting I mentioned his terribly leaking single paned louvred windows and how drafty and cold it must be in the winter. Whether he was going to replace them.
He said since heating is free he doesn't see a pressing need to improve the windows or insulation of his house.
So in a sense, solar has saved him tens of thousands of dollars by removing the need to care about energy efficiency (which is mostly what insulation is about).
The other thing to keep in mind is how incredibly mild the climate is in that part of the world. If a winter day has a maximum below 60 (Fahrenheit) they break out the puffer jackets and gloves.
Certainly something I've been thinking very hard about. My house was built in 2016, and it's already wired for solar. The problem is the upfront cost is pretty significant and honestly a lot of solar providers have poor reputations, like SunRun and even Costco. Also I live in a six-plex, so I don't have nearly as much roof as your example.
Some of you will have repeatedly heard this, but rooftop solar in Australia really is a poster child for showing how renewable energy- and specifically solar energy- can save consumers money.
Getting solar is now the default option for single-family housing in much of the country, as the unsubsidised payback time is about 5-7 years.
What shocks me about debates on rooftop solar is that reliance on "payback time". If you simply run the numbers, the ROI (return on investment) is better than one can achieve with almost any other investment (stocks, bonds, etc) you can buy.
The inverters, particularly, have a finite life so you do have to take that into account when doing ROI calculations.
The inverters, particularly, have a finite life so you do have to take that into account when doing ROI calculations.
I have solar and live in the high desert…so decent sun but I’m pretty far north. Our area is considered good for solar but not great.
All of that said, our payback time is about 15 years….however, an under rated benefit is inflation protection. Barring something destroying the system/panels that is not insured my energy costs are capped at what my loan costs to service. In this day and age that is a nice benefit
Green energy is going to win for simple economic reasons. Noah describes this as “Human ingenuity finds a way. Technology is the ultimate resource …”. In a model of the real economy production has two channels, physical and intellectual. They have completely different time constants for the decay of the new physical or new intellectual production. New physical production involves the consumption of physical capital with physical labor and stored intellectual capital. The Real Physical capital channel has a loss terms for consumption in other processes and an entropic loss term (e.g. food spoils, buildings decay, …). The Intellectual production channel has a loss term for new knowledge correcting incorrect prior knowledge but no entropic loss channel. The Physical Sciences provide crucial intellectual production which accumulates with little loss. However all channels eventually decay unless we figure out fusion.
The discussion of the TCJA misses evaluating the impact of the critical component in increased capital investment: The full expensing of capital investment vs. The reduction in the corporate rate. I’ll postulate that nearly all the impact was from full expensing of capital investment. I find no compelling argument for depreciating capital investments. It makes understanding companies far more difficult. In one of my efficient tax models I consider no corporate tax, dividends taxed as income more progressively than wage income for individuals, capital gains on stocks for individuals taxed as income more progressively than wage income. And get rid of the stepped up basis (which I and many of my boomer friends who grew up on the Peninsula have benefitted from). With that change, and progressive individual tax on realized capital gains, with a complementary individual tax on dividends (required channel balancing) would have multiple benefits. It would remove the relative opacity of evaluating a companies multiple depreciation schedules and make the market far more liquid and responsive. Individuals would be evaluating a relatively simple situation: No stepped up basis for heirs; No delaying taking regular capital gains to manage the progressive taxes on capital gains and the complementary dividend tax channel. A company would have to balance growth through capital investment with paying a steady stream of dividends and stock buy backs to individuals to minimize their aggregate taxes.
Interesting point about the US having the highest “Actual Individual Consumption” in the world, but is that truly a strength? For example, if you’re forced to pay hundreds of dollars in gas to commute from your suburban home to work every day, is that consumption making you or the nation better off? If you have to pay thousands a year in copays and deductibles and other fees for basic health consultations and normal medical care, is that consumption reflecting a “lavish” life style?
> renewables aren’t leading to reliability problems, as many had predicted
Unfortunately, no. They absolutely are.
Blackouts are the worst possible outcome because a sudden voltage sag can cause equipment to trip offline, including generation plants. In the worst case scenario of total loss of frequency stability everything disconnects to protect itself from physical damage, and the grid requires a black start. Most countries have never done a black start in their history and it's generally believed it could easily take days to bring power back online. Grid operators have a variety of ways - currently - to prevent such a catastrophic event in the event of a sudden generation shortfall. This is hard-wired into the grid. In a sudden shortage gas turbines can spin up, industrial users can be cut off automatically (and compensated for that), and of course spikes in spot prices force others to shut themselves down. The shortages caused by renewables are typically not instant in the same way a station tripping is instant, but can be predicted a few hours in advance.
