Why Single Payer In the US Will Not Necessarily Lower Costs

A few days ago I wrote a multi-part tweet on the topic of whether single-payer in US health care would necessarily lower costs.  Twitter is a frustrating medium not only because of the short length but also because many critics just read the first tweet in the string (with the summarized hypothesis to be discussed) and comment without reading the rest.  That is probably why I got many comments like "but European single-payers get better pricing" as if I did not spend a number of tweets on exactly this topic.  So I will go back to my old medium of blogging to deal with this complex topic.

As a thought-starter, let's think about another industry where the US government is the single-payer in a complex industry that is a substantial part of GDP:  Defense.  The US government has always been the single payer in the defense industry and I think it isunlikely most of use think the US government gets particularly good pricing in that industry.  I have seen that a number of folks have instinctively rejected this analogy, without giving any specifics about why they do so, but I want to observe here that in fact Defense may have better price dynamics than single payer for pharmaceuticals, as at least in defense there are multiple sellers to play off against each other.  I am not going to insist on this analogy, and will provide another analogy later that I think is perhaps more apt, but I would challenge the reader to name a field where the US government is a single payer -- not a large payer in a larger market but the single only payer -- and gets better pricing than might be had in a free market.

A single-payer system eliminates market pricing and all the enormously valuable information that those prices contain.  In a real market, prices are set based on the knowledge and preferences and expertise of millions of people. In single-payer, you lose access to all that.

For this post I am going to focus mainly on pharmaceutical prices in large part  because, from observing the Twitter comments, that is what most folks seem to think about first as an area for cost reduction under single-payer.  I will return at the end to a discussion of other health care costs under single-payer.   I am also going to entirely avoid discussion of the many supply-side restrictions in the US healthcare system -- from pharmaceutical approval to physician licensing to hospital certificates of need.  I want to look primarily at the supposed beneficial (in some peoples' minds "huge") price reductions that might flow from single payer negotiating leverage.

Before I do that I want to discuss the misuse (IMO) of the term "economies of scale" in this discussion.  In my mind "economies of scale" refers to a real reduction in unit costs from an increasing volume.  In most cases, this is not what we are talking about with single payer.  There is nothing from single payer, to my understanding, that actually reduces the development, production, and distribution costs of pharmaceuticals.  I know folks like to point to the elimination of private insurance companies as a cost saving, but I find that hard to believe.  Most of the functions of the private insurance company would have to remain and profit margins in health insurance are tiny, on the order of low single digit percentages of premiums.  Eliminating these profit margins could theoretically save a few percent on costs, but only if one assumes that the government is just as efficient on claims processing and management.  One might get rid of some marketing costs, but the government has found under PPACA that communication and education costs, essentially not much different from marketing, have been pretty substantial.

The main potential advantage of single payer for pharmaceuticals is not one of economy of scale but of negotiating leverage.   With negotiating leverage, larger buyers can try to extract discounts vs. what other smaller buyers pay.  Certain countries like Canada have certainly been able to do this with pharmaceuticals purchased by their state health care systems.

For all those who want to point this out to me as if I don't know it, I freely stipulate that it is true.  To understand what is going on, let's take a step back.  Pharmaceutical prices will theoretically include three portions:

  1. Variable cost of actually manufacturing and distributing the pharmaceutical.  For many drugs, even expensive ones, this can be relatively low
  2. Fixed cost of developing the pharmaceutical and getting it through testing and approval.  This fixed cost also will contain a share of the costs of failed drug development efforts, just like one producing oil well has to cover the cost of the 10 dry holes drilled before oil was struck.  These fixed costs can be very very high
  3. For drugs still covered by their patents, a profit from having a monopoly position, which we allow to incentivize new drug and medical procedure development

Most US pharmaceutical makers treat the US as the main market for recovering 2 and 3.  They are willing to treat foreign markets and incremental, and price their drugs (either directly or via the licensing fees they charge) closer to marginal cost without full cost recovery.  This is in part because many other countries negotiate, and the US mostly does not -- Medicare has restrictions on pharmaceutical price negotiation and drug companies have limited negotiating leverage.  If you wonder why the latter is so, it is because insurance companies are required by law that they must buy a lot of these pharmaceuticals.  One's negotiating leverage against a single monopoly seller is extremely restricted if one cannot walk away and the seller knows it.

I have for years supported laws allowing drug re-importation from other countries.  I see no reason why US consumers should tolerate essentially subsidizing drug development for the rest of the world.  By the way, if you don't accept my cross-subsidy picture, watch what happens in the rest of the world if the US were to adopt drug re-importation laws.  My guess is that the other countries would ban their export, because they know such policies would serve to reduce the cross subsidy, lowering US prices but raising prices in their countries.

To understand my concerns over cost control in US single payer, let's think about negotiation at Walmart.  It is well known that Walmart uses its huge market size to get large discounts from suppliers.  In part, these discounts could be related to true economies of scale (ie if you are a niche seller and not yet in Walmart, getting into Walmart could drive huge new volumes for your product).  But for companies like Coke, Walmart's main leverage is the threat to walk away, or at least to give less shelf space, to your product.

But forget the leverage and negotiating strategy for a second, how does the negotiation actually go?  As I imagine it, Walmart does some research and finds the lowest price they can find Coke selling to anyone else is X.  They will then turn to Coke and say we want 10% off X.  The key point is that the negotiation begins in reference to an existing market price.   I will bet that's how you negotiate for a car, or for anything else.

But they key question is: "What happens when there is no market price."  I am the last one to say that US health care markets, with all their various inefficiencies and interventions, is anything like a free market, but there is still some sort of market there.  I would argue that if the US goes single payer, that will essentially end the only market for drugs and other health care services in the world.  How do you negotiate if there is no market price to start from?  What does negotiating leverage even mean in that situation (again, consider the Defense example above)?

I suppose for some years negotiation for pharmaceuticals under single payer will be in reference to the old, pre-single-payer price.  But that reference can only be meaningful for so long.  And how does one use negotiating leverage for an entirely new product?

Let's say a new drug comes along that's a better treatment for gout.  There is no market price or price history.  No one has ever bought it or sold it.  What does your negotiating leverage even mean?  There is no market price, so how can you get a discount?  You could say that you want a discount off list, but the inventor could just name the list price arbitrarily high.  You could ask to see their cost accounting but anyone who has ever made the mistake of taking net profit points in a movie can tell you that cost accounting can be gamed endlessly.

This is basically the situation in government defense procurement.  They can theoretically use their negotiating leverage to get a better price for hammers or sidearms, because a market price exists for those set by many other individual buyers. But how does it use its negotiating leverage for a Patriot missile?

And remember, the only way that negotiating leverage has any power is if one is willing to walk away from the table.  At some point, the single payer has to be willing to say, "F it, if that is your best price for Humira, we aren't buying any (and thus no American can have any)."  Does the government really have the ability / cojones to do this and make it stick?  After all, one reason why insurance companies overpay for a lot of medical procedures is that they HAVE to pay for it, by law.  They cannot walk away from the table.  Imagine negotiating for a car if next time the dealer you are buying from knows you have to leave the store that day with a car.  You are not going to get a very good price.

The situation is slightly different in other health care payments, such as to providers.  But this is only true because there are multiple providers and provider groups in a given area.  And here the negotiating leverage is still the same, the threat to walk away.  And in fact we have seen this, with low cost PPACA plans offering very limited networks -- essentially they have walked away from higher cost suppliers.  Note that this really pisses off consumers, and is one of the reasons they say they hate insurance companies, so its not clear if there would be the political will for the government to do the same thing as single payer.  Also note that providers and banding together into larger and larger provider groups -- essentially in this great game of monopsony and negotiation they want to grow to be too large and comprehensive to walk away from.

The likely outcome is to turn pharmaceuticals and other medical suppliers into regulated utilities.  In electricity, the government essentially acts not quite as single payer but in a very parallel role as single price negotiator.  They negotiate the prices to be paid for all consumers in their state or region.  They are negotiating as the single buyer with a company that is a monopoly provider.  This situation faces all the issues we discussed above, basically a negotiation without any market price reference.  So most governments regulating utilities choose an approach where the utility opens its books and sets prices so that the utility gets a minimum return on capital but not any "excess" profits.   In theory, they try to get the lowest price they can that still ensures that private capital will still have an incentive to flow into the company.

There are a number of problems with this approach vis a vis pharmaceuticals and other health care purchases

  • Its not at all clear it achieves a lower price than in a freer market.  Certainly non-regulated cogen companies in California have made a lot of money selling electricity below the regulated rates
  • There is little incentive for innovation.  Regulated utilities make the most money when they do nothing new or risky.  This may be OK in electrical generation, but it is not great for drug development.
  • There is a lot of potential for cronyism.  Even in electrical rates, certain politically favored groups get lower rates subsidized by less influential groups.  Military procurement often leads to bad decisions driven more by lobbying than reason.  In health care, changes in reimbursement rates in Medicare are already subject to immense political gamesmanship -- for example, the famous annual Congressional "doc fix" battles.

Of course the government could just fix prices by law at some low level, or even seize all pharmaceutical patents and offer drugs close to marginal cost (which tends to be low).  This might work great if you are perfectly happy with the medical treatments available today and want nothing new.  But if innovation is a concern of yours at all, this would obviously kill it (not to mention drive a lot of providers out of the business, reducing demand and increasing wait times to those of .. all the other single payer countries).

While the choice not cut off future benefits just to get current stuff cheaper may seem a no brainer to many of you, I would argue that many Progressives, whether from risk aversion or a lack of ability to perceive opportunity costs, might well take this deal.  Its a sort of Directive 10-289 solution and a preference I discussed way back in 2004 (yes, I was blogging at this same site then).

