Over a decade ago, I suggested following five long-term stories:
productivity; cognitive neuroscience, solar power, cancer therapy, and mainstream media meltdown
It looks like mainstream media meltdown has proceeded quite far since then. People are just as happy to get their fake news from Facebook or Drudge as they are from the NYT or CNN.
Productivity is not such a clear story. If you include unsubsidized health insurance, college tuition, and housing in San Francisco in your cost-of-living index, it is obvious that real wages and productivity are going nowhere. Note that these are all sectors in which public policy subsidizes demand and restricts supply.
If you restrict yourself to consumer durables and non-durables, productivity growth might look decent. If you look at things from the perspective of the autodidact, productivity growth is tremendous. In the last ten years, the amount that you can learn on YouTube has exploded. Whether you need to fix your toilet, learn to play “Crossroads” on guitar, or study advanced academic subjects, it is all there.
I still think that the productivity story is important. The challenge is figuring out how best to follow it.
Cognitive neuroscience seems to me to be less exciting than I expected a decade ago. The Google trend for “cognitive neuroscience” seems to me to be flat/declining.
In 2005, the U.S. Department of Energy predicted that solar power would be price competitive by now. That was too optimistic. However, we can at least say that solar costs are moving in the right direction. And there are still plenty of optimistic articles out there. Six months ago, Peter Diamindis wrote,
for those who want to do the calculations, at a 30 percent annual growth rate, it looks like this: In five years, we go from 0.4 percent to 1.5 percent. In 10 years, we’re at 5.5 percent. In 15 years, we’re at 20 percent, and in 21 years, we’re at 98 percent.
That is, if the share of solar power in total energy production grows at 30 percent per year for a long time, it takes about 20 years to take over. Of course, if it “only” grows at 10 percent per year, it takes much, much longer.
Cancer therapy is proving to be a tough slog. But I think that one can say that the cure rate is increasing, and the death rate is declining. One can argue that, while cancer is still obviously very difficult and very important, some attention is now shifting to the diseases of the brain, such as Alzheimer’s.
On the topic of solar, most people don’t appreciate how its non-dispatchability interacts with the marginal cost of additional share. At 0.4 or 1.5 percent share, it doesn’t matter very much that you can’t control when you actually get the electricity.
At 20 percent, it starts to matter quite a bit, especially in the winter.
So it’s a huge mistake to extrapolate from the growth of solar at these small shares. You also have to extrapolate the growth of storage. And both batteries and other approaches (e.g., pumped hydro) aren’t looking terribly attractive, even with massive technological improvement, when you’d need to store on the order of 10 TWh during a winter day in the US to be 100% solar and wind. I’m not sure how environmentalists are going to like the fire hazards of 100-1000 acre lithium ion battery farms or turning a large fraction of all alpine lakes into hydro storage.
Like most things, solar hits a point of increasing marginal costs/decreasing marginal returns that turns the exponential into a sigmoid.
Do you think “storage” could come in the form of producing hydrogen, thus finally ushering in the prematurely hyped hydrogen economy?
From what I’ve read, the round trip efficiency with even merely conceived technologies is 50%. So multiply all your power needs for 16 hours of the day by at least 2.
It’s not meant as a leading question, but what do you consider a reasonable externality and Georgist resource consumption tax on fossil fuels?
Stipulating in arguendo to the IPCC climate and related impact models, I think the reasonable range of values for the social cost of carbon are $13/ton (where the California market price has traded tightly around since 2010) to $62 (the EPA estimate for 2020 at a 2.5% discount rate).
A gallon of gas produces .009 metric tons of CO2 when burned. So the reasonable range of values for a Pigouvian tax on gasoline are 12 to 56 cents.
Now, there is already a specific federal tax of 18.4 cents/gallon and a specific CA tax of 30 cents a gallon.
So if the goal is to induce the socially optimal consumption of gasoline, we are arguably already at the high end of the reasonable range for such a tax in CA (and many other states)
We do not have significant specific taxes on electricity or fuels used for electricity generation. In fact, we subsidize coal and natural gas in various ways. Ironically, one could interpret this as implying that driving a Tesla powered by grid electricity is more socially harmful than a conventional car, even without the direct electric vehicle tax subsidy.
What Trump could do is make a revenue-neutral tax shift from income to hydrocarbon consumption. It seems like a no-brainer tied up in political gridlock.
You realize a carbon tax necessarily increases the relative price of energy if it has any CO2 related effect, correct?
This implies immediately killing poor people today at the margin as they are extremely vulnerable to increases in energy costs.
That hardly seems like a no-brainer. It may be worth it in utilitarian terms, but I’d want to see a lot more analysis.
