When I was in Montana with my family in July, we happened upon Vice President Joe Biden’s security detail. He was apparently in the area to, among other things, give a talk in Yellowstone National Park about the economic and environmental benefits of federal stimulus projects. In today’s WSJ, Roger Meiners looks closely at one such stimulus project in Montana — a $179,000 grant to a fish hatchery for the installation of solar panels — and finds it wanting.
The fish hatchery uses about 34,000 kilowatt hours (kwh) of electricity annually. At 10 cents per kwh, that means a bill of $3,400. The solar panels, we are assured, will generate 75% of the hatchery’s electricity, at zero cents per kwh. Assuming so, the annual electric bill will fall by $2,550. Applying that sum to the cost, the recovery period for the solar panels (ignoring interest rates) is 70 years.
Solar panel experts say that panels have about a 25-year life, but the latest models, which no doubt are used in Ennis, may have a 40-year life. Taking that estimate, the panels leave us in the financial dark by 30 years. The rate of return looks like Las Vegas housing the past couple years.
1040 says:
behind paywall, so going by your summary: i don’t see any accounting for positive environmental externalities, and also concretely, for the gains from trade (and employment and so on) in installing the panels.
August 21, 2010, 12:27 pmruuffles says:
Google the title. The link returned by google will lack a paywall.
August 21, 2010, 12:28 pm1979 says:
Anyone think electricity is going to stay at 10 cents per kWh for 70 years? Or even 25?
August 21, 2010, 12:29 pmdo re mi fa sol lar says:
How to convert free sunshine into a deficit. Who’s going to wait the many years for the panels to pay for themselves? In a few, there’ll be new and better technology and so on and on. Many cycles of materials transportation, energy consuming manufacture, distribution and storage, installation, short-term consumption and discarding will make for a not so green indu$try.
August 21, 2010, 12:34 pmNoah says:
1040 – grasping at straws. The electrical generation plants and grid aren’t going away so the solar stuff is all additional costs. The panels aren’t free in both dollars and environment impact of the manufacturing, delivery to site, etc. The installation is a couple of guys for a week or so.
The cost of hauling Joe Biden’s sorry butt to Wyoming to brag about the solar installation probably exceeded the cost and savings by a order magnitude or more.
August 21, 2010, 12:37 pm1040 says:
thanks, ruufles. looks like he dismisses the entire idea of govt stimulus assuming adequate demand in the economy which doesn’t square with the astronomically high unemployment numbers. nobody argues for govt spending when there is enough private spending. saving rates are at the highest they’ve been in a long time, there just isn’t enough spending, and govt spending needs to substitute private spending. it’s almost as if he is not even aware of these long and well studied ideas, and would prefer glib ideological sound bites. if i didn’t know better, i’d think it was a wsj op-ed. oh wait…
August 21, 2010, 12:40 pm1040 says:
huh?
three words. gains from trade.
August 21, 2010, 12:41 pmruuffles says:
The idea of paywalls greatly distress me. Previously I decided I would pay for online content only if they delivered hundreds of high resolution photos taken by the photographer that are not possible to include in the paper version.
Now I also want a list of citations as to where the author got his numbers from, basically a copy of the author’s list of references consulted. Surely it would not have been a burden on the WSJ or the author to include them in the online version.
August 21, 2010, 12:45 pmCommentus Anonymus says:
Really? Nobody?
August 21, 2010, 12:46 pmdo re mi fa sol lar says:
two words. not green.
August 21, 2010, 12:50 pmblue fin perch says:
one word. boondoggle.
August 21, 2010, 12:57 pmGuy says:
So… you’re not a Keynesian? Still, don’t you think it’s slightly disingenuous to “suggest” the stimulus is a waste of money without addressing the theory of it?
August 21, 2010, 12:57 pmJuan says:
una palabra: españa
August 21, 2010, 1:01 pmJuan says:
El camino a la insolvencia está empedrado de buenas intenciones.
August 21, 2010, 1:03 pmdavidbernstein says:
Google “broken window fallacy”
August 21, 2010, 1:03 pmPaul in LA says:
Something is wrong with the numbers. I just had 10500 Kw installed with panels at $500 per 205Kw panel plus the labor and inverter at $20000.
