Last week MA sent me this piece which says 1 in 10 pensioners are millionaires. I think the number is much, much higher than that. Keep in mind that the article is referring to the UK, so being a millionaire there involves more than just $1m US or Cdn.
One in ten pensionable households can lay claim to a million pounds in assets, official figures indicate. ...
This rise is in part attributed to rising property values. Prices for houses owned by the typical retired couple have climbed by £10,000 since 2006, the data showed.
A significant increase in the value of pension pots has also left retirees better off, with private pension assets increasing from £60,000 to £82,300 over the period.
There is one huge category missing from these calculations: gubmnt pensions and other programmes for seniors. What is the present value of all the gubmnt pensions and other old-age assistance programmes such as social security, Canada Pension, Old-Age Assistance, medicaid, medicare, drug plans, etc.?
Here's an indication of what I mean: suppose someone retires at age 60 with an expected lifetime of 87 years; suppose further that the effective real interest rate is 2%. In this case, the present value of an annuity paying $48K/year is just over $1m. See this. [Present value tells how much you'd have to invest at that interest rate to generate that income stream], making this person de facto a millionaire at age 60.
In Canada, just the Canadian Pension Plan plus Old-Age Assistance alone probably pay about $15K/year.
Add in the present value of health coverage and drug subsidies. Given that health plans for seniors in the US regularly cost at least $5K/year, we're already up over $20K/year. Then throw in a bit of retirement savings, perhaps a small pension and maybe the value of a house, and before you know it, the person has wealth of over $1million.
Being a millionaire isn't nearly so uncommon as it used to be.
Ever since I read much of his work in The National Lampoon in the early 1970s, I have enjoyed the writings of PJ O'Rourke. He rarely disappointed me then, and that continues to be true.
So much of what he says in this interview [via Scoop] strikes a chord with me. I especially liked these snippets:
What has been your greatest disappointment?
My parents died much too young.
If your 20-year-old self could see you now, what would he think?
He wouldn’t notice me. I’d just be another old, hopeless square.
Life, out of 10: as inspired by Spinal Tap – “Turn it up to 11”
If you have never read anything by PJ O'Rourke, try his latest.
The Province of Quebec has high debt, low economic growth, and a gloomy economic outlook. More gubmnt spending will not turn things around, and a permanent change in the economic climate will (a) take time to create and (b) not be believed until it has persisted for some time.
A sad tale of woe. And this summary from Maclean's puts it well:
For decades Quebec businesses have been plagued with repeated bouts of separation anxiety and the constant irritant of the province’s language police. The province punishes businesses with some of the highest taxes in North America, yet it has rung up a $2.4-billion deficit and a debt load equal to half its GDP, the highest in the country. When not arbitrarily overriding the rights of shareholders to protect underperforming Quebec companies, the government has flip-flopped on its attitude toward resource development. In short, it’s an economic environment layered with uncertainty, instability and state interference.
Regime uncertainty is probably one of the worst things that can happen to an economy. If entrepreneurs have little confidence in what they can count on in the way of regulations, gubmnt policies, and economic climate, they will choose safer investments and/or business ventures in other jurisdictions.
The only hope for Quebec is to create an economic climate that will promote economic growth and then stick with that climate for a number of years. Undoing regime uncertainty cannot be done quickly or easily.
What are the odds of your existing ... as you? [from Jack]
I love his conclusion [to which I have added the emphasis]. At the same time, though, this realization about the probabilities makes me feel less like a miracle and more like an insignificant random event. What if Mom and Dad had been in a slightly different position and a different sperm cell had won the race? What if they hadn't married when they did? Or at all? Etc. I wouldn't be here.
That's a little unnerving, I must say.
Those four words, people respond to incentives , capture the essence of much of economics.
Here is another example that my son (Adam Smith Palmer) and his friend explained to me over the weekend: Air conditioner theft.
When the price of copper sky-rocketed, it became pecuniarily rewarding for people to find old copper and recycle it.
Not all of the old copper they found was old, though. Enterprising thieves also found that they could steal air conditioners (not the window type, so much, but the big units that sit on a concrete pad outside a house) and sell the valuable copper inside the units. These thefts in Houston and the surrounding area could occur outside any home, but the most vulnerable places were in new developments where the houses weren't quite completed and not many people were living in the houses.
Air conditioning units contain a large amount of valuable copper that well-trained thieves can strip from your system within minutes to sell as scrap metal. As a homeowner, an air conditioning theft can be devastating as it leaves you uncomfortable and at a loss of your expensive investment.
