28 March 2007

A BMW 320i in Clayton

Today I was at Clayton, the home of the HSV, to convert Australian dollars into U.S. dollars. While there I saw a BMW 320i parked in the street. It seemed like a nice-looking car, but the thing costs a little over $50,000 and it practically has nothing. It has a measly 110kW inline 4-cylinder engine, which is comparable to that in a Toyota Corolla. Fuel consumption on this BMW is very impressive at 7.4L/100km, but this sort of fuel consumption can be matched by a Corolla. The difference is you pay about $30,000 more for the Bimmer. In fact, I may be oversimplifying but it seems that fundamentally there is no difference between the Corolla and the 320i. Sure, the 320i is rear-wheel-drive and the Corolla is not, but with that little power why would it matter? On the topic of fuel economy, if you're paying $30,000 more for a car, why would you be worried about fuel economy? How can any 320i owner be proud that he saves lots of money on fuel when he paid $30,000 for a badge?


BMW 320i Executive | Roadtests | The Australian

25 March 2007

Environmentalism is Homophobic

An individual may have a business generating electricity, and he makes electricity to earn money. However, if he makes electricity to earn money he may only consider the money he makes privately and not consider any pollution he creates, e.g. while making the electricity he may burn coal, which creates carbon emissions, which may harm others. The individual who makes electricity looks at the private cost and not the social cost.

The assumption here is that people dislike carbon emissions and so carbon emissions and whatever is the natural consequence of carbon emissions is disliked by "society." Society is I assume is just the aggregation of many individuals.

However, let's keep the same concept and look at another issue. Let's look at homosexual behavior. An individual who engages in public homosexual behavior (e.g. a man kissing or having sex with another man in public) may do so to increase his own private welfare because such an act is pleasurable to him. However, if an ultraconservative religious person witnesses this homosexual behavior, then the ultraconservative religion person may not like it. In fact, if most people are ultraconservative and don't like witnessing homosexual behavior, then an individual who engages in homosexual behavior may not be considering the social cost of his behavior.

Environmentalism is about altering private decisions so that they are in line with social costs. But social costs depends on whatever most people think, and people are irrational, prejudicial, and so on. Environmentalism then can results in a tyranny of the majority in which the preferences of the majority are forced upon the minority. The majority who hate homosexuals can suppress homosexual behavior because they believe homosexuality is a social pollution. Likewise, the majority who hate carbon dioxide can suppress the people who like carbon dioxide. The majority who hate water pollution can suppress the people who like water pollution.

21 March 2007

National Heart Foundation Tick Given to Nine McDonald's Meals

The National Heart Foundation has given their tick of approval to nine meals from McDonald's. At first I thought this meant those nine meals were healthy enough to eat regularly, but reading carefully I noticed that this is not the case at all. The National Heart Foundation's website says that you should only eat once per week at McDonald's and if you do eat there you should have the meals with the tick. The reason why the tick was given was not because the meals are healthy but because the meals are healthier than some other meal that they chose. This I think is just confusing. I have written to the National Heart Foundation about this issue. Below is my letter.

To Heartline,

I have seen the nine meals in McDonald's given the tick of approval. Even though these nine meals are given the tick, the National Heart Foundation website recommends that each person only eats from McDonald's once per week. This low frequency suggests that although the nine tick meals from McDonald's is healthier it may not be healthy.

The website says that the tick is awarded to food that is healthier than some other standard, but how is this other standard chosen? Can food providers choose which food they want to compare it to? For example, the McChicken meal with salad and water is compared to a McChicken meal with fries and Coke, but couldn't anything be seen as relatively healthy if compared to something that is extremely unhealthy. For example, if the Coca Cola Corporation wanted to give the tick to its drink then couldn't it apply for the tick and ask that the Coke be compared to rat poison? Is this how it works or is the food compared to other foods in its category. If so, then I would like to know how the National Heart Foundation defines the categories of food.

In order to fix this confusion to help me and other people choose health food, I recommend the National Heart Foundation give food a number or index that summarizes how healthy the food is. The number can be called a healthiness index (like the consumer price index or the consumer confidence index). This will allow consumers to compare whether one food is healthier than another based on which has the higher healthiness index. Whether the tick is given or not is difficult because there is the question of how healthy does the food need to be to be defined as healthy. By giving a numerical index then the consumer can decide for himself or herself how healthy he or she wants to be.

17 March 2007

Tradable Permits and Car Pooling

The SO2 Emissions Trading Program: Cost Savings without Allowance Trades

The paper above talks about a program pollution permits. Firms are given permits that allow them to pollute. If they want to pollute more then they buy more permits. The theory states that when the permits are handed out, firms trading among themselves will push production of the pollution to the most productive polluter. The firm with the high marginal abatement costs will ask the firm with the low marginal abatement cost to produce the pollution. This happens because the firms now must factor into their decisions the cost of pollution, which is the cost of the permits.

Something similar happens in the automotive world. How much pollution a car makes is related to how fuel inefficient it is. There are other factors as well, such as how cleanly the car burns the fuel, but driving a car alone produces carbon dioxide, which results in global warming. How much fuel you burn determines then how much pollution you cause. But in this case drivers must pay for their pollution. If you drive a fuel efficient Prius then because the Prius burns 4.4L/100km then you will pay less per 100km than if you drive a Landcruiser, which averages about 16L/100km, which is almost three times more. What should happen in this case is that the Landcruiser driver who realizes that he is paying so much for fuel will be better off car -pooling with the Prius driver.