August 21, 2010, 1:04 pmIt would have cost a lot less if I didn’t have a tile roof [they have to drill holes through the tiles. If you scale up from my costs the total should be about $85,000. Are labor costs that much higher out there than in LA/
1040 says:
bastiat told a great story except it pretends the macroeconomy doesn’t exist (velocity of money) and doesn’t account for technology improvements.
August 21, 2010, 1:08 pmblack math says:
So much for stimulus spending. French ticklers would be cheaper.
August 21, 2010, 1:09 pmChrisIowa says:
Government Contract.
August 21, 2010, 1:13 pmruuffles says:
The company which got the contract appears to be a California company, which doesn’t make much sense. Since they’ve completed the project, the Act requires a report be done to describe the project in detail. Still looking for that …
https://www.fbo.gov/index?s=opportunity&mode=form&tab=core&id=83f1ed19d1fb70b613f93267614abc97&_cview=0
August 21, 2010, 1:28 pmByomtov says:
News flash: WSJ runs anti-stimulus op-ed.
August 21, 2010, 1:36 pmJK says:
Google “negative externalities”
August 21, 2010, 1:44 pmGuy says:
What ended the Great Depression?
August 21, 2010, 1:45 pmblack math says:
Paxil?
August 21, 2010, 1:53 pmCornellian says:
I applaud your fearlessness in splitting infinitives.
August 21, 2010, 1:55 pmBill Woods says:
You had 10.5 MW installed? Or did you mean you’ve got 10,500 W = 10.5 kW?
This fish hatchery:
34,000 kW·h per year x 0.75 = 2.9 kW(average) ~~> 10 kW(peak).
I don’t see how this ever makes money:
August 21, 2010, 2:20 pm$179k / 2.9 kW = 62 $/W ~~> >50 ¢/kW·h.
Passing By says:
Mr. Meiners’ article is poor stuff.
The first half proves at length what everybody already knows — that solar power remains uneconomic. The government is funding solar installations because they’re uneconomic … it’s trying to jump-start an economic solar industry. That’s hardly a new idea: it’s how trans-continental railroads, airlines, and the Internet got started. And it may or may not be a good policy in this case–it would be nice if Mr Meiners addressed the question.
Instead, he makes wild, stupid generalizations. No, Mr. Meiners … it’s not obvious that “When you spend your money, you choose what you want. When politicos spend your money, or your grandchildren’s, there is less value.” I get excellent value for the money that my elected representatives (your ‘politicos’) spend for me on a police force, on medical research, etc. Is nurturing a solar power industry such a good investment? Mr. Meiners’ nevers offers any reasons pro or con.
Then, in mid-article, Mr. Meiners changes topic to the government’s deficit spending in a recession. At that point, he abandons the whole evidence/reasoning thing entirely, simply announcing that it’s “worsening our long run economic situation”.
It seem more like a bar-stool rant than a serious discussion. So it fits well on the Journal’s editorial page; but I’d like to believe that standards are higher here.
August 21, 2010, 2:22 pmA. Criminal says:
Well, it certainly wasn’t the US government, whose efforts just made it last longer (after mostly creating it in the first place), so I’m gonna take a guess: the Great Depression was ended by breaking solar panels. Panels broken by private unionized minority fish with Fed contracts, to be exact.
August 21, 2010, 2:23 pmPassing By says:
Well, it certainly wasn’t the US government, whose efforts just made it last longer (after mostly creating it in the first place),
That’s a new one. People like Milton Friedman and Ben Bernanke claim that government (i.e, Federal Reserve) inaction let the Depression take hold, but never that government action created it.
Care to be more specific?
August 21, 2010, 2:32 pmFrank G says:
If conventional energy costs are higher in the future, then the solar panels will yield a positive ROI. If, somehow, conventional energy costs are not higher in the future, then life will be good no matter how much was spent on these solar panels.
August 21, 2010, 2:33 pmrandom commenter says:
“People like Milton Friedman and Ben Bernanke claim that government (i.e, Federal Reserve) inaction let the Depression take hold, but never that government action created it.”
You might want to re-read the comment you’re responding to.
“If conventional energy costs are higher in the future, then the solar panels will yield a positive ROI.”
This is clearly false as a blanket statement. Care to share your calculation establishing how much higher energy costs would have to be to make this project a winner?