And of course, since people respond to incentives, homeowners have worked out ways to deter the thefts:
Or home owners have let potential thieves know that there is a high probability they will be caught by:
Also, in Houston, the recyclers have been enlisted by law-enforcement agencies not to buy new copper tubing from air conditioners and to make sure they have a documented provenance for the copper.
As many of us in economic analysis of law like to point out, the theft itself is "just" a redistribution of wealth. The inefficiency comes when people use scarce resources to carry out the thefts and when people use scarce resources to deter the thefts.
Just before the plane taxied to take off from Pearson International Airport, I texted my son* in Houston, "we gotta get some guns and oil beer."
He figured I was making some kind of statement about guns in Texas but he had no idea what I was talking about.
So he googled "oil beer".... and eventually concluded that I was referring to a beer brand, Guns and Oil. Indeed, the person sitting next to me on the plane has a small ownership interest in the brewery, which is what sparked my interest in the beer.
I suspect that Guns and Oil targets (!) the NASCAR, NRA, redneck market niche. My seatmate said it tastes like Dos Equis, but I haven't found any yet to try.
*my younger son, aka Adam Smith Palmer.
A few weeks ago I saw this question posed on Facebook:
Would you give up the internet for $1million?
I don't know what it would mean exactly to give up the internet.
I'm not sure where the line would be drawn. However, despite this incomplete understanding of the conditions, I doubt if I would take the deal. I'd rather have the internet than have someone give me a million dollars.
I asked several of my friends (via email, of course) if they would take the deal, and they all said "no".
That means the internet is generating one heck of a lot of consumer surplus (roughly speaking, the difference between what something is worth to us and what we pay for it). If having the internet is worth more than a million dollars to millions of people, then the total consumer surplus must be gazillions of dollars.
Interestingly, this exercise does not work symmetrically: I would not be willing to give up $1million to have the internet; if I had to pay $1million to be able to use the internet, I'd give the internet up in a flash. The wealth differences between having the internet and not having it are so large, the situations are not comparable.
So here's another way to consider the exercise:
If someone said you must pay $1million for the internet and at the same time that person gave you $1million, would you use the money to buy access to the internet?
I'm not sure I would. But that raises questions about the validity of my initial answer, since the situations are financially identical.
Part of the reason for my hesitation in this second scenario is that if I have the internet, I have something called "the endowment effect" --- I'd be reluctant to give it up if I have it; but if I don't have it, I might also be hesitant about buying it.
Part of the reason might also be that I would be upset about someone else getting all that money (the dreaded economics and politics of envy) that could have been mine.
In the old days when the rational expectations cowboys dominated the economics profession, they would merely have pointed out that the inconsistency in my answers shows I'm not being rational (in fact am being pretty stupid) without examining the nature of human behaviour in general.
Increasingly, though, economists are recognizing that most people have these tendencies (see behavioural economics) and that our assumptions of rational maximizing and rational expectations, while very useful, do not explain all of human behviour.
Addendum: Including data plans for our phones and our household internet plan, Ms Eclectic and I are paying perhaps as much as $2000/year for access to the internet. If those fees can be expected to persist and if we expect to live a long time, the present value of those fees at a real interest rate of 1% would be less than $200,000. So we are, indeed, paying a lot for the internet, but nowhere near $1m.
I was born in the United States. I emigrated to Canada over 40 years ago. Nearly 15 years ago, I took out Canadian citizenship. When I did that, I was under the mistaken belief that doing so meant I was de facto giving up my US citizenship.
Apparently for tax purposes, I was wrong. The US is one of only a few (two?) countries that tax on the basis of citizenship, not on the basis of residence and not on the basis of where you earn your income. They assert that even if you take out citizenship in another country, if you were ever a US citizen, you are still a US citizen (at least for tax purposes).
This situation presented no problem for me until a few years ago. The taxes in Canada are higher than the taxes in the US, and so I never owed them anything. In fact, until two years ago, I stopped even filing a return (again believing that I no longer had to file since I am a Canadian citizen and have had no US income).
Things have changed. Margaret Wente is in the same situation (only more ridiculously so, since she left the US when she was 14):
Welcome to the nightmare of U.S. citizens abroad. There are hundreds of thousands of us in Canada, and millions more worldwide. Most of us are law-abiding people. But the U.S. government is treating us like tax cheats. It also says that any “U.S. person” (meaning anyone born in the United States, or even anyone with American parents) must keep filing U.S. tax returns, forever – or else. ...It gets worse, because now there will be no place to hide. On July 1, the loathsome FATCA (Foreign Account Tax Compliance Act) kicks in. It requires banks around the world to cough up the financial information of any client suspected of being a U.S. person. This means your RESPs, your mutual funds, your bank accounts. To its shame, Canada did not resist this extraterritorial abuse of power and privacy. The banks can’t resist, either – they’re on the hook for heavy fines if they don’t comply.