Ironically, though progressives want to posture as being "dynamic", the fact is that capitalism is in fact too dynamic for them.  Industries rise and fall, jobs are won and lost, recessions give way to booms.  Progressives want comfort and certainty.  They want to lock things down the way they are. They want to know that such and such job will be there tomorrow and next decade, and will always pay at least X amount.  That is why, in the end, progressives are all statists, because only a government with totalitarian powers can bring the order and certainty and control of individual decision-making that they crave.

Progressive elements in this country have always tried to freeze commerce, to lock this country's economy down in its then-current patterns.  Progressives in the late 19th century were terrified the American economy was shifting from agriculture to industry.  They wanted to stop this, to cement in place patterns where 80-90% of Americans worked on farms.  I, for one, am glad they failed, since for all of the soft glow we have in this country around our description of the family farmer, farming was and can still be a brutal, dawn to dusk endeavor that never really rewards the work people put into it.

This story of progressives trying to stop history has continued to repeat itself through the generations.  In the seventies and eighties, progressives tried to maintain the traditional dominance of heavy industry like steel and automotive, and to prevent the shift of these industries overseas in favor of more service-oriented industries.  Just like the passing of agriculture to industry a century ago inflamed progressives, so too does the current passing of heavy industry to services.

I understand the large numbers of people are concerned about the potentially bankrupting effects of a major medical condition.  The problem is that people keeps suggesting solutions that don't actually solve the problem, or make things worse.  I have suggested an intervention here that preserves much of the health care market while protecting folks in the case of major medical conditions.

Uber Takes Another Body Blow

Waaaay back in April of 2015, I prophesied that California's efforts to turn Uber drivers into employees would kill Uber, though it would take some years to bleed out.  California has since embodied that court ruling into law (a law which Uber is currently ignoring).  Now, New Jersey is going after Uber:

Two months after Uber decided to ignore new ignore new California legislation requiring companies to reclassify contract workers as employees - a measure which would affect up to one million residents who work as contractors and drastically impact Uber's bottom line - more states are lining up to demand a pound of flesh from the world's formerly most valuable startup (and subsequently one of the year's worst IPOs).

On Thursday, New Jersey picked up where California left off and found that Uber owes the state about $650 million in unemployment and disability insurance taxes because the rideshare company has been misclassifying drivers as independent contractors, the state’s labor department said.

As Bloomberg reports, Uber and its subsidiary Rasier LLC were assessed $523 million in past-due taxes over the last four years, the state Department of Labor and Workforce Development said in a pair of letters to the companies. The rideshare businesses also are on the hook for as much as $119 million in interest and penalties on the unpaid amounts, according to other internal department documents.

The New Jersey labor department has been after Uber for unpaid employment taxes for at least four years, according to the documents, which Bloomberg Law obtained through an open public records request. The legal battle goes back to 2015, when New Jersey first informed Uber that it had obtained a court judgment ordering the company to pay about $54 million in overdue unemployment and temporary disability insurance contributions. It’s not clear whether the company ever paid any of that bill.

The tax issue in my mind is not the biggest problem.  I still think that the worker "protections" states are starting to insist Uber adopt (e.g. minimum wage, shift lengths, shift scheduling, etc) are death for their whole labor model, and in fact will hurt most of their workers by killing what attracted drivers to Uber in the first place.  To summarize that article, there is a huge irony in that for decades labor advocates have been decrying the loss of agency by hourly workers in a capitalist economy.  Uber has given its drivers agency they don't have in almost any other hourly job, and labor advocates are doing all they can to kill it.

Phoenix Light Rail Fail, 2019 Update

To the surprise of no one who reads this blog, Phoenix Light Rail continues to fail at every goal it set for itself, despite over $2 billion in cumulative expenditures and over 10 years of time to "catch on."  In fact, the only goal it has succeeded in is to allow our local leaders to virtue signal with their peers that they have a "modern" transit system, "modern" for some reason defined as increasing the use of a 150-year-old transit technology.

Here are the numbers, relatively fresh from Valley Metro's ridership reports.  Valley Metro has stopped (for reasons likely to become clear in a moment) publishing long-term ridership trend charts, so I have made my own from their data.

The original Phoenix light rail line cost about $1.4 billion.  The one line was expanded midway through the 2016 fiscal year by 31% in length and 36% in cumulative dollars spent (to very little obvious effect).  To date, well over $2 billion has been spent on the line.

What we can see here is exactly what Randall O'Toole of Cato has been saying for years -- that light rail projects tend to actually hurt total transit use as they scavenge resources from other modes, like buses.  This is because light rail costs so much more to move a passenger, both in terms of capital investment and operating cost, so $X shifted from buses to rail reduces total system capacity and ridership substantially.  We have seen this in Phoenix, as light rail costs have forced closing or reduced services in a number of bus routes, with obvious results in the ridership numbers.

There are a couple of ways to look at the ridership numbers and our $2+ billion light rail investment.  First, this investment has gained us an additional 1.25 million round trips on the system, at a capital cost of $1600 per added annual round trip ($2B divided by 1.25MM).   For someone who commutes 250 days a year, this means the Phoenix taxpayer has spent $400,000 per incremental daily commuter on the system.  I used to predict that we could more cheaply buy every rider a Prius with the money we spent on the system, but I obviously underestimated how bad it was.

Another way to look at this is that in fact we did not increase ridership at all, but decreased it.  From 1997 to 2008 the system increased ridership by an average of 5.6% a year.  Had the same growth rate obtained for the last 11 years since light rail was put in place (and certainly Phoenix has continued its fast growth in this period) the ridership of the system should have been north of 110 million trips a year.  By this metric, we spent $2 billion to shift to a costlier, less flexible transit mode that lost us 45 million annual trips.  Even if transit had just grown with population we should have seen 80 million or so trips in 2019.

The problem with light rail (and the reason it is popular with government officials) is that it is an upper middle class boondoggle.  There can be no higher use of transit than to provide mobility to poorer people who can't afford reliable automobiles.  Buses fulfill this goal better than any mode of transit.  They are flexible and can reach into many corners of the city.  The problem with buses, from the perspective of government officials, is that upper middle class people don't like to ride on them.  They like trains.  So the government builds hugely expensive trains for these influential, wealthier voters. Since the trains are so expensive, the government can only build a few routes, so those routes end up being down upper middle class commuting corridors.  As the costs mount for the trains, the bus routes that serve the poor and their dispersed commuting destinations are steadily cut.

Some of my other posts on Phoenix light rail are here.  As you can see from this 2008 article, I am not just a Monday morning QB but predicted exactly this failure in advance and explained why from data.

Family Blogging Updates

My sister has a podcast that seems to be doing well on theater and its potential trans-formative effect on people and communities.  The Princeton Alumni Weekly wrote about it here.

My son has a blog on economics as applied to Sci Fi/Fantasy realms and board games.   Having survived a period of sometimes nearly debilitating OCD issues, he is also writing about what he learned, eg here.

My daughter continues to work through art school (which is like a million times more work than my engineering degree, shattering a lot of stereotypes I had).  She has updated her portfolio here.

Creating Conspiracies By Reading History Backwards

Sorry for the absence, I have taken a bit of vacation and simultaneously been consumed in a deluge of interest for our company's new offerings.

I saw this story a while back, titled "Japan's General Staff Office Knew About Hiroshima and Nagasaki Atomic Bombing in Advance and Did Nothing, According to 2011 NHK Documentary"  I am only going by the author's summary because I can't understand the Japanese original, but this fits in with a whole class of revisionist history of which I have written before.  A historian digs through piles and piles of intelligence reports and decrypts and finds 2 or 3 that seem to point in advance to some catastrophic event in advance of that event.  A classic example was the revisionist claim that FDR knew in advance of Pearl Harbor but willfully ignored the warnings because he wanted a reason to pull isolationist US into the war with Germany.  More recently, whole conspiracy theories rest on similar hints that the GWB White House knew about the 9/11 attacks in advance.

The problem with all these theories is that they are reading history backwards.  Intelligence agencies weed through thousands of rumors, decrypts, and hints every day.  The historian can wade through this mass and latch onto the couple of correct and prescient such rumors because she knows how history turns out.  She knows Japan bombed Pearl Harbor so she knows how to jump right to the needle in the haystack.  But officials at the time had no such foreknowledge.  Sure there may have been hints of attacks on 9/11 but there were also likely hints that turned out to be incorrect on scores of other potential plots and attacks, plots that would have (at the time) looked no more or less realistic than a hinted attack on 9/11.

There is a related problem that is a pet peeve of mine related to probability.  Let's say I offered you a 50/50 bet that you would win if a 6-sided die came up 1-5 but lose if the die came up 6.  Clearly, all day long the right decision is to take the bet.  But then imagine you took the bet and the day came up 6.  Was this, in retrospect, a bad decision?  I would argue absolutely not, you made a great decision that simply did not work out this one time, but over time making similar decisions will be a winner.  On the flip side, imagine someone who took the opposite side of the bet, a 50/50 bet that only pays off with a 6.  If a 6 comes up, did they make a good decision?  Absolutely not.  It was a terrible decision that they got bailed out on by luck, but over time they are going to bankrupt themselves.

These may seem like contrived examples, but I see exactly this sort of bad analysis all the time of risky decisions taken in an array of fields from sports to business.  I am sorry, but a football coach that goes for it on 4th and 8 from his own 30 and makes a first down did NOT make a good decision, despite the fact it worked out okay this one time.  But almost everyone in the media brings a retrospective bias to analysis of such decisions, rating them a good decision if they worked out all right and a bad decision if it did not work out all right, irrespective of whether the decision, when made, made a lick of sense.