In this context reliability problems surface first as deindustrialization, not blackouts, so the graph Noah presents is not terribly informative for the early stages. What we actually see in countries that genuinely tried an energy transition (the USA has not) is like this:
https://iowaclimate.org/2022/09/25/german-industry-collapse-companies-leaving-in-drovescan-no-longer-bear-cost-explosion/
> Germany is losing important sectors of the economy and industry. Those who still survived the Corona measures are now facing massive increases in energy prices. Many businesses, the self-employed and companies can no longer bear the cost explosions. In addition, there is the danger of blackouts due to a power shortage. The consequences are insolvencies or the migration of companies abroad. This does not only affect the manufacturing industry. An overview of which companies want to leave Germany – or stop production here – you will find the current list further down in the article.
Deindustrialization is certainly one of the outcomes predicted by those who pushed back against forced renewables transition.
But blackout risk is also real and has never gone away:
https://www.achgut.com/artikel/netzbetreiber_warnen_stromnetz_kollapsgefaehrdet_wie_nie
> the German transmission system no longer handles the "n-1 error" in every case. This means that if, in a tense situation, one of the large transmission lines suddenly fails due to a lightning strike, long-wave conductor cable vibrations in strong wind and snow, sabotage or a transformer/high-voltage switch fault, " the power grid could become unbalanced " - in other words, collapse in a domino effect. The result, translated, is that there could be a partial grid failure or, in the worst case, a blackout. This time it is not me who is saying this, but the team leader for system behavior in the strategic grid planning department at TransnetBW. I wrote this on the axis years ago and was insulted for it.
There's a couple of other technical problems with the transition that is generally overlooked by all except grid operators:
1. Inertia. Existing power grids rely on the rotational inertia of the turbines in large thermal or hydro power plants to keep the system frequency locked, especially in the event of a sudden trip or load block. Other generators like solar and wind are asynchronous and converter based, because they have either no or nearly no rotational inertia of their own. They follow the frequency set by the thermal plants. This works OK when there aren't too many of them and they can rely on nuclear, coal and gas to act as a frequency buffer. But nobody knows what a grid looks like without turbines to act as wave-formers though. Some new fully electronic solution would be needed, yet no such solution presently exists. Politicians aren't aware of this problem because it's too technical for them, and have been ploughing ahead with mandates regardless.
2. You can't black start a grid with only wind and solar.
There's a good article on the problem with loss of rotational inertia here:
https://cheesecakeenergy.com/2022/02/28/grid-inertia/
> Without this stabilising force, the grid could face a greater risk of frequency excursions that could force generators offline or cause outages like the 2019 blackout that affected about 1 million consumers across Southern England. While a variety of factors contributed to the blackout, the loss of inertia was a critical element in the system failure.
> the synthetic inertia offered by battery storage is an ultra-fast response time; any response time at all is a spike on the mains otherwise known as a RoCoF event. It was this reliance on synthetic inertia rather than real inertia that caused the 2019 blackout in Southern England. While synthetic inertia is excellent for recovering from faults, it cannot prevent them occurring in the first place.
I would like to disagree with the conclusion that lower corporate tax rates increase investment. My direct observation and experience over 45 years says no they don't. Why?
Who invests when tax rates are cut, but demand is not there?
Who buys a $75,000 new truck at $69,000 when you have a good one and you really just do not need the truck? You don't have a need for, also called demand.
Do lower tax rates increase existing capacity expansion? Not unless demand or speculation says so. Think over built housing and commercial buildings.
Financial companies, Private Equity, Investment Banking don't make greater equity investments do they? I think they already have low tax structures. Buying a company doesn't mean hard P&E investment.
So, I think lower corporate tax rates do not increase capacity, create capacity without identifying demand. Once demand is identified ,invest.
I would imagine an analyis since WW2 supports my observations.
The answer is:
For any given amount of demand, capital costs will affect how much of that demand you can meet.
Suppose if you bought a new truck you could scale up your moving business to serve a bunch of customers who currently can't quite afford your services. But right now trucks are too expensive, so it isn't worth the cost to serve those customers. But then the government passes a tax cut, so now your financing is cheaper and you can afford to buy a truck and serve those customers. So you buy the the truck and now more people can get moving services.
The demand was already there. All that was needed was the cheap financing.
Thanks!!
Noah has tried to explain this to me once before and he clearly understands taxation theory better than I do, so I apologize for asking this again. But:
Isn't the optimal policy not to abolish the corporate income tax completely, but to make dividends tax-deductible, so that only retained earnings are taxed?