When I first heard about this stuff a couple of years ago, I thought it was a paranoid fantasy. But it was for real. When I wrote about my own dilemma about whether to comply, I was inundated with e-mails from terrified little old ladies who were afraid they’d be arrested at the border on their way to Florida. They won’t be. But the truth is bad enough. Even though the IRS has now promised not to treat them like criminals, simply complying with the law can cost thousands of dollars. On top of that, some people have been on the hook for taxes on assets that are tax-free in Canada. Plus, all the assets you hold jointly with your spouse have to be reported as if you owned them all.
These new US tax laws are an expensive pain. To cope with them, we have put all our US-taxable financial assets (including savings accounts that are tax-free in Canada as well as registered savings plans for grandchildren) in my wife's name, and I have moved all my Registered tax-free savings plans (including retirement savings) out of mutual funds (which the IRS declares to be "off-shore trusts").
It still costs me nearly $1000 a year for an accountant to prove to the IRS I don't owe them anything. As a result, I am seriously considering spending the money to renounce my US citizenship.
The only reason I bother with all this is that I have a son who lives in the US, and I would hate to be detained at the border on the way to visit him. Otherwise I would ignore the whole thing and just stay out of the US. "People respond to incentives."
And you know what? Before I emigrated, I don't think I contributed enough or long enough to collect Social Security from the Farghin Bastidges.
If red wine has all these health benefits, then surely if I drink two glasses a day, I'd be saving my drug plan lots of money. It follows they should pay for my wine.
From the Daily Mail [via MA]:
[Dr William McCrae] claims the antioxidant properties of red wine have reduced the risk of a second heart attack in his patients by half - and the risk of a stroke by 20 per cent.
And the sight of the cardiologist pushing a trolley laden with 125ml glasses of cabernet sauvignon has become a familiar sight at Great Western Hospital in Swindon. ...
A small amount of alcohol reduces blood pressure and therefore lowers the risk of heart attacks and strokes, as well as relaxing anxious patients, he added.
The skins of certain red wine grapes, which are used in the fermenting process, are rich in flavonoids which are known to have health-boosting properties.
Red wine also helps keep the inner lining of blood vessels smooth, which also helps prevent blood clots.
Dr McCrea recommends health-conscious drinkers quaff red wines with the highest antioxidant concentrations, which tend to come from high altitudes - such as Cabernet Sauvignon from Chile and Shiraz and Pinot Noir from South Africa.
Younger wines are apparently better because older vintages lose their antioxidants in the barrel and corked wine is not recommended as the cork absorbs antioxidants.
Wine also has to be drunk soon after opening, as it loses its antioxidant properties with exposure to the air.
There are zillions of socionomology majors floating around, and the demand for them by employers is not very high. Consequently, socionomology majors don't earn much and, by implication, receive a low financial return on their investiment. From Lifehacker [via JR]:
Not surprising. And yet so many socionomologists refuse even to try to understand economics and end up complaining that because they have a BA and because they borrowed and spent so much money they somehow deserve better and more than the rest of world is willing to pay them.
However, as the article concludes, financial return on investment isn't everything.
Taxi drivers across the world went on strike last week to protest the growth of Uber, a car-ride-share service based on smartphone apps. The result? Customers, already frustrated with problems in the taxi industry became even more upset with the licensed taxis, and many of them switched to Uber. It strikes me as unusual, to say the least, that a business providing customer service would shut itself down to protest the inroads into their business by upstart innovators.
It was as if they were saying,
We're angry about the increased competition, so we are going to force you to try using the services of our competitors just to see how much they can improve the product we have been providing under the protection of entry regulation and licensing.
Uber has been a game changer...[A]t the end of the day, the story is rather simple and similar everywhere. The number of taxiS allowed to operate has been limited over time. Black cars were forbidden to pick up passengers on the street. Now technology makes that available, but also allows for simple citizens to attempt to provide a similar service, if they want to (UberPop). In the world of GoogleMaps and GPS, you don't need to paint your car white (as in Milan) or black (as in London) to signal that you'd be happy to transport people if they're to be charged. ...
Is Uber the taxi of the future?