Illustrating the Corruption in Climate Science

Long-time readers know that while I believe the evidence for warming over the last 100 years is strong, the evidence of negative knock-on effects from this warming (hurricanes, tornadoes, sea level, etc) is really weak, often the weakest part of an climate report.  Here is one example.

In the most recent National Climate Assessment written by our betters in the US Government, this chart was used to illustrate increasing hurricane intensity.

I will begin with the positive:  The use of a metric for total hurricane energy rather than something like hurricane counts or landfalls is a huge improvement over past reports and a much better metric to test changes over time in hurricane frequency and intensity.  Now here is the bad news -- the North Atlantic hurricane date is based on a cherry-picked time interval that creates a trend where none exists, and the authors HAD to know it.   The odds that this is just sloppiness or incompetence rather than outright obfuscation are low.

Pat Michaels had Ryan Maue (the scientist who creates most of the hurricane intensity databases) calculate this same metric back to 1920.  This is what the chart looks like, with the cherry-picked dates in the Assessment chart shown in red

That red trend line is just as dishonest as can be.  It is super hard to see any sort of long term trend here, just a multi-decadal cycality that hurricane scientists used to acknowledge before they started extrapolating individual sine waves into long-term upward trends.  This is particularly true since the advent of many new hurricane observation tools, such as aircraft and space photography, mean that numbers before 1960 may well be underestimated.

In fact, when you look beyond just the North Atlantic and look at all the world's oceans, there is not even a trend in hurricane intensity over the period since 1970  (accumulated cyclonic energy is a slightly different but related way to measure the time integral of hurricane intensity).

Unicorns and the Societal Benefits of Short Selling

I will refer you to my post last December on how much of society seems to hate short-sellers, and on some of the virtues of short selling.

For this post I just wanted to make a more narrow point -- one reason that unicorns (private startups with valuations north of $1 billion) like WeWork and Uber and Peloton had their valuations get so out of whack is because there is no way to short stocks in the private equity world.

Companies like Lyft and Uber and WeWork have seen private funding rounds at ever-increasing valuations.  These are done outside the accountability of the broader market and untethered to any sort of normal valuation metrics like earnings or even revenues.

Lots and lots of investors, perhaps the vast majority of them, believed that the last private round that valued WeWork at $45 billion was insane.  Many folks, including myself, would have gladly shorted the stock at this price had we been able.  Heck, many of us would have shorted back at $10 and $20 billion valuations for the company.  Because there is no short selling in this private equity world, unicorn valuations are +based on information from a very limited number of the most optimistic company supporters.  And because of this faulty price discovery, billions of capital that could be doing something more productive have been wasted in many of these companies, poured into business models that don't work or, worse, the tequila and drug fueled Gulfstream flights of the founders.

As I wrote over a decade ago, short selling broadens the group of people who can "vote" on a company's value

At the start of the bubble, a particular asset (be it an equity or a commodity like oil) is owned by a mix of people who have different expectations about future price movements.  For whatever reasons, in a bubble, a subset of the market develops rapidly rising expectations about the value of the asset.  They start buying the asset, and the price starts rising.  As the price rises, and these bulls buy in, folks who owned the asset previously and are less bullish about the future will sell to the new buyers.  The very fact of the rising price of the asset from this buying reinforces the bulls' feeling that the sky is the limit for prices, and bulls buy in even more.

Let's fast forward to a point where the price has risen to some stratospheric levels vs. the previous pricing as well as historical norms or ratios.  The ownership base for the asset is now disproportionately made up of those sky-is-the-limit bulls, while everyone who thought these guys were overly optimistic and a bit wonky have sold out. 99.9% of the world now thinks the asset is grossly overvalued.  But how does it come to earth?  After all, the only way the price can drop is if some owners sell, and all the owners are super-bulls who are unlikely to do so.  As a result, the bubble might continue and grow long after most of the world has seen the insanity of it.

Thus, we have short-selling.  Short-selling allows the other 99.9% who are not owners to sell part of the asset anyway, casting their financial vote for the value of the company.  Short-selling shortens bubbles, hastens the reckoning, and in the process generally reduces the wreckage on the back end.

I am not advocating some goofy plan to bring short-selling to private equity.  What I am saying is that prices set in markets with a robust ability to sell short are going to be much more trustworthy than prices set where short-selling is not an option.

Sustainability Is Baked Right Into the Heart of Capitalism

A while back I was having a back and forth on Twitter with a Tesla supporter.  They had said that Tesla was the poster child of sustainability, I presume because since Teslas are electric that they are presumed to use less energy and produce fewer emissions.  I learned a long time ago not to try to have discussions with Tesla supporters on energy consumption -- even if the fan in question understands that electricity is not magic pixie dust summoned for free out of nowhere, they seldom understand issues with geographic variability of electrical generation sources or the difference between electrical sources for the average vs. marginal incremental load.

So I just said the company can't be very sustainable because it spends far more than it earns, ie it consumes more valuable resources than it produces (a ratio made even worse if one factors in all the taxpayer subsidies the company consumes as revenue).  The person I was tweeting with replied that this fact had nothing to do with environmental sustainability.

I would argue that financial stability has everything to do with environmental sustainability (though I will admit that this comparison is a bit hard since environmentalists seem to bend over backwards to NOT define "sustainability" very precisely).  In fact, I think that sustainability is baked right into the heart of capitalism.

The reason for this comes back to the magic of prices.  Of all the amazing, wondrous things we celebrate in the world, prices may be the most overlooked.  Just think of it: with no governing structure or top down ruling board, a single number encapsulates everything most everyone in the world knows about a particular product: both its utility and relative scarcity, both now and as anticipated in the future.  It is a consensus derived voluntarily between millions of people who never meet with each other and likely never communicate with each other.

It is amazing to me that people who talk so much about their concern for scarcity tend to be the same folks who ignore prices and even eschew markets and capitalism.  But in prices we have a number that gives us a single metric telling us the world's consensus on the current and future scarcity of any commodity.

We do know that prices can miss some things.  Perhaps most relevant today, they can fail to include the cost of emissions (ground, water, air) associated with that commodities extraction, refining and processing, and use.  But compared to the effort of trying to create some alternate structure for managing product scarcity, this is a relatively simple problem to fix (simple technically, but not necessarily politically).  Estimates of these pollution costs can be added as a tax (e.g. a carbon tax on fossil fuels to take into account climate effects of CO2 emissions) and prices will continue to work their magic but with these new factors added.

Along these lines, Andres McAffee writes about some research work by environmental scientist Jesse Ausubel.  He writes in Reason:

In 2015, Ausubel published an essay titled "The Return of Nature: How Technology Liberates the Environment." He had found substantial evidence not only that Americans were consuming fewer resources per capita but also that they were consuming less in total of some of the most important building blocks of an economy: things such as steel, copper, fertilizer, timber, and paper. Total annual U.S. consumption of all of these had been increasing rapidly prior to 1970. But since then, consumption had reached a peak and then declined.

This was unexpected, to put it mildly. "The reversal in use of some of the materials so surprised me that [a few colleagues] and I undertook a detailed study of the use of 100 commodities in the United States from 1900 to 2010," Ausubel wrote. "We found that 36 have peaked in absolute use…Another 53 commodities have peaked relative to the size of the economy, though not yet absolutely. Most of them now seem poised to fall."

The charts are great and I encourage you to read the whole thing:

Postscript:  Going back briefly to Tesla, if the company consistently spends more money that it takes in, then it means the resources it employs could be used elsewhere more productively.  Talented people who design cars could be using those talents more productively at another car company.  Or defined differently, talented people who are passionate about saving the environment could have more impact working on something else that helps the environment.  Scarce (and environmentally suspect) cobalt and other Lithium ion battery resources could be used to more impact in other applications (many of which also may be to transition the world's energy economy from fossil fuels but do it better or faster).

I Think I Would Prefer to Pay Commissions

Several years ago, a new brokerage called Robinhood successfully began penetrating the millennial market for stock trading with a zero brokerage fee model.  In recent weeks, Fidelity, TD Ameritrade and Interactive Brokers have all followed suit (I have accounts with the latter two).  This sounds cool until one sits back and wonders how these companies expect to make money instead.

We know one way Robinhood does it -- they route consumer stock orders to large companies who pay for this order flow.

Payment for order flow is a decades-old practice that can be traced to the early years of electronic trading. It was pioneered by Bernie Madoff at his regulated securities firm. (He later became infamous for a multibillion-dollar Ponzi scheme he ran on the side.)

Read more: How high-speed traders are transforming the stock market 

Here's how it works: Retail brokers like Robinhood focus on recruiting customers and building the trading interface, but don't actually execute their clients' orders. They outsource that to firmsincluding Citadel, Two Sigma and Wolverine Securitiesthat pay for the right to handle those trades. While orders from large, sophisticated investors can burn the market maker who executes the trade, retail trades are considered relatively safe.

These firms earn a tiny bit of money off each transaction, often 1 cent or less per share. Some see payment for order flow as a critical piece of market infrastructure—facilitating the fast and cheap buying and selling of stocks. But critics of high-frequency trading have long argued that the practice actually hurts the little guy, to the advantage of large firms.

Federal rules dictate that brokers must seek the best execution for clients’ trades, but finding the best price possible is not necessarily a requirement. Consumer advocates say the system creates an incentive for brokers to route orders to the market maker that pays the most.

During last year’s fourth quarter, regulatory disclosures indicated that Robinhood shipped virtually all of its orders for stock trades to four high-speed market makers. The bulk was bought by Citadel, which paid Robinhood an average of “less than $0.0024 per share" on the trades it was routed in that quarter. Those small numbers add up—Robinhood’s users have executed more than $150 billion in transactions.