August 21, 2010, 2:41 pmJK says:
Great post Passing By, nail-on-the-nose.
August 21, 2010, 2:42 pmrandom commenter says:
“Great post Passing By, nail-on-the-nose.”
Indeed. We might lose a little money on each transaction, but just think of the volume!
August 21, 2010, 2:58 pmSarcastro says:
Stupid Hoover Damn and highway system. If it were economic, the government wouldn’t need to have made it!
August 21, 2010, 3:04 pmPassing By says:
random commenter — I don’t understand your point.
A. Criminal’s comment reads: “What ended the Great Depression? … Well, it certainly wasn’t the US government, whose efforts just made it last longer (after mostly creating it in the first place)”
To me, that says the US government’s efforts created the Great Depression
Which I found to be a very unusual point of view, and asked for more specifics. What am I missing here?
August 21, 2010, 3:20 pmElliot says:
When we can observe the actual program, who cares about the theory? Good intentions aren’t worth squat. Reminds me of the theory behind all those workers’ paradises.
August 21, 2010, 3:31 pmElliot says:
After installation, what are the operating costs of solar panels?
August 21, 2010, 3:38 pmGuy says:
I always thought it was the war spending, but maybe I’ve been brainwashed.
August 21, 2010, 3:38 pmGuy says:
Because the theory is that even if the money is spent sub-optimally (like, say, building a bunch of warships just so that they can blow each other up) that can still stimulate the economy nonetheless. Imagine the solar panels were priceless works of art, or something similarly useless.
August 21, 2010, 3:40 pmGuy says:
Actually I requested that comment deleted, because I assume he applied the estimated lifespan of the panels, but with a lifespan of 40 years, I get $62/W to be slightly more than 1% of a cent per kilowatt-hour, did I make a mistake in conversion?
Adler’s math seems right, except that it ignores inflation and interest rates.
August 21, 2010, 3:48 pmanon says:
The article seems to ignore the time-value of money. The future savings should be discounted by an appropriate discount rate. This may largely offset the increasing cost of electricity.
The practical problem of Keynesian economics right now is that one of its fundamental assumptions, the presence of an economically inefficient savings rate, is just not true. The US savings rate, although up from its unsustainable levels of the early-2000s, is still well below historical averages.
What this means is that the money taken in the form of taxes to pay for projects like these would more likely to be spent for consumption than Keynesian theory would predict. Consumption has the same effect on economic growth as government spending (with exception of long-term benefits of high-positive-externality government spending such as building infrastructure). However, going through the process of taking it from the tax-payer, giving it to the government, and then giving it to the grantee introduces tremendous transaction costs, resulting in a net reduction of economic growth.
August 21, 2010, 3:55 pmGuy says:
If I do all the math from the start, I get about 18 cents per kW-h.
August 21, 2010, 4:00 pmGuy says:
Yes, I did, forgot to convert watts to kilowatts before going to kilowatt-hours (this is why you should never convert units in your head, folks) but 18 cents per kW-h seems right.
August 21, 2010, 4:09 pmSteve2 says:
A big one’s keeping them clean, since any dirt/pollen/bird poop build-up on them blocks light and reduces their output.
August 21, 2010, 4:53 pmFedya says:
So you’d be in favor of bombing Pearl Harbor again?
August 21, 2010, 4:54 pmGuy says:
Seems like that would be more suboptimal than investing in solar power, especially given the likelihood of the real cost of energy increasing in the future.
August 21, 2010, 4:57 pmM. Gross says:
Besides adjusting for the NPV, it should be noted that photovoltaic efficiency falls out with time, so your solar array will produce steadily less power as the years progress.
August 21, 2010, 6:18 pmElliot says:
We can examine the spending and determine if it is wasteful without knowing anything else. Good intentions don’t matter outside of the seminar rooms.
August 21, 2010, 6:44 pmMario says:
Very nice post, Passingby.
Passing By: Mr. Meiners’ article is poor stuff.
August 21, 2010, 6:52 pmLaura(southernxyl) says:
I always heard that it was WWII that ended the Great Depression, also.
…How much of the year will those solar panels be maximally productive in Montana? How much will maintenance costs be … clearing snow, etc.?