We don't know, but certainly the company is pretty smart in managing the protest. Instead of building bridges with taxi drivers, Uber used the strike as a marketing device, offering big discounts to clients and attracting new ones. So theWashington Post reports that "Uber's British ridership went up 850 percent yesterday thanks to black cab protests that left Londoners snarled in traffic".
Look for increased sabotage, violence, and many more legal challenges.
Addendum: Interestingly, there is no mention of Uber in the Wikipaedia entry for "Taxicabs of the United Kingdom"; at least there was no mention as of last weekend.
A Facebook friend recently posted that she, "Might be a bit shopped out," after having spent a day or two in intensive shopping. Here is what she really meant, in econ-speak:
At the time that I posted that status update, the expected additional or incremental benefits from additional shopping were out-weighed by the expected additional or incremental costs of additional shopping, and so I decided to stop shopping even though I fully understand that if I had continued to shop I would likely have acquired additional information and that by stopping now I might miss out on some good buys.
Note the importance of the word "expected". She didn't know for sure, but she had formed an estimate of the relevant probabilities in her own mind. Based on those expectations, she decided to quit.
And even though the rational expectations cowboys of the economics profession don't like to admit it often, she undoubtedly formed her expectations based on her past experiences and acquired information; i.e., most rational shoppers have adaptive expectations.
We need to stop relying on politicians and gubmnts to create jobs. Interestingly, my Facebook friends from both the left and the right clicked on "like" when I posted this meme. I think my leftish friends in Ontario especially liked it because the leader of the conservative party here has promised to create a million jobs if he is elected. My rightish friends liked it because they(we) agree that the best thing the gubmnt can do is create an environment that gets out of the way of private entrepreneurs and that encourages innovation, entrepreneurship, and economic growth.
Yes, gubmnts can create some jobs. We saw it in the US in the depression, we saw it during WWII as military jobs were created. But for the long run, the best thing a gubmnt can do is create environments that encourage businesses. These environments do NOT involve corporate handouts or subsidies, for those policies depend on gubmnt deficits or taxes. Instead, the more successful environments are those that cut the red tape and reduce bureaucracy.
Many of my more leftish friends feared the worst when Thatcher and Reagan were elected, but those leaders had the right idea.... and in the end, they implemented policies that promoted growth and hence job creation. They didn't create jobs directly; instead, they tried to implement policies that would be conducive to job creation in the private sector.
I really am bothered by all the redistributionists who couch their arguments in terms of "rich (or high income) people don't deserve that much." That argument smacks of redistributionist greed and envy more than concern for the poor. The evidence is so clear that policies to promote economic growth are by far the best long-term anti-poverty programme.
From Cafe Hayek,
Piketty promotes the politics of envy, in which greater equality is a goal in itself — as opposed to the goal of helping out those at the bottom of the income distribution — and Piketty plainly states that the policies he recommends to reduce inequality would do so by pulling down those at the top rather than bringing up those at the bottom.
Indeed. It is truly – yet sadly – astonishing that attitudes and behaviors that rightly bring down punishment on children who exhibit them on the playground (envying the toys that others have and ganging up to take from those who are perceived to have more toys) are regarded as progressive, humane, and just when exhibited by adult voters and when encouraged in adults by adult professors, pundit, politicians, and preachers. ...
For more, see this by Bob Murphy.
According to WaPo, one school district in New Orleans will close its traditional schools and rely on only charter schools to provide K-12 education. This decision means students (and parents!) will choose from among private providers of education. Some opponents, of course, worry that gubmnt bureaucrats will no longer have control of, or a say in, the education.
They should NOT worry so much. Successful profit-oriented charter schools will have to be open to parental input, will have to strive to provide good products, etc. Those that don't will lose students; those that do will grow and thrive.
Parents will have a choice. The marketplace is a stern disciplinarian for those who don't measure up.
Long-time readers of EclectEcon will remember that I have been skeptical about the effects of "Fair Trade" designations, wondering to what extent, if at all, they help the downtrodden workers of the world. For example, see this, this or this; also, see this at Marginal Revolution. I remain even more skeptical, having seen the results of this study, reporting that workers on "fair-trade" coffee farms do noticeably worse than workers on the larger coffee plantations [via JR].
There is much more. If you think buying "Fair Trade" products helps the downtrodden workers of the world, read this report. And then think again, especially about whether you are helping the workers or helping bureaucrats of well-meaning organizations.
From time-to-time, internet correspondent MA points me toward various cartoons. He noted this one, with the subject line in his message, "Caveat Emptor".