While companies like TD Ameritrade also accept money for order flow, these payments are far less than the ones helping to keep Robinhood afloat, though that may change now.

I am sure if I bothered to Google search, I could find articles and studies that go both ways as to whether this directed order flow costs a retail investor (in the form of a slightly worse transaction price) more or less than a $5 or $12 commission.  Here is my default on this, and it goes back to the saying that if you don't see the sucker at the poker table, then you are it.  If something is opaque in the financial world, it is not very likely it is breaking in favor of the retail investor.  As such, I would MUCH rather a cost a I see that is well defined than one I do not.

Why You Are Seeing All Those Videos of Teslas Wandering Dangerously Through Parking Lots

As I promised readers of this blog, I have mostly taken my Tesla obsession offline from this blog and, when I need to, scratch that itch on Twitter.  But there is an interesting story developing in the Tesla world that I think gets at the heart of the unseriousness, perhaps even amorality, of its management.  For those of you who follow all things $TSLAQ on Twitter, there is likely to be little new for you here.

When last I blogged about Tesla, it was struggling to still be the growth company that its equity valuation implied.  Last year I wrote a fairly comprehensive take on why I thought Tesla was done as a growth company (I argued, among other things, that Q32018 might be their high water mark -- remember that in a second).  That was intended to be my last post as my kids were worried about my obsessive behavior, but I just couldn't resist posting in May when Musk announced that Tesla was no longer really a car company and would be a robotaxi company by 2020 with a million automated rideshare vehicles on the road.

That was not the end of Tesla news this year.  Since that time it has become increasingly clear what I have said form the very day the acquisition of SolarCity was announced, that that transaction was a thinly-veiled bailout of Musk and his family to the detriment of Tesla shareholders.  And for added bonus points, Tesla was recently sued by Walmart when its SolarCity installations on the roofs of various Walmart stores started catching on fire and threatening to burn the stores down.  And I don't even think I have mentioned on this blog the Musk fake $420 buyout announcement or the Musk "pedo" lawsuit by the Thai cave diver hero.

So obviously I continue to be tempted out of my vow of silence.  And it is happening again.  Several days ago, in fact just before the end of Tesla's 3rd quarter, Tesla released by OTA update a "Smart Summon" feature in its cars, part of a package of autonomous driving features Tesla has promised for years and for which many Tesla owners paid in advance with their purchase (many years ago).

Smart Summon is a sort of automated car valet.  When one comes out of, say, the mall she can pull out the Tesla app, hit a button, and have their Tesla start up and drive itself to them.   Unfortunately, this feature sometimes works and sometimes is a real fail (here and here, for example).  Already people are reporting damage claims to their car when in summon mode, though Musk and his enablers in the hipster media claim its all operator error. This by the way is right out of the Musk playbook:  go on social media and hype Tesla autonomous driving uses that go beyond the terms and conditions, and then defend themselves in court that users violated the terms and conditions (Musk taking his hands off steering wheel in a 60 Minutes show demonstration and Musk retweeting people having sex in a Tesla while in autonomous driving mode are just two examples).

So why would Tesla release what appears to be at-best beta software that could easily lead to people getting hurt?  One reason is that Musk is totally steeped in the Silicon Valley "fake it before you make it" culture, all the way back to Paypal.   Given its paint and reliability issues, the Tesla Model 3 should arguably have been tested for much longer than it was before release, just as one example.  And certainly there was a lot of pressure on Musk as he has been promising this release as imminent for months, and some folks have been waiting literally years since they first paid for the feature to actually get it.

The problem with this is that there is a difference between the consequences of screwing up at Paypal and screwing up with a motor car.  A half-baked Paypal feature might have led to someone not being able to pay for their beanie baby they bought on eBay.  A half-baked summon product can lead to children getting run over (just as a half-baked Theranos product led to thousands of people with potentially life-threatening diseases getting false and misleading blood tests).  At some point there is going to have to be a reckoning of where to draw the line against this culture -- perhaps Tesla will give us that opportunity.

But I (and many others) think there is another reason this was rushed to market.  To understand this reason, we need to put together four pieces of data

  • Tesla has collected over a billion dollars in pre-payments for autonomous technologies like Smart Summon.  Because customers have not gotten an actual product, these sit on its balance sheet and have not been recognized as revenue in Tesla's financial reports.  Releasing Smart Summon could allow Tesla to recognize some of this billion dollars as revenue in the quarter it was released, which happens to have been, just barely, the third quarter.
  • In the third quarter of 2018, Tesla really starting selling the Model 3 in mass.  It had a big quarter as it worked through years of pent up orders, and a profitable quarter in part because it focused all its production on fulfilling only the highest margin variants in the order queue.  Remember what I said above -- because it was blowing through all its pent up orders and selling an unusually profitable mix, I predicted Q32018 might be its high water mark.  Even with record unit deliveries in Q32019, Tesla's revenue and profit is likely to be down year over year.
  • Tesla's stock, while down substantially over where it was a year ago, still trades at sky-high valuations for a company that is a) in the auto industry, which typically trades for very low multiples; and b) loses billions of dollars with little prospect of making any money.  The reason it has such high valuations is expectations of growth that Tesla fans have for the stock.  Obvious evidence of stalled growth could knock a huge percentage of the value off the stock, perhaps even driving it below Musk's margin call price.
  • In the SolarCity story linked above, we found out just how far Musk is willing to go and how many ethical corners he will cut to defend his investment in a failing growth company.

My hypothesis is that Musk demanded that Tesla rush release of Smart Summon, whatever condition it was in, to market before the end of the third quarter so he can book hundreds of millions of dollars of customer pre-payments as revenue in the quarter and perhaps prevent a year over year revenue decline.  Yes, that would be super cynical, but this is the man that essentially faked the solar shingle product in order to get Tesla shareholders to bail him out of his soon-to-be bankrupt SolarCity position.

Trade carefully.  As disclosure I am current short Tesla via long-dated put options.

Why Prohibition Only Makes Things Worse

Many politicians seem to be jumping on the "ban vaping" bandwagon due to a series of respiratory illnesses potentially associated with vaping that are still being investigated.  Politicians absolutely love to ban sh*t during public panics like this irrespective of logic and unintended consequences, especially in an election cycle.

I think most thinking human beings understand that banning vaping could hurt those trying to give up cigarette smoking (which is at least an order of magnitude more dangerous than vaping) even if they don't think this outweighs the risk of vaping.  OK, all except this knucklehead.

But here is another unintended consequence.  Start with this:

Media outlets, following the lead of the U.S. Centers for Disease Control and Prevention (CDC), continue to blame recent cases of severe respiratory illnesses among vapers on "vaping" and "e-cigarettes" in general, falsely implying a link to legal nicotine products. This misinformation is fostering public confusion that may lead to more disease and death, both from smoking and from the black-market products that have been implicated in the lung disease cases.

Based on the available information, the overwhelming majority of patients with respiratory illnesses had used black-market cannabis products. While a small percentage of patients say they vaped only nicotine, they may be reluctant to admit illegal drug use, and they may not know what they actually vaped if they purchased cartridges on the black market. If nicotine products are involved in any of these cases, it is almost certainly because of additives or contaminants in counterfeit cartridges or e-fluid, since legal e-cigarettes have been in wide use for years without reports like these.

So if vaping is banned (or at least flavored vaping is banned), won't that take these dangerous street black market products from a tiny percentage of the market to 100%?  If you want to vape in the future under these bans, the only product available to you will be exactly the dangerous street products that led to the ban in the first place.  Effectively the ban will cover all safe products and effectively exempt all unsafe products.

WeWork Looks To Be The New Pets.com

The spectacular flame-out of Pets.com is the event that many folks of my era use to mark the end of the late 90's internet bubble.  In turn, it looks like WeWork is vying to mark the end of the current Silicon Valley unicorn bubble.  I won't go into all the problems of its IPO, but suffice it to say that they can't get retail investors to bite anywhere near their last private funding round valuation, and in fact are scrambling to maybe go public at half the value that companies like Softbank invested at.

The incredible thing about WeWork is that it is really a minor repackaging of a quite mature real estate model.  Companies like Regus have for decades leased large blocks of space and then released it in small blocks to individuals and small businesses, sometimes packaged with additional services.  WeWork just took that model, then added some new age language and some espresso machines.

While WeWork is growing rapidly, the service it offers is not new. The Belgian company IWG, which operates under the brand name Regus and a variety of other, smaller brands, utilizes the same business model of leasing office space, refurbishing it, and sub-leasing it under shorter terms to tenants.

IWG has more square feet of office space than WeWork, earns more revenue, and actually earns a profit. However, IWG has a market cap of just $3.7 billion, less than 10% of WeWork’s most recent valuation. The primary difference between the two is that WeWork describes its business model in the faux-tech lingo of “space-as-a-service” and its mission as “elevating the world’s consciousness.”...

Another difference is that WeWork operates with a much higher degree of risk by taking on significantly more operating lease commitments with longer terms and more geographic concentration.

I compared this to Pets.com but actually I think a better analogy is to the late 70s/early 80s Texas real estate and S&L bubble.  In the runup to the S&L crash, land investors played a game wherein they flipped a piece of real estate back and forth between related parties, raising the price with each sale.  Having pumped up the value on paper, they then got some S&L to lend at 100% or even 105% LTV and when the land values all crashed, S&L's were left holding the bag.

This process of pyramiding the value of an illiquid asset in private sales is very similar to what is going on in the Silicon Valley unicorn world.  Companies like Lyft and Uber and WeWork have seen private funding rounds at ever-increasing valuations.  These are done outside the accountability of the broader market and untethered to any sort of normal valuation metrics like earnings or even revenues.