August 21, 2010, 7:02 pmElliot says:
It’s very complex and the issue has been in play for seventy years. The answer one gets is usally a function of the current politics of the person answering the question. Everybody wants hostory on their side.
One of the things to add to the WWII idea is that the controls FDR imposed in the Thirties had to be withdrawn in order to get the productivity and industrial growth necessary to wage the war. That’s a very interesting situation.
August 21, 2010, 7:26 pmAbdul Abulbul Amir says:
Zero cents per kwh! So there is no maintenance cost, and they never get dirty and need cleaning. That only makes sense if they are kept in the shipping crates.
August 21, 2010, 8:28 pmAllan Walstad says:
What ended the Great Depression? Probably the departure of FDR and his counter-productive policies. Actually, “policies” is too nice a word to describe his jacking around with the economy.
As to how the government caused the market collapse that led to the GD, the basic answer is that it created the Federal Reserve. Then Hoover thought he could “engineer” a recovery, making things worse by trying to prop up wages and prices. FDR was basically Hoover on stilts.
Guy
I.e., you subscribe to the broken window fallacy. We build wealth by going around destroying things. We pay people to dig holes and fill them up again. Keynes’ nonsense. Time to let go.
The theory that I believes makes most sense is this: Bubbles are caused by the Fed pumping up the money supply, distorting interest rates and stimulating malinvestments — capital projects that falsely appear economically feasible. (Government subsidies can do the same thing.) Bubbles invariably burst as the unsustainability of the malinvestments becomes clear and they must be liquidated. What is necessary to get back on track is for the market to be able to adjust, to reallocate capital and labor back to sustainable lines. Attemps to stimulate or prop up the economy by government spending only frustrate and delay the adjustments. The recent housing boom and bust, along with the government efforts since then to prop up home prices, is an excellent example.
As for the solar panels: I suppose it’s possible that electricity prices will go through the roof sufficiently to produce a positive payback, especially if we get even more massive government meddling in the energy market. But if that were a good bet, we’s see entrepreneurs placing that bet without need of subsidy. No permanent good can come of subsidies for this sort of thing, because as soon as the subsidies go away, the jobs go away. If stimulus is like a shot of adrenalin, the end of the stimulus is a shot of botox. Is anyone here advocating perpetual stimulus? That would be like an adrenalin IV — eventually, when you’ve pumped an a gallon, it does not stimulate anymore.
August 21, 2010, 8:47 pmA. Zarkov says:
Let’s do a net present value analysis. The article says these solar panels will save $2,550 per year over a life span of either 25 or 40 years. The present values of the 25 and 40 year future cash flows are $39,836.30 and $50,471.60 respectively, applying a discount rate of 4% per year. As the installation cost is $179,000 in today’s dollars, this project loses either $139.164 or $128,528.
Now let’s increase the cost of electricity. If cost of electrical energy increases by 2% per year then the present values increase to $50,014.80 and $70,238.60 both still way below the cost of the project.
If we let the cost of electricity go up at 8% per year, which means the price would double about every 9 years, the 25 year solar panels will save $108.024 still– below cost. But the 40 year panels save $242,695 which does give a positive net present value. Now Obama told us he would follow policies that will cause the cost of electricity to “sky rocket.” So perhaps they’re on to something. Of course this will ruin or economy and people won’t be able afford a trip to Yellowstone.
Finally these solar panels must require maintenance. Let’s take the case where electricity costs 8% more each year and the panels have a life of 40 years as this is the only example where we get a positive net present value (NPV). In this case if the maintenance cost exceeds $669 per year, the NPV goes negative.
This project is a loser. It will cost the taxpayers money. It will not save anything. If they buy the panels from China, the cheapest supplier, we have a jobs program for the Chinese. I don’t know who supplies the panels. If it’s the Chinese then this project is a spectacular loser. If the panels come from a domestic supplier, then the govenment is being wasteful.
August 21, 2010, 9:24 pmNobody At All says:
(edited) Assuming a 25% capacity factor, I’m thinking that this is maybe around a 10kW system – so around $18/installed watt? Market is around $8/installed, I think.
August 21, 2010, 9:49 pmhho says:
Glad to see that Mr. Adler is outraged by the government wasting $157K.
Will you get around to addressing the trillion dollars wasted in Iraq and Afghanistan anytime soon?