I wonder how much of the 2001 – 2005 productivity growth was simply outsourcing cheap manufacturing to China and had little effect on the average person. Anyway, I thought productivity might bring back some manufacturing jobs to the US in 2009 but the process is taking longer than expected. (The US factories would have 10 workers repair the machines and do this control inventory or speed to market.) I see lots of productivity improvements with computer phones but the impact could be lower GDP. I suspect a lot of the autodidact improvements are lowering GDP as we call less plumbers today. (And it probably make it easier for families to become single income.)
And in terms of solar right now at 10 – 30% growth from .4% is still not a large number and it is focused on areas with exceptionally high electric bills. (West Coast & Hawaii. We have solar and it only saves because the power company charges twice as much during the summer daytimes.) Once it gets to 10% (15 years) several things will happen:
1) It will impact other generation and electric systems as Kevin noted earlier.
2) State politics will get interesting. Solar panels will become a problem in energy producing states.
I recommend reading Matt Ridley for some useful insights on both cancer and neuroscience.
http://www.rationaloptimist.com/blog/chan-zuckerberg/
I’m with Klever Dick above – solar ain’t gonna happen, apart from with subsidies and other government boondoggles – unless it’s the tropics/deserts. In Europe and especially here in the UK you produce more CO2 in the manufacture of the panels than you save in their usage. It’s their energy efficiency that matters not their artificial cost.
Besides the New Commanding Heights / four forces, what other long-term stories would you guess at today?
Re: Solar- that article is beautiful example of selection/confimation bias. A personal anecdote, we had a cousin who installs home solar panel systems give us a quote. Including a 30% tax credit, and supplying 1/2 of the labor ourselves and a 0% interest loan it would take 16-18 years to pay for itself. Without those conditions (assuming a 4% loan) it would take 30+ years to pay back. Life span of a solar panel is ~25 years.*
This is clearly non scalable currently. Without massive subsidies (in the hundreds of billions a year) a 30% growth rate isn’t even a pipe dream, its a flat out lie.
In terms of home installation becoming cost effective the actual costs of the solar panels would have to approach roughly 30% of current prices, or double in efficiency (or some combination). Commercial sized systems have some large gains (and some small losses) thanks to scale, but if solar is only growing at a 30% rate with large scale subsidies that is a terrible sign. Truly revolutionary technologies don’t take 20 projected years with massive subsidies to dominate a market.
OK, onto the perovskite cells. As noted above the cost of silicon cells has to drop by more than half for current efficiency to make cover the other installation costs because that is the bulk of the cost now. An increased efficiency/decreased cost panel sounds like the grail, but it isn’t unless those other costs stay at the same level. Solar cost per watt has been falling for a long time, but every time it falls it becomes a smaller % of the total cost and so each successive fall has less of an impact. Major advances are needed just to cover the loss of subsidies over the next few years.
Finally this paragraph is really misleading
“This is a big sticking point — perovskite degrades in hours when it comes into contact with moisture — as opposed to silicon-based cells, which come with 25-year warranties. New research is promising, however. Researchers have created a new perovskite photovoltaic which actually removes the layer that tends to degrade, creating a material that has proven to be stable for more than 1,000 hours of operation (after which researchers stopped testing!).”
25 years of operation at 10 hours a day is a lifespan of >91,000 hours. The exclamation point makes it seem like 1,000 hours is enough testing. 1% of needed lifespan? Encouraging, but not exciting. And note the lack of comments on the extra cost of producing those panels, why is that? I am sure if the numbers were particularly favorable they would have been included in the analysis. Oh well a few decades of 30% improvements in cost and we will be right there! When have I heard that before?
*These numbers for the Philadelphia area, better latitudes change the calculation.
Cognitive neuroscience might not have lived up to the hype, but neural networks and biologically inspired computing have exploded. Deep learning is taking over large parts of traditional machine learning tasks and are doing as well as humans at certain tasks. Better than humans in some cases.
Here are the five big questions for the next ten years:
1) Does the developed world follow a post-religious and slow family/low birth rate path?
1a) Does the rest of the world follow? ie India is now at ~replacement fertility and religion is diminishing.
2) Lots of productivity is occurring but it is just lowering work hours at this point? How does society adjust to less work?
3) It never changes: Energy in all forms.
4) Who and what is the next big bubble? I hear China a lot but I assumed to follow the path of Japan in their way. Not an ugly burst but a slow diminished path.
5) What the heck happens in the Middle East? Can they calm down and be productive (outside of lots of oil money)? Do they continue fighting the post-religious global community?