These unicorns often promote custom metrics like engagements or users rather than any traditional financial metrics, because their financials generally are awful.  WeWork, for example, consistently spends $2 for every $1 of revenue it brings in.   All you have to know about the complete corruption of valuation metrics can be gained by looking at WeWork's preferred metrics:

More than its cash-burning ways, WeWork’s IPO will test investor tolerance for made-up accounting metrics. You might recall “Community Adjusted EBITDA,” the gauge WeWork devised to measure net income before not only interest, taxes, depreciation, and amortization, but also “building- and community-level operating expenses,” a category that includes rent and tenancy expenses, utilities, internet, the salaries of building staff, and the cost of building amenities (which WeWork has described as “our largest category of expenses”).

  • ARPPM (annual average membership and service revenue per physical member). “[R]epresents our membership and service revenue (other than membership and service revenue generated from the sale of WeLive Memberships and related services) divided by the average of the number of WeWork Memberships as of the first day of each month in the period.” (Note: this is not just creative accounting, but also creative acronym construction.)
  • Adjusted EBITDA before Growth Investments. “[A]n additional supplemental measure of our operating performance, which represents our Adjusted EBITDA further adjusted to remove other revenue and expenses (other than revenue that relates to management fee income from advisory services provided to Branded Locations) and what we define as ‘Growth Investments,’ which are sales and marketing expenses, growth and new market development expenses and pre-opening community expenses.”
  • Location Contribution. “[R]epresents our membership and service revenue less total lease costs included in community operating expenses, both calculated in accordance with GAAP, excluding the impact of Adjustments for Impact of Straight-lining of Rent included in community operating expenses.”

Or, you could just throw your money on the street.

This has been a pyramid scheme, pure and simple (with more than a touch of founder self-dealing at WeWork).  There is no way Softbank could have imagined that WeWork was actually worth $47 billion if they were to hold it and manage it for 30 years.  The only way they thought $47 billion made sense was that they were sure they could unload it on the next group, probably retail investors, for a higher number.  This is greater fool investing, and works right up until there is not another fool available.

Postscript:  WeWork founder Adam Neumann reminds me a lot of Donald Trump in his business life.  All the investors will lose money. The company will likely go bankrupt.  Building owners will have leases broken and banks will lose money on defaulted loans.  But Adam Neumann will walk away from it all with hundreds of millions of dollars.  That is the typical Trump deal in a nutshell.

Trump Argues Any Current Business Problems are "Bad Management"

From an interview the other day

Q I can read you the tweet, Mr. President. You said that, “Badly run and weak companies are smartly blaming these small tariffs instead of themselves…”

THE PRESIDENT: Yeah. A lot of badly run companies are trying to blame tariffs. In other words, if they’re running badly and they’re having a bad quarter, or if they’re just unlucky in some way, they’re likely to blame the tariffs. It’s not the tariffs. It’s called “bad management.”

The first answer to this is, LOL.  This is the man with a string of failed businesses (steaks, college) and multiple bankruptcies in his core business.  In fact, I would list one of Trump's most useful business skills is his ability to get other players in the capital structure to take the losses for his bad business decisions and management.

But as far as trade is concerned, if one is worried about bad management in US businesses, then the right thing is certainly not to protect those businesses from competition.  The US auto business in the 60's and 70's as well as almost the entirety of the British industrial base in the 20th century are good examples of the problem.  Protecting businesses from international competition, as is Trump's objective, only shelters those businesses from accountability and reduces the pressure to fix whatever bad management may exist.

As a special bonus, I would argue that many of the bad habits of large US companies today are directly attributable to the stimulative Federal Reserve policy which Trump wants to increase.  Returning profits to shareholders in the form of share buybacks rather than dividends is a perfectly valid strategy, particularly when the tax code favors capital gains over dividends.  But when companies borrow billions just to buy back more of their own stock, rather than reinvest it in new opportunities, something is broken.  A large part of the blame are twin Federal Reserve policies of low interest rates and a QE-created equity and asset price bubble.

Why California Forcing Uber Drivers to Become Employees May Hurt Many Drivers

Apparently California is close to a new law mandating that Uber drivers (and other "gig" economy workers) be treated as employees rather than independent contractors.  Progressives are cheering this as a victory for the drivers:

I have explained before why this will likely kill Uber (e.g. here) but let me summarize quickly the argument of why this is bad for most drivers (self-plagiarized from a Twitter thread).  The key issues are driver productivity and driver agency.

Let's define worker productivity as far as Uber is concerned as the amount of customer revenue a driver brings in per paid hour. In the current model, this is not a real concern for Uber as they are only paying Uber drivers when they are actually driving customers.  Essentially, Uber drivers and Uber have a revenue share agreement to split customer revenue. Uber has set the share low enough to maximize its revenue (of course) but high enough to still attract drivers. It tweaks this formula fairly frequently.  Uber driver productivity as we have defined it is essentially locked in by the formulas in this revenue share agreement.

Given this arrangement, note what Uber does NOT have to worry about. It does not have to worry that drivers are working hard enough or are positioning themselves in productive locations and productive times of day.  Uber drivers can drive anywhere they want at any time they want.  An Uber driver currently can turn on the app at 4am in the suburbs of Peoria and Uber does not care, even if this positioning is unlikely to get many rides. Why? Because Uber only pays if there is a ride.  It doesn't care if the driver is sitting around unproductively, because it is not paying the driver for that time.

So today, it is left up to the driver to make trade-offs between the most productive time & positioning and the demands of their own personal schedule & life choices. This sort of flexibility has real value to many drivers. It is agency that many hourly workers don't have, and that has attracted many people to become Uber drivers.  My neighbor, for example, sits in his living room all day with the app on and runs out to the car whenever he accepts a ride (and then turns the app off so he can come back home).  He gets few rides in our area but he is happy with the lifestyle and the little bit of extra money he makes from Uber.

But this all changes if drivers must be Uber employees and subject to wage and hour laws.  The key difference under such wage and hour laws is that Uber would have to pay drivers whether they have a passenger or not, as long as the app is turned on.  Suddenly, forced to pay for labor whether the labor is working or not, Uber is going to get real interested in driver productivity.

If Uber pays by the hour, my neighbor's preferred way to drive is a dead loser for the company. In fact, if I am a driver and paid by the hour, I could go find a library in an out of the way place at an odd time of day and sit and read and collect hourly paychecks -- All without having to drive much. Now, instead of productivity choices being in the driver's hands because it's the driver that makes more or less money with greater or lesser productivity, these choices now land in Uber's lap. Uber can no longer allow so much driver agency.

If making Uber drivers hourly workers does not kill Uber altogether, then Uber is going to be forced to monitor driver productivity and do one or both of two things:

  1. Establish productivity rules, such as driving time windows and allowed geographic ranges and/or
  2. Set a minimum productivity threshold below which Uber will have to let those drivers go

Interestingly, like a lot of labor regulation, this one will benefit the middle while hurting the lower-paid drivers.

  1. Top drivers will be unaffected, because they already make the minimum
  2. Middle drivers may get a small boost
  3. Lower-earning drivers will lose their driving jobs entirely

A better way to characterize this law is that it will greatly reduce the flexibility many Uber drivers love, while causing the lowest paid drivers not to make more, but to lose their driving gig altogether.

I wrote a great deal more about how much of labor regulation actually hurts the lowest rungs of unskilled workers in an article here for Regulation Magazine.

A Quick Privacy Quest Update

  1.  The Brave browser is terrific and an essentially seamless transition from Chrome.  I depend too much on Lastpass and needed a browser it would work with, and it works just fine in Brave.  I am sure Brave is more vulnerable than they let on but it is an almost no-brainer upgrade from Chrome.
  2. DuckDuckGo is okay but well short of Google for search.  I don't find the search results are as good and related Google functionality like Google Finance (e.g. when you search a stock price) and I quickly missed Google places and maps.  I am continuing to try to make it work but I keep a Google tab open and find myself going back to it frequently.
  3. I have been using Express VPN.  I am not knowledgeable enough about how these things work to say if it is better than other VPN services but it seems to work fine for me.  Really almost invisible except that websites that depend on your browser or computer being recognized (e.g. some banks) will put you through verification hoops every single time you log in.
  4. Stuck with Gmail.  Our company uses Google Apps to host email and some other services for our company and switching costs are high.  Particularly since I have a grandfathered free account for up to 100 users, which saves a ton of money.

Trump Tariffs May Have Been Protecting A Goldman Sachs-led Aluminum Price Fixing Ring

The very first tariff President Trump imposed in 2008 was a 10% tariff on aluminum imports.  Because those desperate aluminum makers in the US needed protection from foreign competition.  Or someone did.

It turns out that earlier in the decade Goldman Sachs is accused of leading a price fixing ring that attempted to corner the market for domestic aluminum and aluminum warehousing

Purchasers accused banks and commodity trading, mining and metals warehousing companies of conspiring to hoard aluminum inventory earlier this decade, after prices had declined because industrial activity fell during the global financial crisis.

The purchasers said the alleged conspiracy led to delays in processing orders and higher storage costs, ultimately inflating the cost to produce cabinets, flashlights, soft drink cans, strollers and other goods containing aluminum.

One way to avoid this sort of thing is to allow robust import markets where consumers can seek alternatives when those of domestic suppliers are unreasonable, for whatever reason.  I would trust a free trade regime to far more than the FTC or the US courts to sort this sort of thing out in a timely manner.