August 21, 2010, 9:59 pmLaura(southernxyl) says:
hho, can you point to the sentence in which outrage is expressed? Or even a phrase? A short one?
Also, for your information, you can set up a blog at blogger. Here. It’s free and you can express disapproval about money spent in Iraq and Afghanistan to your heart’s content.
August 21, 2010, 10:10 pmPassing By says:
Allan Walstad–As to how the government caused the market collapse that led to the GD, the basic answer is that it created the Federal Reserve.
The Federal Reserve system was created in 1913 and has existed continuously since. If you’re going to claim that creating it caused the Great Depression in the 1930s, then you need to explain whay it took 20 years to do so; and why it hasn’t created many more since. You might also try explaining how similar central banks have existed even longer in other countries without regularly setting off Great Depressions.
August 21, 2010, 10:12 pmLawStudent says:
If he is informed he will dismiss the entire idea. These long and well studied ideas have shown government spending is incredibly ineffective as an attempt to stimulate anything other than calls for more government spending.
August 21, 2010, 10:25 pmAllan Walstad says:
Passing By
I’d put it just the other way: Fed created in 1913, market crash and Great Depression only 16 years later. Central bank and other government monetary manipulation has a lot to do with market booms and busts. The GD was just the worst of the screw-ups. Well, the worst until now. The jury is still out on whether the Fed and feds will succeed in making the current recession much worse, as they are sure trying to do by any standard of common sense.
By the way, I referred to “the market collapse that led to the GD,” as having been caused in significant degree by the Fed. But just because you have a market crash doesn’t mean you have a depression, as witness the crash of ’87. The difference is that Reagan stood aside and let the market sort itself out. The market is resilient. To really make it sick and keep it sick, you have to do a lot of stupid things over a period of time. Hoover & FDR did, abetted by the Fed of the 20s and 30s. It’s too early to be sure that the Greenspan/Bernanke/Bush/Obama combination will prove as destructive, but so far, so bad.
August 21, 2010, 11:55 pmhho says:
“Also, for your information, you can set up a blog at blogger. Here. It’s free and you can express disapproval about money spent in Iraq and Afghanistan to your heart’s content.”
———
And if you don’t like reading my posts here, you can print out this page on 28 pound ecru bond paper, roll it into a tube and stick it up your ass.
August 22, 2010, 12:13 amFrank G says:
The point I was making is that solar technology is a hedge against the risk posed by higher conventional energy costs. Obviously we can’t predict how much higher those costs will go, if at all.
August 22, 2010, 1:05 amathEIst says:
I always thought it was the war spending
Where are Tojo and Hitler when you need them?
August 22, 2010, 1:08 amA. Zarkov says:
He asked how high the future energy costs have to go to get a positive NPV. See my post which answers this question.
August 22, 2010, 2:05 amA. Zarkov says:
For the 40 year solar cells with no maintenance costs, electricty has to go up more than 6.67% per year, or double about every 11 years.
August 22, 2010, 2:12 amRagebot says:
Google earthship for lots of intel about off the grid power. Bottom line is you really have trouble economically justifying alternative energy sources of any type. Solar is probably the worst alternative energy source for multiple reasons, not the least of which is unless you are somewhere like Arizona limited sunshine becomes a real issue.
Earthship developments like the one at Taos always suggest you have a combination of solar and wind power because often when there is no sun it is because of something like a rain storm with a strong wind. A Honda generator is also highly suggested as a backup.
Until you have had personal experience living in something like an earthship when it is off the grid and dealing with the daily problems with alternative power generation you may want to limit your comments about how good an idea solar power is.
August 22, 2010, 2:24 amDavid M. Nieporent says:
Knowledge of what Milton Friedman actually said, apparently. You’ve never read his Monetary History if you think his complaint was that Fed “inaction” created the Great Depression.
August 22, 2010, 4:08 amTony Sidaway says:
From the report here, it appears that the writer in the Wall Street Journal does not understand the distinction between a fiscal stimulus and an investment. Spending money at this time to stimulate low-carbon energy can also be viewed as a strategic measure, just as one might spend money on subsidizing a rapid transit system. Laissez-faire capitalists may object, but that doesn’t mean every item of government spending must be evaluated as if it were a short term investment looking for profit. If that were so we probably wouldn’t want to spend so much public money on healthcare!