Okay, I laughed at the situation. But then I thought, "This is exactly the intention of caveat emptor [let the buyer beware]." From now on, unless he suffers from extreme stupidity and myopia, Dagwood will ask the price before committing to buying two hot dogs. I have had many, many Dagwood-type experiences. I hope I learned from them.
But unfortunately in today's nanny-state mentality, what too many people learn from their mistakes is that politicians will listen to their whining, "There oughta be a law..." Rather than assume responsibility for their decisions and actions, people want the gubmnt to step in and not just protect them, but also make decisions for them. But the more that happens, the less we think and the less vigilant we become.
With this mentality, people will press for regulations/legislation requiring Elmo to list his prices up front so people aren't deceived (or punished for being careless!).
I'm going through many letters that my mother wrote home when she was attending Drury College in Springfield, Missouri. One intriguing statement that shows how times have changed since her frosh year there, December, 1935:
At Fellowship meeting tonight we decided that we could have radios in our rooms if we paid one dollar per semester for the electricity.
That's a nice line from "Field of Dreams", but it's nonsense in the real world. Just ask the people of Pontiac, Michigan.
For more than 20 years, the Pontiac Silverdome in Detroit hosted many of the greatest spectacles. The World Cup, The Super Bowl and the NBA Finals took place there. Led Zeppelin and Pope John Paul II both took the stage there, though not together. Wrestlemania III set a record for indoor attendance at a sporting event in America there.
Now? There's nothing there.
Detroiturbex.com, a website devoted to the preservation of fading Detroit-area landmarks, has shined a spotlight on the now-abandoned Silverdome, and what's in view isn't pretty. The stadium's fabric roof has collapsed, exposing the field below to the elements. The seats will be torn out and sold later this year. The suites are being left to rot.
Fortunately the options for gubmnt involvement in health-care provision include more than the just the US (pre- or post-Obamacare) or the National Health Service of the UK. [via Lydia and Jason]. There is much more here, but this graphic provides a good overview.
I just finished reading this piece by Don Boudreaux at Cafe Hayek. It is a lengthy piece that takes on Piketty, the economist who argues for more gubmnt action to reduce inequality. What struck me most was this very insightful comment:
Piketty has a peculiarly strange “then a miracle occurs” step in his analysis. He argues that one justification for powerful efforts to redistribute incomes and wealth more equally is that the rich are disproportionately likely to abuse power for their own greedy and socially destructive ends. So what to do? Answer: increase government’s power! Qu’est-ce que c’est?! [EE: this is French for WTF?] (Piketty is like too many economists: ignorant of public-choice.)
This attitude that Boudreaux identifies is far too common among the redistributionists. Essentially it says, "The gubmnt has created policies that favour cronies and promote inequality. But I know what to do about it. Put me (and/or my friends) in charge and we'll do it right." And all the while this argument does nothing to include the real world of voter influences and public-choice economics: the sad, simple fact is that the more power gubmnt and politicians have over resources, the greater the incentive for individuals to try to influence gubmnt policy, politicians, and the behaviour of bureaucrats.
This is yet another example of Kip's Law:
“Every advocate of central planning always — always — envisions himself as the central planner.”
This cartoon has been making the rounds on Facebook lately. Half my FB friends seem to think it depicts reality pretty well and that indeed most evil can be traced to old white men. The other half think it represents bias in literature, in higher education, and in the media against entrepreneurs and individualism. I have a wide assortment of friends!
People told me I should apply for Old-Age Security [OAS] payments when I took a buy-out from The University of Western Ontario several years ago.
I didn't think I should bother because I was earning enough that the gubmnt would claw it all back.
Was I ever wrong. No foolin'.
Here's how it works.
Suppose you earn enough that you purportedly don't qualify for OAS. Instead of not paying you, the gubmnt pretends it pays you and then withholds the entire amount for income taxes. They say they've increased my income by $X and they have also increased the amount withheld for taxes by $X as well. But my tax liability on $X of extra income is only .45X or something like that. So the gubmnt says I've already paid an extra .55X toward the taxes on the rest of my income.
No foolin'. So the gubmnt reduces my taxes considerably with this procedure.
What a bizarre scheme. It sure seems like a boondoggle to me. But it reduced my tax liability quite a bit this year.
I loved the movie, "A Beautiful Mind," starring Russell Crowe. However, I did not much care for its treatment of game theory or economics.
