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Posts from December 2011

How to make a stimulus stimulating

Tuesday 13th December 2011

Here’s an interesting video on why the American stimulus has pretty much failed to do what it was designed to do:

I’m not going to claim that it definitively explains why the stimulus didn’t work. As far as I can tell it was made by a libertarian think-tank – so possibly some bias there – and it really only gives anecdotal evidence. Nevertheless I think it’s objectively fair to say that the American stimulus did fail, that we know that governments aren’t very good at spending money efficiently*, and so at the very least the explanation that is given in the video is plausible.

For the sake of argument, let’s assume that a stimulus was the right response for America in 2009, and that the problem was that the money wasn’t spent very well. Well, surely a more sensible approach would’ve been to use the stimulus money to lower taxes? Increasing the personal allowance on income tax (assuming they have this in America; I know it works differently because of State and Federal governments) seems like one reasonable way to do this, which would be pretty progressive too I imagine. Take less money from people so that they have more to spend, because people tend to spend money more usefully than governments do.

I suppose that it’s possible that the actual result might have been that people would’ve paid back some of their debts, rather than spend more money. I’m not sure if that would necessarily be a bad thing, but I guess it’d detract from the actual aim (to quickly stimulate growth). But if that’s true, it doesn’t necessarily follow that tax cuts would be less effective at stimulating growth than extra government spending was. And I think it’s pretty certain that if people used tax rebates to pay off debt, it’d do much less damage than does wasted government spending. If the stimulus is used to pay back debt, then we can probably think of it as a “deferred” stimulus; debt is paid off now, so that people can spend more in the future.

I’d like to make clear that I don’t necessarily think this is what the American government (or the British, for that matter) should’ve done. Fundamentally, I think that the economy would’ve been in a better situation in taxes and government spending were generally lower, particularly in the boom years. And I’m not really a fan of Keynesian economics in general (it seems way too full of magical thinking for my taste). But if we decide that a stimulus is a good idea, then it seems to me that cutting taxation – taking less money from people when times are tough – would be much more effective.

I do wonder why so few Keynesians seem to advocate this course of action though…

I realise that lately I’ve tended to write lots about economics and finance and politics. Mostly that’s because it’s topical and I find it interesting, and because I’m learning about this stuff and writing about it is a good way for me to get things clear in my mind. If I write something, I like to be pretty sure that it’s accurate, so I end up going away and reading lots more. Today I’ve been learning about how fractional reserve banking works (which is rather less intuitive than I thought), so I guess this entry could’ve been even drier…

Anyway. My next blog post will probably be about aeroplanes.

* Lots of studies (for¬†example) which have compared growth rates and tax rates in different countries show that there’s a negative relationship between the rate of tax (and thus the size of government) and growth rate (i.e. bigger government leads to less growth and poorer people). I did read one interesting paper recently (which I now can’t find) which found that up to a point, an increase in government increases growth. But that above a (comparatively low) level, the relationship is negative. That kinda makes sense; government is useful for some things. A country with a small government which – for example – just maintains the rule of law (i.e. provides courts, police etc) might be expected to have more growth than a country that doesn’t have these things. The trick is finding those things that the government can genuinely deliver efficiently, and stopping it from doing other stuff (in practise, it’s easy for politicians to pander to special interests; its a good vote winner).

Posted In: Politics Tagged: | No Comments

Another hybrid?

Sunday 4th December 2011

At first glance, electric cars seem to be a good idea. Certainly at current prices, using electricity seems to be a relatively cheap way of fuelling a car. And for many people, who mostly use their car to make short journeys, the range issue isn’t generally a problem.

However, most people also use their car for occasional long trips. For example to visit friends or relatives who don’t live locally. And so although people generally only make short trips, they still need it to be able to make longer journeys on occasion. I think this is probably one of the major barriers preventing wider uptake of electric cars at the moment (price being another big one; a comparable EV typically costs 50-100% more than the alternative conventionally-powered car). Even if you only make short trips 95% of the time, most people don’t want to buy or rent another car for the other 5% of the time.

But perhaps there’s a way to have the best of both worlds. At the moment, certain cars have a “hybrid” system. Here, a traditional internal combustion engine (ICE) provides power in the first instance, and this is supplemented by an electrical system which collects energy which would otherwise be wasted (in braking etc). Seems like a good idea, although I do find it surprising that many of the cars which use this system don’t actually seem to do it very well. For example in the real world, a Prius only seems to be about as efficient as other mid-size cars (e.g. the Ford Mondeo or the BMW 3-series) which use reasonably-sized diesel engines, and are much less efficient than many smaller cars which use small engines with forced-induction. Only the Prius is more harmful to the environment, once you take into account the materials used to manufacture the hybrid system…

I reckon that this might be the wrong way to go about making a hybrid drivetrain. Rather than having a drivetrain that is mostly ICE and partly electric, why not have the balance the other way?

By that I mean, rather than fit an ICE drivetrain with a slimmed-down electric drivetrain, why not fit a small engine to an electric drivetrain? So for short journeys you can run solely from the batteries, which you can then charge as you need. But then if you want to make a longer journey – or if you run out of electricity – you can fill up with petrol or diesel and start the engine.

I can’t see too many downsides to this. It’d be harder to package and would increase the weight slightly, but I guess that this is only the same problem as is faced with the drivetrain on other types of hybrid. But in this solution, the car gets the best of both worlds.

Of course, I’m not a mechanical engineer so there could be problems I haven’t foreseen; perhaps there’s a good reason why no-one uses this drivetrain (if that’s correct. Maybe some cars do, and I just haven’t heard of them). But I really can’t think of many negatives which would outweigh the obvious benefits: EV efficiency for smaller journeys, and ICE range for longer ones.

All this being said, has anyone actually worked out whether EVs really are¬†more efficient than cars with an ICE? Or does using an electric drivetrain simply move the location at which fuel is consumed away from the vehicle? I actually don’t know the answer to this, although if making a journey using an electric car costs less per mile, I guess that’s a good hint.

Posted In: CarsEngineering Tagged: | 3 Comments