August 22, 2010, 4:28 amPassing By says:
Allan Walstad–… the crash of ’87. The difference is that Reagan stood aside and let the market sort itself out.
Reagan’s beside the point here, since we’re discussing the Federal Reserve. And far from standing aside, the Fed moved decisively to prevent the crash from causing a wave of finance-house bankruptcies.
The actions were generally credited to Alan Greenspan, who had become chairman only a few months earlier. Example: “His [Greenspan's] terse statement that the Fed ‘affirmed today its readiness to serve as a source of liquidity to support the economic and financial system’ is seen by many as having been effective in helping to control the damage from that crash.”
David Nieporent — Knowledge of what Milton Friedman actually said, apparently. You’ve never read his Monetary History
Actually, I have. Please re-read carefully the original statement by A. Criminal that I was responding to; and ask whether Friedman would agree with it as a summary of history.
August 22, 2010, 4:43 amA. Zarkov says:
There’s a very good reason we use hydrocarbon fuels: high energy density. No other fuel (except nuclear) has the energy density. Pure hydrogen has a high energy density, but there are no hydrogen wells, so it’s not as basic feedstock like coal, natural gas and oil. The U.S. has abundant coal and natural gas and it makes sense to use them. Hydrocarbons mean prosperity and people want that. Without liquid hydrocarbon fuels we can’t have airplane travel because the batteries are too heavy for the energy they store. Gasoline has 80 times the energy density of or best battery type– lithium ion. The so-called “green energy” will always be a niche because it’s too expensive.
August 22, 2010, 4:47 amRicardo says:
Not quite. Friedman certainly blamed the Fed for inaction on some fronts but was also quick to criticize the Fed for raising the discount rate in 1931.
August 22, 2010, 6:40 amPassing By says:
Ricardo — Your point is quite right. However, I was responding to A. Criminal’s comment … and it’s hard to say that any action in late 1931 caused the Depression. Industrial production was already down by almost 40% at that point.
August 22, 2010, 9:43 amAllan Walstad says:
Passing By
You don’t dictate the scope of the discussion. My point is that government intervention causes and exacerbates much of the instability that plagues the market. One sort of intervention is monetary expansion by the banking cartel, the Fed, created by government. Other sorts include such quackery as “stimulus spending” and various efforts to encourage people to purchase homes they can’t afford. Fed monetary expansion had a lot to do with the ’29 crash, and Fed jerking around with the money supply thereafter made things worse. The Smoot-Hawley tariff made things much worse. FDR’s wild poking at the market and vilification of business also made things much worse. All this is well known but denied by big-government apologists.
Greenspan’s statement, like the more recent bank and car bailouts, is an example of creating moral hazard (go ahead, screw up — we’ll pour greenbacks on the mess). “Serve as a source of liquidity”? In others words, we’ll make things better by doing more of what made them bad in the first place. At one time, Greenspan knew better. Then he got hold of power. A sad and oft-repeated story.
August 22, 2010, 12:10 pmSammy Finkelman says:
The argument there would be that that’s what made it the Great Depression. (The reason for the rise in interest rates was to maintain the gold standard, which was being done by many countries. It couldn’t be done but caused many banks to collapse, starting with the Creditanstaldt Bank in Vienna in 1931)
By the way there was no word for recession, then. The word recession was coined in 1937 because they wanted something that was less strong than depression, even a not great one. As a result, the Great Depression (which is what the events after 1929 were called) became simply the Depression or even the depression.
An economic downturn used to be called a depression. Actually the various depressions before had been pretty severe downturns, or they did not have a name, although the one in 1921-22, the one in which Harry S Truman lost his haberdashery shop – was rather short-lived.
The period April to December 1920, especially the last month, could be called the Great Deflation. Prices dropped by about 45%), wholesale or commodity prices about six months before retail prices.
The Smoot Hawley tariff increase of 1930 is also blamed for the depression, but this is also a little bit late. It didn’t help, of course. And it didn’t save jobs in America (at the expense of other countries was the idea.)