The movie showed Nash arguing that if everyone else hits on the blonde, he should hit on the brunette and he'd be more likely to get lucky. That is pretty simplistic; if everyone thinks the way he does, then everyone will hit on the brunette, and he will be more likely to get lucky with the blonde. Most likely a mixed strategy is called for in situations like this. Or better yet, wait to see what the others do.
And Peter Foster [via Jack] rightly attacks the movie's criticism of Adam Smith and "the invisible hand":
The violence done to Smith in A Beautiful Mind was just one in a long series of misinterpretations and attacks, which at least confirmed Smith’s continued iconic status. To rationalist intellectuals, Smith’s “natural order” has always seemed not merely implausible but downright objectionable, not to mention leaving them little room in which to exercise their own large brains and acute moral sentiments. ...
What sort of guidance does the hand provide? Friedrich Hayek gave perhaps the clearest explanation of its ministrations in his seminal article “The Use of Knowledge in Society.” Hayek pointed out that the issue in commerce wasn’t one of planning versus non-planning, but of who should do the planning, and at what level. He noted that everybody plans according to their own perspectives and desires. The sort of knowledge people use in such planning is not analogous to scientific knowledge. It is “knowledge of the particular circumstances of time and place.” It cannot be known by others, much less in toto by any individual or group. It cannot be captured by statistics or fed into government economic plans.
The key question is how to utilize all this dispersed knowledge. That is what the market does, by providing a vast arena for promoting, judging and rewarding efficiency and innovation. This fact, wrote Hayek, is a “marvel” but an unacknowledged and underappreciated one. Not only is the market not “designed,” but those who participate in it “usually do not know why they are made to do what they do.” This, suggested Hayek, is a good thing. He quoted the Cambridge philosopher Alfred North Whitehead, who had pointed out that “civilization advances by extending the number of important operations which we can perform without thinking about them.”
However, there is a downside to this unconscious aspect of the natural order. If you don’t have to think about it, you don’t have to understand or appreciate it, and you become more vulnerable to taking “thoughtful” actions — or pursuing policies — that might damage or destroy it.
In case you missed it elsewhere, here is the link to the collection that is being put together. The early Newsweek editorials, Capitalism and Freedom, and Free to Choose all played a role in my growth as an economist. A partial list of the collection, with links:
Many of you may remember a sacharin-sweet book by Shel Silverstein, called "The Giving Tree". A few days ago, my older son (David Ricardo Palmer) posted this amusing variant of that book's cover on Facebook:
Seems a little less touching than The Giving Tree, but also a bit more realistic. Reminds me a bit of Pierre Trudeau's response to some protestors back in the 70s.
Despite what you might hear from some members of the interventionist left, the middle class is doing pretty well in Canada. In the piece at that link, Andrew Coyne summarizes the research. An excerpt:
Not only are Canadian middle class incomes among the highest in the world, but so is their rate of growth: up 20%, after inflation, in the decade after 2000, allowing us to catch and pass first Germany and now the United States. This isn’t just a story of American decline, in other words. It is a story of Canadian success.
The study confirms previous data showing the middle class in this country has never been as well off in our history: Whether you look at median incomes, real wages or household net worth, the story is the same. (Again, for those in any doubt, these are all in constant, inflation-adjusted dollars.) The more the evidence piles up, the more it discredits the thesis, popular in certain quarters, of a “struggling middle class.”
With fossil fuel prices continuing to rise and be uncertain, heavy users of fossil fuels have a strong incentive to look for alternatives or to look for energy-efficient ways to reduce their uses of fossil fuels. Here is one interesting example [via JR]:
Container Ships to Use Kites to Save Fuel
Minnesota based Cargill has just signed an agreement with Skysails that aims to reduce greenhouse gas emissions in the shipping business by using a giant kite. That’s right…a kite. Skysails, based in Hamburg, has developed a patented system which uses a kite to propel large shipping vessels across the sea. The wind-harnessing propulsion system, In theory, could end up reducing fuel consumption by an impressive 35%.
Here’s how it works: A monstrous 3,444 square foot kite is attached, via rope, to a control pod that electronically manipulates the kite to maximize potential wind benefits. The kite itself flies anywhere from 300 to 1300 feet in the air, whipping around in a figure 8 formation. Since the system is controlled electronically, it requires little attention from the crew. The computer system makes all the necessary adjustments to maximize available wind and relates telemetry back to a monitor located on the ship’s bridge.
What intrigues me about this example is that these container ships will not be using solar panels or windmillls to generate electricity. They are using the wind power directly. Furthermore, they will be instituting the plan in response to market forces, not gubmnt subsidies.