Amazon Fires, Summer of the Shark, and the Unintended Consequences of Stupid Climate Policy (ie Ethanol Mandates)

I know I have told the story of the "Summer of the Shark" before, but I need to repeat it again because it is so relevant to the Amazon fire story

let's take a step back to 2001 and the "Summer of the Shark." The media hysteria began in early July, when a young boy was bitten by a shark on a beach in Florida. Subsequent attacks received breathless media coverage, up to and including near-nightly footage from TV helicopters of swimming sharks. Until the 9/11 attacks, sharks were the third biggest story of the year as measured by the time dedicated to it on the three major broadcast networks' news shows.

Through this coverage, Americans were left with a strong impression that something unusual was happening -- that an unprecedented number of shark attacks were occurring in that year, and the media dedicated endless coverage to speculation by various "experts" as to the cause of this sharp increase in attacks.

Except there was one problem -- there was no sharp increase in attacks.  In the year 2001, five people died in 76 shark attacks.  However, just a year earlier, 12 people had died in 85 attacks.  The data showed that 2001 actually was  a down year for shark attacks.

The Amazon fire story is like the Summer of the Shark stories back in 2001, except on steroids due to the influence of social media.  Just like with Summer of the Shark, everyone is convinced that this is the worst summer ever for Amazon fires.  And just like back in 2001, the media is bending over backwards to claim a trend without actually giving any trend data.

The Washington Post deftly avoided actually showing any trend data by having a couple of "experts" claim that this summer is the worst ever in their memory

“I cannot remember any other big fire episode like this one,” said Vitor Gomes, an environmental scientist at the Federal University of Para.

Ricardo Mello, head of the World Wide Fund for Nature’s Amazon program, struggled to find the words to describe his pessimism on Thursday.

“It’s historically — this is highest number [of fires] I’ve ever seen,” he said.

It turns out that trend data is actually pretty easy to come by.   NASA for example captioned a recent satellite photo of the Amazon fires by writing

 “As of August 16, 2019, satellite observations indicated that total fire activity in the Amazon basin was slightly below average in comparison to the past 15 years. Though activity has been above average in Amazonas and to a lesser extent in Rondônia, it has been below average in Mato Grosso and Pará, according to the Global Fire Emissions Database”

Wait, there is actually a global fire emissions database?  Wow, that seems like something that could be more useful to an article about trends than the anecdotal memory of two people.  It turns out the picture is complicated.  It is close to a 20-year high in the Amazonas region but much closer to average in the 9 other measured Amazon regions.   And with the exception of the Amazonas region, the basic picture is of the last 10 years having generally fewer fires than in the first decade of the century.  The level of fire is worrisome but far short of an unprecedented catastrophe.   As the Times wrote:

The number of fires identified by the agency in the Amazon region so far this year, 40,341, is about 35 percent higher than the average for the first eight months of each year since 2010.

The decade before that included several years in which the number of fires identified during the first eight months was far higher.

But the most interesting part is to consider the effect of short-sighted US climate policy.  It would be hard to imagine any climate policy stupider than ethanol mandates and subsidies.

One of the interesting things about the Amazon fires is that most folks agree the fires are largely limited to cleared farmland within the Amazon basin.  For example, here is the NY Times:

Natural fires in the Amazon are rare, and the majority of these fires were set by farmers preparing Amazon-adjacent farmland for next year’s crops and pasture.

Much of the land that is burning was not old-growth rain forest, but land that had already been cleared of trees and set for agricultural use....

Brazil was actually doing pretty well slowing the clearing of the Amazon

The new Brazilian President rightly deserves blame for increasing rainforest clearning

While campaigning for president last year, Mr. Bolsonaro declared that Brazil’s vast protected lands were an obstacle to economic growth and promised to open them up to commercial exploitation.

Less than a year into his term, that is already happening.

Brazil’s part of the Amazon lost more than 1,330 square miles of forest cover in the first half of 2019, a 39 percent increase over the same period last year, according to the government agency that tracks deforestation.

But one of the forces that has been at work for years has been US ethanol policy, essentially the government mandates and subsidies to divert a large amount of food and cropland to fuel production.  An article in Grist and Foreign Policy in 2010 discusses this issue in depth

In the FP piece, author Nikolas Kozloff jumps right to the point in his lead:

While sugar cane ethanol is certainly less ecologically destructive than some other biofuels, the industry’s boosters have overlooked one key fact: You’ve got to plant sugar cane somewhere. One couldn’t pick a worse place to harvest cane than Brazil’s Atlantic rainforest. There, sugar cane crops have led to deforestation and, paradoxically, more carbon emissions.

Both articles go on to discuss the shift in sugarcane from the Atlantic to the Amazon rain forests.  I would argue that by raising world food prices, corn ethanol in the US also has an effect, by creating the economic incentive to clear more farmland in the Amazon to plant crops essentially subsidized by US ethanol mandates.

The Knives May Finally Be Coming Out for Elon Musk: Vanity Fair Discovers the Tesla-Solar City Sham

Back in June, 2016 Tesla (a car maker) made an offer to buy SolarCity (an installer of rooftop solar). One does not need 3 years of distance to figure out the acquisition made no sense, I (along with many others) thought it was crazy at the time:

I am sure there are probably some hippy-dippy green types that nod their head and say that this is an amazing idea, but any business person is going to say this is madness.  It makes no more sense than to say GM should buy an oil production company.  These companies reach customers through different channels, they have completely different sales models, and people buy their products at completely different times and have no need to integrate these two purchases.  It is possible there may be some overlap in customers (virtue-signalling rich people) but you could get at this by having some joint marketing agreements, you don't need an acquisition.  Besides, probably the last thing that people's solar panels will ever be used for is charging cars, since cars tend to charge in the garage at night when solar isn't producing.

SolarCity was burning cash like crazy -- not only was it selling below cost to grow market share, but it was paying all the costs of the solar installations up front and only getting repaid over time by homeowners through power purchases.  Further, it was losing its access to the capital markets as investors became more skeptical about its management and business model.  Frankly, it was facing chapter 11.

But wait! SolarCity's Chairman and largest investor, Elon Musk, was also the Chairman and majority investor in Tesla (Musk's cousin was SolarCity's CEO and founder and the two companies shared several other board members, including Musk's brother Fredo Kimbal).  Tesla was hot in the way that SolarCity had been several years prior and still had access to the capital market and a stock with a sky-high valuation.  So a combination was proposed.  Tesla investors were skeptical, despite their being largely in the bag for Musk, so Musk then did a much ballyhooed solar shingle reveal.  This seemed to be the technology of the future and helped close the deal.

Readers know I write a lot about Tesla and Musk but this deal was the beginning of my interest.  At the time, in that original article, I knew little about Musk and his reputation and was reluctant to call this deal a self-dealing fraud (as I would today).  Years of Musk's lies and outrageous promises have convinced me he is untrustworthy -- for just one example, the solar shingle reveal turned out to be a total fraud and to this day, three years later, there is still not a sell-able product.

In the community of Tesla critics, frustration #1 seems to be how bulletproof Musk's reputation is in the media.  For many folks he is still a genius**, Tony Stark made real, the man of vision who is changing the world.  Adding to his protective bubble is his ability to wrap himself in saving-mankind virtue.  Critics of Tesla or Musk are immediately labelled as paid oil company operatives or uncaring enemies of the planet.  Maintaining this image is important, because his companies all milk billions of subsidies from the government, from the state subsidies to build his various manufacturing plants to the subsidies for electric car sales to the subsidies for solar roof installations.  A failure of his image might cause taxpayers to question all their money he is taking.

Well, you know this might be coming to an end when Vanity Fair, which is more likely to prop up a flawed virtue-signalling Left-leaning celebrity than dig up dirt on them, comes down hard on Musk and the SolarCity acquisition.  This is a fabulous article that mainly focuses on the SolarCity acquisition and the Buffalo Gigafactory 2's $750 million in state subsidies generating about zero jobs there.  But it also ventures briefly into many other niches of the Musk/Tesla fraud story.  I recommend the whole thing.   Most all of this has been discussed in the Tesla skeptic community for years but kudos to Vanity Fair for starting what I hope will be a general trend of increased skepticism in major media about Musk and Tesla.

 

**Postscript:  I am absolutely convinced Musk is not an engineering or scientific genius (he may be a promotional genius, though).  He is a master at saying things that sound smart to the average person, but sound ridiculous to an expert in that field.  Tesla skeptics even have a word for it, the "revelation," and stories abound of people saying, "I thought Elon Musk was a genius until he started talking about something I knew a lot about...."

While PT Barnum is sometimes suggested as an analogy for Musk, the best analogy I can come up with is Ferdinand de Lesseps, leader of the effort to build the Suez canal and author of the French disaster trying to build a canal in Panama.  De Lesseps, after Suez, was the greatest hero in France -- he was considered a genius and called the "great engineer."  But in fact he was not an engineer at all, but a dogged promoter and money raiser with big visions.  If you want to understand Elon Musk, read the first third of the David McCullough book "The Path Between the Seas" which covers the French efforts at Panama (then read the whole book because it is all wonderful).

Postscript #2:  My moment of revelation was Musk's hyperloop, which seems to entrance politicians and Popular Science types but which has never made a bit of sense to me.

So here is the story so far:  We know that the main barrier to high speed rail projects is that they are astonishingly expensive to build and maintain given the high cost of the right-of-way acquisition and building track to the very high standards necessary to support safe high speeds.   See for example California high speed rail, which is following some sort of crazed Moore's law where the cost estimate doubles every 18 months.