The truth is, there was a vicious cycle in which money kept getting destroyed. People who blame the existence of the Federal Reserve Board would want to say that if it hadn’t existed – well they think money is independent or should be from government – but you could say well somebody else would have done something, the way J. P. Morgan prevented a depression in 1907. Because there was no economic downturn this is known merely as the “Panic of 1907″
(But we were heading into a very severe depression in 1913-14 (Coxey was going to march again as he had in 1893) but were saved from that by the outbreak of World War I in Europe (the European War) which created a lot of spending in the United States (European nations confiscated the holdings of their citizens that were held in the United States, sold them, and used it to buy munitions) plus unleashing all restraints on the creation of money by European countries.
In 1914 the stock market was closed for six months. But the thing is, by 1929-30 they had forgotten how to prevent a depression and adopted and were wedded to the wrong theories. The stock market was not closed and a lot of other things were not done.
If the same people who were around fifteen or twenty to twenty five years before were around then, it would not have happened.
August 22, 2010, 12:32 pmPassing By says:
Allan Walstad –
My point was simple.
You claimed that after the 1987 stock market crash, “Reagan stood aside and let the market sort itself out.”
The market did not “sort itself out”. We were headed towards a full-on financial panic, with investment-house bankruptcies, etc. The Fed intervened and prevented that.
August 22, 2010, 1:42 pmAllan Walstad says:
Reagan and the Fed are two different things, Passing By. Fortunately, Reagan didn’t do his part to make things worse (like Bush and now Obama have), and the market, being resilient, bounced back. We’re not so lucky this time around.
August 22, 2010, 2:06 pmkarrde says:
If I may, whether it agrees with the others or not:
(Caveat: I’ve been reading The Forgotten Man by Amity Schlaes, in which Ms. Schlaes gives a greatly-detailed account of the actions of government officials, politicians, and intellectuals during the late 1920′s and the 1930′s. It increased greatly my knowledge of the Depression, as well as showing a year-by-year summary of the Depression, several false-hope recoveries, and the way that government policies affected the markets.)
There was a significant crash in the Stock Market in 1929. It didn’t cause a sense of impending doom, though. However, the deflationary effects of the Fed following the Crash (added to the increased government spending and increased tariffs enacted by Congress and Pres. Hoover to fix it) cause the problem to develop in a full-blown Depression. Among other things, the Fed clamped down on the money supply; the Smoot-Hawley act crippled trade with the rest of the world by making it expensive for other nations to sell things to American citizens…similar laws in other countries made it more expensive for citizens of the U.S. to sell things in those countries, further compounding things.
Up to this point, Hoover has been successful in many ventures (both business and government), and had been trying to find ways to use government power to forge a better future for the nation. The beginning Depression was his first big, public failure.
Then-Gov. Roosevelt promises a New Deal, including a more balanced budget than Hoover (!), and wins the Presidency amid general discontent over Hoover’s policies.
Roosevelt brings in a large number of academics to help him, and his policies have more than a little of the experimental, the spur-of-the-moment, and the try-this-new-idea-now, and lets-raise-taxes-on-the-rich. (Up to and including sending officials with conflicting messages to an International conference on reducing tariffs…and sending a telegram contradicting all those mixed signals to the conference while it occurred…) The effect was instability, further deflation, stagnation in the job market, and unclear funding plans (which resulted in a bigger deficit than Hoover’s).
Further monetary problems came with Roosevelt tinkering with the value of gold. The Government tried to purchase most of the gold in the country, and Roosevelt would occasionally change the price, for no good reason. Businesses and banks were scared, partly because they weren’t sure that the dollar would still be on the gold standard, nor were they sure its value would stay constant. Roosevelt did finally make a decision about the dollar, the gold-standard, and the value of the dollar, but it was after at least a year of tinkering.
During this time, academics and leaders were singing the praises of the national solidarity and strong government that had been seen during 1917-1919, when the entire nation shifted to war footing. Thus, Roosevelt’s attempt to re-create a war-style command economy through some of his agencies.
I haven’t finished the book, but I am getting the general impression that the large unemployed populace was put back to work doing things like carrying rifles, driving tanks, making jeeps, making airplanes, making destroyers/subs/cruisers/carriers, and farming to feed the nation plus a global military force…while putting the Federal government into the kind of debt that was to be expected during wartime.
The surplus of money afterwards seemed to do the trick of killing the Depression.