It seems to me there's a clear market failure when retained earnings finance a large share of new corporate investment. The CEOs can't all be right when they think their own firm has investment opportunities with above-market expected returns... it's like all the children in Lake Wobegon being above average.
If you assume this is a principal-agent problem, with managers systematically biased in favor of growing firm size at the expense of shareholder value, then it seems as if the right policy would be a zero tax rate on distributed profits and a positive tax rate on retained profits. You could bring that in just by leaving the marginal rate schedule alone and making dividends fully deductible. Am I wrong about this?
This is how it works in Australia -- dividends come with franking credits -- and I wouldn't say it has any massive material differences in investing or business culture from what I can tell.
There's also a fair amount of research that the stock price of companies simply gets bid up to account for the tax deductibility of dividends making them, in practice, not actually all that deductible since the value of the dividends then simply gets taxed as capital gains.
Tax policy is hard.
What are franking credits?
That's just what the tax deductibility of dividends is called in Australian tax code. No idea about the history of the name.
I thought you bowdlerized an obscenity there.
"This tax code drives me mad with these franking credits!" :)
Australia has a similar interesting system of wage boards which is ruined by how they've given everything related to wages and retirement an impenetrable silly name.
Try to guess what "casual" "super" and "award" mean.
At the individual level or the corporate level? I don't understand
Noah, I have consistently said that the word “transition” is actually the proper word. The problem is that the rhetoric has never taken into account the actual problems of building in America.
Nobody wants to address that. Instead of being in the “yes” mode to a planned project, everybody involved in the approval process seems to come from a no position.
Federal, State, and local governments have been larding on social goals like DEI or environmental markers or, in some cases, requiring other construction projects that have nothing to do with the original project. One of my clients had to pay for a new stoplight and new fire department piping. It was straight-up blackmail by those on the planning board.
In any event, there has been no plan for the transition. If you want to put up charging stations along America’s Interstate system, little to no state or local involvement should be required. DEI should not have to be the goal of the construction company. You make a plan, then implement it. Instead, there is no plan that I have ever heard of, and all the usual suspects for slowing down construction still exist.
As for Taxes or Tax Cuts, we are entering the world of fantasy. Revenue to the federal government has been fairly steady for many years. It is about 17.5% of GDP. Spending is about 19% of GDP. Currently, we are spending 24% of GDP. Our current budget is about 50% higher than pre-pandemic.
Even if we allow for the scared political class worried about shutting America down and the economic concerns. Overspending on economic mitigation was wasteful. While there might have been justification for the initial mitigation packages, Biden and Democrats saw a chance to add massive government spending.
There has been little talk of reversion to the mean. When the economy and employment are good, spending should be retracted to lower the annual deficit, not added to it. I think it was Admiral Mullen who, when asked what the biggest threat to America is, said the debt. With interest on the debt the second largest item in the budget, and in a short time, becoming the largest item on the budget all this talk is a fantasy.
Trump's tax cuts should expire except for the corporate tax and 100% expensing of business investment. I also prefer to tax income rather than capital. I could argue that taxing loans against your stock portfolio is, in reality, income if you are using it to pay for personal items like jets and watches, yachts, and the like. I have no issue with taxing the wealthy who use this scheme to avoid taxes.
In reality, taxes or spending will have to change...and as usual, our political class will need a crisis to do anything. Having to do so will only anger Americans more than they currently are.
The only reason to lower corporate taxes is that higher tax rates put local businesses at a disadvantage over multinationals who are better at shielding profits from getting taxed. I would lower corporate tax rates to 10% in exchange for treating all kinds of personal income as the same - long term capital gains, qualified dividends, etc.
Seconding one part of this - there is so much in the overall legal and tax and economic system that disadvantages local businesses (starting with how many major sectors are oligopolies). The big companies can simply afford to play more "games" with taxes and other tricks (and extended legal fights), etc. And have the money to adjust the system to their benefit (see Doctorow and enshitification)
One of the things Cory Doctorow wrote in a Pluralistic piece a few months ago was the proliferation of private equity firms colonizing a lot of family-owned and otherwise locally based small businesses: veterinary practices, paint and body shops, mortuaries, medical testing labs, optometrists, and the like.
I think one of the pressures is that private equity is mimicking the buy-or-bury approach of Big Tech. A lot of the independent businesses are owned by retirement-age boomers who either don't have children willing to take over the businesses or would just rather give their families a trust fund and cash out before the PE-owned businesses drive what they don't own out of business.