So we are going to fix the cost problem by ... requiring that the "track" be a perfectly smooth sealed pressure vessel under vacuum that is hundreds of miles long?  What about this approach isn't likely an order of magnitude more expensive than rail?  The prototype above which allows only one way travel cost about a billion dollars per mile to build.  And with a lot less functionality, as current prototypes envision 10-20 person sleds, one step beyond even the worst airline middle seat in terms of likely claustrophobia, and less than half the capacity of a bus.  It would take 15-20 of these sleds just to move the passengers from a typical aircraft.   Not to mention the fact that there is no easy way to do switching and a return trip requires a second parallel track.  All to reach speeds perhaps 20% higher than air travel.

Postscript #3:  I hope this (from the Vanity Fair article) is true, but I doubt it:

Everyone in Albany, says the longtime lobbyist, has accepted that the Buffalo plant is a “disaster”—a poster child for why government giveaways to big companies don’t work.

Postscript #4:  To be fair, Lynette Lopez is a reporter that has had her eyes open to Tesla for quite a while and has done some good reporting.

Postscript #5:  I should have mentioned that Bethany McLean, author of the Vanity Fair article, cut her teeth on helping to bring down Enron.

Why I (Mostly) Don't Blog About Climate Anymore

Recently the journal Nature published a "study" arguing that climate contrarians got too much media attention and that, essentially, the media needs to stop quoting them.  A part of the study included a list of climate skeptics and their media influence scores.

It was a little off-putting to be left off this black list, though I feel certain that 10 years ago in my active period I could have easily made the cut.  Nevertheless, it is clear that I have fallen by the wayside.

And that is by choice.  I simply do not have the ability in this blogging hobby to play decades-long games of wack-a-mole with the same arguments over and over.  In a different sphere, I see folks like Mark Perry and Don Boudreaux take on the same anti-trade arguments for years.  I respect them for it and appreciate the effort, but I don't know how they do it.

From my observation, the world of climate remains the same old sh*t.  No one has come up with a better approach for estimating the all-important value of the temperature sensitivity to CO2 concentration.  Alarmists are still assuming massive amounts of positive feedback in the climate system but have done nothing new to prove this is really true.  Trends are still extrapolated from individual weather events, and trends are often claimed in the media without actually showing any trend data.

And the whole thing has become tribal as hell.  The other day I tried to engage Kevin Drum on twitter about a chart he used that I thought was bad.  I was trying to make the point that there is no scientific reason to believe that worldwide increases in atmospheric CO2 concentration would have 3x their average effect in a 25 mile radius around Phoenix (as the chart seems to show) and that the more logical explanation is that the chart is based on at least somewhat corrupted data.  I said nothing like "and thus global warming is all a scam."  In fact, the only conclusion I drew was a very modest one everyone interested in global warming should be able to agree with, that it has been a mistake not to have invested in a better surface temperature network given how important the issue is to us.

But even that was too much -- you could tell Drum was automatically treating me as a denier and anti-science.  Take this exchange for example


Kevin Drum is one of my favorite people to read because he is one of the few folks in Left or Right who will occasionally question his own tribe.  This is not Kevin Drum thinking, this is Kevin Drum giving the tribal answer because anyone poking even modestly at the edges of climate orthodoxy has put his fur up.

So I move on to other things.  To be honest, this may just be a personality trait of mine related to ADD/limited focus.  I find myself bored with the whole Tesla critic community as well, seeing the SOS ever day.

Postscript:  For those who do not follow me much, here is my current position on global warming

  • Man-made global warming is real but likely exaggerated, in particular from unrealistic assumptions about massive amounts of positive feedback in the otherwise long-term-stable climate system.  The chance of large (>2C) warming is remote but non-zero
  • Most of the claimed relationship of extreme weather events to manmade CO2 are a crock.  Time and again the media and activists claim trends (e.g. in hurricanes, droughts, and tornadoes) that simply are not there when you actually look at trend data.  Where we do see trends, such in sea level rise, those trends have often been going on since the mid 1800's, making it difficult to attribute them entirely to man-made CO2 produced mostly after 1950.
  • It is possible to create a low cost climate insurance plan that might actually be a net economic improvement over the current regulatory environment, even before considering environmental benefits.  That plan is here.  Speaking of tribalism, it does not run one way.  This plan essentially got me shunned in much of the skeptic community.

Postscript #2:  The skeptic list from Nature has some odd names.  Don Boudreaux and Ron Bailey stuck out to me.   Boudreaux to my knowledge is not engaged in the climate debate at all and I know Bailey is an AGW believer.  Both, however, are anti-authoritarian and pro-market, and in the era of the Green Great Leap Forward, or whatever it is called, I suppose that is enough to put one athwart the climate change alarmists.

Can We Never Learn From The Our Failures With Cuba?

Apparently the American embargo and blockade of Cuba have worked so well that Trump wants to try the same thing with Venezuela

Axios is calling it President Trump's Venezuela naval blockade "obsession" based on accounts of unnamed administration officials: "President Trump has suggested to national security officials that the U.S. should station Navy ships along the Venezuelan coastline to prevent goods from coming in and out of the country, according to 5 current and former officials who have either directly heard the president discuss the idea or have been briefed on Trump's private comments," according to a new report.

He's said to have repeatedly raised the idea in private as a way to finally deliver regime change in Caracas, after prior attempts - including a short-lived push for military coup - failed earlier this year. Supposedly, the plan would be to station US Navy ships along the coast such that all vessels would be blocked from entering or exiting the South American country.

I am trying to think of an example of an authoritarian regime brought down by a blockade or embargo, and I am struggling to do so.  We have embargoed the Cubans for 60 years and the communists still sit there merrily running that county.  We have embargoed Iran off and on for 40 years and yet essentially the same regime is in power.  And don't even get me started on the 1940 embargo of Japan**.  The closest I can come is the fall of apartheid South Africa, though that was never a full embargo -- it was more of an international public shaming that worked in part for the reason that the people of South African remained engaged with the world in trade and other matters.  Also I think giving too much credit to international players for the changes in South Africa is to reduce the agency, persistence, and bravery of the internal opposition.

I will say that an attempted blockade of Venezuela will definitely have three entirely predictable outcomes

  1. It will hurt the citizens who we are trying to help
  2. It will give Marxist apologists an excuse for Venezuela's economic disaster (ie "it wasn't socialism, it was the evil American blockade)
  3. It will lead to unnecessary confrontations with other countries.  What happens the first time the US Navy puts a shot across the bow of a French or Russian or Chinese merchant ship?

I have a strong bias towards engagement as a palliative for authoritarian regimes.  Let their folks interact with the quasi-free West long enough and pressure will come for change.  You know who agrees with me?  The leaders of North Korea, which is why they would rather live in the Middle Ages than allow their folks any interaction with the West.

** Postscript:  Readers might respond that the wartime embargo of Japan was extremely effective.  Eventually the US Navy was able to strangle the Japanese economy.  This indeed was effective at reducing the Japanese warmaking ability, at the cost of abject misery for much of the Japanese people.  But note that it never even came close to forcing a regime change.  Only the American atomic bombs combined with the Russian declaration of war eventually (barely) led to Japanese surrender.

Who Could Have Possibly Predicted This? Solar Roads a Failure

I seem to have established a couple of tiny blogging niches for myself, as there are two things with an absolute certainty that readers will email me -- solar road stories and pictures of steam plumes used to illustrate pollution articles.

So as not to disappoint my loyal readership in these two niches, Popular Mechanics as the story of a 5 million euro solar road in France.  And, surprise, it turns out that putting solar panels flat on the ground in a cloudy region and then driving over them does not work very well.

The noise and poor upkeep aren't the only problems facing the Wattway. Through shoddy engineering, the Wattway isn't even generating the electricity it promised to deliver. In 2016, the builders promised it would power 5,000 households.

There proved to be several problems with this goal. The first was that Normandy is not historically known as a sunny area. At the time, the region's capital city of Caen only got 44 days of strong sunshine a year, and not much has changed since. Storms have wrecked havoc with the systems, blowing circuits. But even if the weather was in order, it appears the panels weren't built to capture them efficiently.

“If they really want this to work, they should first stop cars driving on it,” Marc Jedliczka, vice president of the Network for Energetic Transition (CLER), which promotes renewable energy, told the Eurasia Times.

By the way, I called this particular project out as madness when it opened, so all of this was certainly foreseeable.  Just so we don't let those responsible slink away from their bad judgement, this was from an article when the road was first opened

A 1km (0.6-mile) route in the small village of Tourouvre-au-Perche covered with 2,800 sq m of electricity-generating panels, was inaugurated on Thursday by the ecology minister, Ségolène Royal.

Royal has said she would like to see solar panels installed on one in every 1,000km of French highway

More of my solar road articles are here.

Democrats Pounce

Republicans, not completely without justification, frequently argue that papers like the New York Times and Washington Post often frame mis-steps by Democrats in terms of the Republican response.  So instead of "Biden makes racist gaffe" the headline might read "Republicans pounce on Biden over his latest statements."  I will confess that I don't really notice this so much but Conservatives in my feed are often posting examples.

For balance, I thought it would be useful to demonstrate that Conservatives are perfectly willing to do the exact same thing.  Take this story by Rick Moran.  The headline is "Trump Has Democrats Acting Like Pavlov's Dogs."  After a couple of grafs describing Pavlov's famous work, he writes:

Donald Trump gets Democrats hysterical with just about anything he tweets. It's a classic Pavlovian response and Trump plays his opponents like a well-tuned fiddle. He doesn't even have to say anything necessarily controversial. Whatever he tweets, his opponents see 1) racism, 2) fascism, 3) white supremacy, or 4) his enabling one or more of the previous. Trump tweets, Dems salivate. It's classic.  He knows exactly which buttons to push, which subjects are liable to turn liberals into sputtering, spitting, stammering piles of gelatinous goo.