August 22, 2010, 3:51 pmElliot says:
Let’s get serious here. The reason we did not enter a full blown depression in 2009 is because I burned a dozen roses in my back yard every day for two weeks. Had I not done that, we would have surely faced an economic disaster.
August 22, 2010, 4:21 pmLaura(southernxyl) says:
Well, if no one else will say it, I will: Thank you, Elliot.
August 22, 2010, 8:25 pmalkali says:
Actual, non-rhetorical question: 10c/kWh? I pay 17c-19c in New England. Is electricity really that much cheaper in Montana, and if so why?
August 22, 2010, 9:28 pmleo marvin says:
If you’re talking about his comment immediately before yours, why? Because we can’t prove a negative? By that reasoning we should never take any preventative action, since every time it works we can’t be sure anything would have gone wrong if we did nothing.
August 23, 2010, 12:03 amGuy says:
If you were just buying them for your significant other, would that mean the purchases failed to stimulate the economy, since roses don’t do anything productive, just sit there and look pretty?
August 23, 2010, 12:11 amBRAD3000 says:
Fascinating responses…
Have been playing with the numbers for more than a year for a home solar installation & have always come up short. Its just way too costly unless you factor in backup power availability vs none and eat the expense after tax rebate. PVs are cheaper now & with the higher outputs like 230watts but even with a design using 32 panels making a ~36kwh/day system, it only dents the 65-100kwh per day we use in a house that we have made as energy efficient as possibe (sol.screens, OEM R/barrier, extra insulation, EE windows with a/market laminate, larger attic vents, 100% CFLs etc.) The AC overhead just cannot be got around in TX summers. Spending $40k to save 50-30% on the power bills has a really long term ROI…
Bottom line is solar for everyone/purpose aint going to cut it so this leaves us with nuclear more so than clean coal for the next 100years at least, until fusion is finally cracked… perhaps we will get better at the waste disposal too.
0.02
August 23, 2010, 12:46 amBill Woods says:
It really is. See http://www.eia.doe.gov/fuelelectric.html (Hmm … the map in the top right isn’t working for me at the moment, but clicking through:
Montana is 7.72[ ¢/kW·h]. Value is in the 7.14 to 8.00 range,… By contrast, VT: 12.33; NH: 14.65; ME: 13.83; MA: 16.27; CT: 17.79; RI: 16.01.)
At a guess, it’s access to old hydro and low-sulphur coal, plus slack demand for more power in recent decades, hence few new, expensive plants.
August 23, 2010, 3:22 amBill Woods says:
Aren’t you grateful to him for preventing an economic disaster? And 14 dozen roses don’t come cheap; it was a significant personal sacrifice.
August 23, 2010, 3:28 amorions-hammer says:
I always thought of solar panels as relatively expensive insurance against energy price spikes, such as might follow a coup in Saudi Arabia. Like the price of fire suppression sprinklers or nuclear weapons, the cost-benefit analysis is dominated by low-probability undesirable events.
August 23, 2010, 3:59 amElliot says:
Now, if you hear some of the critics, they’ll say, well, the Burning Roses Act, I don’t know if that’s really worked, because we still have high unemployment. But what they fail to understand is that every economist, from the left and the right, has said, because of the BRA, what we’ve started to see is at least a couple of million jobs that have either been created or would have been lost. The problem is, 7 million jobs were lost during the course of this recession.
August 23, 2010, 11:59 amleo marvin says:
Laura,
I read “Thank you, Elliot” as sincere appreciation for the logic of his parody. If, as I now realize is another possibility, you were just continuing the joke and thanking him for burning the roses, then never mind.
August 23, 2010, 3:33 pmLaura(southernxyl) says:
Yeah.
August 23, 2010, 9:47 pmdiz says:
Just a quick point…
The economics are worse than described in the OP for a few reasons.
First and foremost is that a lot of that 10 c/kwh charge goes to maintaining the grid. Power generation costs might be 2 or 3 cents of that 10 cent charge. Grid costs are largely fixed, though they are typically paid for by users as if they are variable through a “postage stamp” rate on consumption.
Since the project looks as if it will not be disconnected from the grid (snippet says the solar panels will provide 75% of power), no cost of maintaining the grid will go away.
So, not counted in the economics is that the project will result in much of the grid costs of this particular connection being amortized onto others.
August 24, 2010, 4:14 pm