It's not until like the 13th paragraph that we find out what the article is actually about, which is this:

Trump shared a tweet and video from  conservative comedian Terrence Williams that claimed without evidence that former President Bill Clinton and former Secretary of State Hillary Clinton -- Trump's 2016 presidential election rival -- were responsible for Epstein's death. The Federal Bureau of Prisons and Attorney General Bill Barr said Epstein died in an "apparent suicide" while in federal custody.

I consider myself to be one of the last people in America who can evaluate Trump's actions on a case-by-case basis without resorting to a default tribal position.  And I will say that this is ...  pretty f*cking egregious.  On a number of dimensions.  First and and foremost, the DOJ has already announced an investigation into this matter, so Trump is effectively commenting on an active Federal investigation in its very early stage.  I encourage you to check Mr. Google and search for times where Conservatives criticized Obama for commenting on an active investigation.  I remember a number of such occasions, e.g. here.

Second, not only is he commenting on an active investigation, he is suggesting a suspect.  Yes, I know the comic is having fun with the Clintons-knocking-off-their-opponents meme.  That is fine for a comic, but it is unacceptable for the person at the top of the federal law enforcement establishment.  This is how people like Richard Jewell had their lives ruined.  The fact that the suspected targets here are a former US President and Mr. Trump's opponent in the last election just make this all the worse.

This behavior of Trump is indefensible, which I suppose is why Mr. Moran chose to play the "Democrats pounce" card.

Sometimes I Wonder If People Just Need to Have An Enemy

I find this depressing:

We seem to NEED an enemy.  We hop from one enemy to another -- Soviet Union to Iraq to Al Qaeda to Russia to Iran and now to China (with a certain minority always having Israel as their enemy).   I find this depressing.  As I told a reader in a private email the other day, for whatever cynicism I project here, I am actually a sloppy optimist, a pacifist, and a conflict avoider.  Maybe that is part of the appeal of Canada or New Zealand in surveys -- I mean, its hard to imagine them having enemies.

We had a Chinese exchange student back when my kids were in high school who frequently visits us here in the US.  The first day we saw here in America she looked exactly like Honey in the Doonesbury comics -- Mao jacket and hair and glasses and all.  After four years of college at Michigan, she is as American as my kids.  She and her friends want so much to be like us in so many ways, without rejecting her Chinese cultural heritage.

This country has so much positive soft power -- everyone around the world wants to be here and partake of our culture.  I don't think either Republicans or Democrats really understand the real reasons behind this pull.  Republicans seem to believe folks are lining up at the border for welfare checks while I don't know what Democrats believe any more, as their Presidential candidates all reject many of the great things about this country I would have thought attracted people.  Maybe that is why politicians of both parties so consistently piss away this potential goodwill.

I am not naive about China -- they are an authoritarian state desperately in need of reform.  I just don't think going into cold war tension mode with them is going to help.  I tend to believe in the power of engagement by ordinary people with the rest of the world to drive change, which we should have been trying years ago in Cuba.  Isolating authoritarian regimes is really just doing their work for them.

This Isn't A Map of Global Warming, It's A Map of Corrupted Temperature Stations

Kevin Drum published this map on his blog, which he says was originally from the Washington Post.  He does not include a link so I can't give any more background on the chart.  For example, I have no idea which surface temperature data set it is based on.

The fact that smart guy like Kevin Drum can publish this uncritically just demonstrates how little even vociferous global warming advocates actually understand about the issue.  Because all this chart does is reinforce a skeptic argument that the global surface temperature data set is corrupted and can exaggerate warming trend data.

Let's start with this:  I have read much of the IPCC reports and have skimmed the rest, and I can say with certainty that these reports contain no theory about how increasing the concentration of atmospheric CO2 from 0.03% to 0.04% causes warming of 2C or more focused in hotspots as small as a 50 mile radius.  There is absolutely no theory, and I would argue no way, that a general global warming trend of 1-1.5C per century is causing warming 2-3 times that rate narrowly over San Jose, California or Phoenix, AZ.

The fact that many of these hotspots are focused over urban areas is a good indicator that this temperature data set is corrupted with urban heat island biases.  This is a different kind of man-made effect but one which is local and is not the result of a global warming trend, and thus should not be in a database aimed at measuring this global warming trend.

Something like 10 years ago I saw a similar chart online based on USHCN measurement stations.  At that time, the chart showed a hotspot over Tucson

At the time, Anthony Watt was running his Surface Stations project to document the conditions of all the USHCN temperature stations (the crosses on the map) that formed the basis of the US global warming / temperature trend numbers.  So I drove down to Tucson to see the temperature station in the middle of that hotspot.  What I found was that the temperature station that 100 years ago was in a rural open field was now measuring the temperature of an asphalt parking lot in the middle of a large city:

As an aside, this was a fun project as I still see this picture reproduced in random places from time to time.  After this picture got some publicity, the government shut this station down and moved it to a better location.

But the point is that the hotspot on the temperature change map was both real and fake.  Real in the sense that Tucson was definitely hotter due to the change in land use, as are most all cities (just watch the weather in a city and they will often say that it will be a low of 45 in the city, and 40 in the outlying areas).  My son and I measured the urban heat island in Phoenix for a high school science project.  We found it to be as high as a 6-8F difference between city and the surrounding countryside at certain times of day.

But the hotspot was fake because this had nothing to do with global warming from CO2, and thus including this hotspot in the temperature data was exaggerating the global warming trend.  This is especially true since there are only a few data points, so this reading for Phoenix was averaged into the reading all over the Southwest and tended to raise the official temperatures for much of Arizona, not just in Tucson.  Where temperature stations are sparse, such as in northeast Montana, a single bad surface temperature station can corrupt the data for a large area.  This effect is even further exaggerated in places like Africa, where temperature stations can be hundreds of kilometers apart.

This is one reason satellite temperature measurement makes so much sense, as it is not subject to these sorts of biases (though it has other issues, including sensor drift and the fact that satellites can shift orbits and eventually die).  Whenever you see high temperature records today, they are usually set in the city at the airport, a big paved facility in the center of an urban area that 50 years ago was probably an open field.  There is a good chance the record has more to do with urbanization around the temperature measurement station than with global warming.

I believe the scientific community at NOAA and GISS have been almost criminally negligent with the surface temperature network over the last 30 years.  In the late 80's, when we became concerned with global warming, experts knew all too well about vast problems in how we measure surface temperatures.  We have invested tens of billions of dollars to fight global warming, but practically zero to measure it better.  We should have invested in a better, more reliable, less biased (in the scientific not political sense of that word) measurement system.  The amount of money we wasted in Solyndra would have paid for the upgrades, but we still have done nothing.  As a result, much of the warming signal is actually manual corrections to the raw data, undermining the signal to noise ratio of this critical metric and calling into question the bias (in the political not scientific sense) of these manual corrections (eg here and here).  For example, it turns out the past continues to cool.

Postscript Bonus:

The Danish Meteorological Institute, which has a key role in monitoring Greenland’s climate, last week reported a shocking August temperature of between 2.7C and 4.7C at the Summit weather station, which is located 3,202m above sea level at the the centre of the Greenland ice sheet, generating a spate of global headlines.

But on Wednesday it posted a tweet saying that a closer look had shown that monitoring equipment had been giving erroneous results.

“Was there record-level warmth on the inland ice on Friday?” it said. “No! A quality check has confirmed out suspicion that the measurement was too high.”

 

This Is Why I Resist Pleas for More Spending on Government Schools

I am perfectly willing to believe that some school districts somewhere have spending too low to ever provide the education we expect in 2019.  But after sending my kids to a private school that did a fabulous job with kids and whose tuition was lower per student than the spending in most public schools, I have become suspicious of pleas for more and more money.  It seems that lack of money is ALWAYS the claimed problem at public schools.

In fact, I am increasingly convinced the problem is not lack of money but how the money is spent.  As the percentage of staff in most public schools who are administrators rather than teachers climbs over 50%, many public schools are doing exactly what every other government bureaucracy does -- starve spending for actual public services in favor of feeding a growing, increasingly well-paid administrative staff.

Here is this week's example.  Via Zero Hedge:

The Baltimore Teachers Union (BTU) has set up a donation page on their website to raise money and supply classrooms with fans this school year because of 60 Baltimore City School (BCS) buildings don't have air conditioning.

"It's no secret that Baltimore's students have had to weather the spectrum of extreme temperatures in their classrooms. We've all seen the photos of kindergarteners sitting in their coats and mittens at their morning circle. The reverse is true when school is back in session at the end of summer, when schools' internal temperatures have been measured at over 100 degrees. The Baltimore Teachers Union knows that educators' working conditions are students' learning conditions," BTU said on the donation page under the title "Donate to the BTU Fan Drive."

You see this all the time -- teachers begging the public for donations to help them through shortages of basic school supplies.  The blame is always put on public funding -- obviously Baltimore public schools are starved for cash and forced to beg for simple infrastructure items like fans.  But wait:

Of the 100 largest school systems based on enrollment in the United States, the five school systems with the highest spending per pupil in 2017 were New York City School District in New York ($25,199), Boston City Schools in Massachusetts ($22,292), Baltimore City Schools in Maryland ($16,184), Montgomery County School District in Maryland ($16,109), and Howard County School District in Maryland ($15,921). Maryland had one additional school system in the top 10, making it four of the top 10 school systems in the United States.

In the public recreation field, I call this borrowing from the infrastructure.  Infrastructure maintenance and spending is starved in favor of richer deals for growing administrative staffs.  That is why most major parks agencies have billions of dollars in deferred maintenance.  Transit agencies apparently do the same thing.