In the sulphur dioxide trading program mentioned above, one of the surprises was that although firms were allowed to trade permits among themselves there was actually very little trading done. The paper suggests that high transaction costs may have been a problem. Search costs also may have been high. This is related to the car issue because even though we can expect the Landcruiser driver to want to car pool with the Prius driver, the Landcruiser driver may not even know the Prius driver. Perhaps the Landcruiser driver lives in the country while the Prius driver lives in the city, and in this case the transport costs would be high if the two were to meet each other. Car pooling also requires you to find people who are going to the same place as you are and then to negotiate with them how much they can pay you. So clearly just as there are transaction costs in trading pollution permits among firms there are also transaction costs in car pooling.

Installing Armour on a Landcruiser

I drove a Ford Fiesta and my friend Joe drove a VT Commodore. When Joe saw my car he laughed and told me that a small car is stupid. I told him that it was much cheaper to buy than his car and it achieves much better fuel efficiency. But then he told me, "What if a 4WD rams into you? You'll be dead! Ahahaha!" I told him that a 4WD ramming into his Commodore would likely injure him rather than the 4WD driver but he told me that he was more likely to survive in his Commodore than my Ford Fiesta. Even though he admitted that my Ford Fiesta is cheaper to buy and run that his Commodore he said, "You can't put a price on your life."

Joe and I went to a bar once and we were talking to some females. I offered to drive one female back to her my house and when she saw my Ford Fiesta she didn't seem interested in me anymore. I spoke to Joe about this incident and he told me that females need to feel protected and my driving a Ford Fiesta does not signal to the female my ability to protect her and so by instinct she is repelled. Joe told me that with his Commodore he get lots of attention from the females.

Feeling depressed about my situation, I traded in my Ford Fiesta with the intention of getting a Commodore. But at the dealer I decided to do one better and got myself a Toyota Landcruiser with all the options including bullbar and side-curtain airbags. When I showed Joe he was speechless. He tried to put me down by saying how much the car costed me not only in purchase price but also fuel efficiency, but I reminded him about what he said earlier: "You can't put a price on your life." It felt good to knock Joe, telling him that if he and I were to smash into each other I could destroy him. I have also been having more luck with the females. Not only is the Landcruiser a big and safe vehicle but I drive it sensibly and it is black and has tinted windows. It looks really good.

However, a few days ago Joe traded in his Commodore for a Nissan Patrol. It's about equal in size to my Landcruiser. This is a bummer because now he and I are equal and I need to know how I can increase my probability of survival. There seems to be more and more large 4WDs on the roads nowadays and this worried me because as more and more people drive 4WDs then my probability of survival decreases. I need to invest money into ways to give me an advantage over the other 4WDs. As Joe said, "You can't put a price on your life." I am thinking of fitting armour onto my Landcruiser to make it tougher. The armour will be attached on the inside so you cannot see it. Do you know anyone who installs these kinds of armour? If not armour then what else can I do to make me safer? They say 4WDs like Lancruisers, Pajero, Patrol, and Land Rover are at the top of the pecking order but what about vehicles like the Hummer? I need ideas here.

11 March 2007

Comparison: VE Calais v. Landcruiser

I am thinking of buying a VE Commodore Calais with a V8. It seems like a rather nice car but I'm yet to test drive it. My wife, however, thinks I should buy a Landcruiser or Prado because where we live there are quite a few city 4WDs around and being in a Landcruiser would give us greater chances of survival if we were to smash into a 4WD. She said that vehicles higher up were more likely to win in collisions and she showed me a video that proves this:

YouTube - Fifth Gear - When an SUV rams a smaller car

Not only is the Landcruiser more likely to win in collisions but it might even have better resale value. We sometimes go camping but not that much, so the car will mainly be for urban driving and my wife will drive it most of the time because I have a Camry. I've done a bit of research and you'd expect the Landcruiser 4WD to have much higher fuel consumption figures but in fact fuel consumption is roughly similar for the Landcruiser and V8 VE Calais (about 15L/100km).

04 March 2007

Questionable Value with Falcon E-Gas

I'm met a family with two kids deciding which car to buy. They were thinking of buying a Falcon with dedicated LPG because LPG is apparently cheap. A new Falcon XT eith E-Gas costs $37,390. If you get $1000 back from the Gov then effectively you pay $36,390. On the other hand, an Camry costs $29,500. That's a difference of $6890. Camry's fuel efficiency is 9.9L/100km and Falcon E-Gas's is 15.1L/100km. Assuming LPG price of $0.45 per litre and $1.10 per liter for petrol, then for every 100km you travel on the Falcon with E-gas you save $4.095 or $0.04095 per kilometer. The family does 15,000 km per year, and so every year by getting the Falcon E-gas they save $614.25. Therefore, it will take 11.21 years for the Falcon E-Gas to be cheaper than the Camry! And that's not factoring in the tax the Gov will put on LPG in 2011. The family got the Camry instead. They considered not only the economic reasons but also because refilling with petrol is so much more user-friendly than refilling with LPG.

A 4-cylinder small car has lower running costs than a large LPG car. Many see the price difference of LPG and petrol and find this idea hard to believe, but just do the math and you can see. A small car uses 6L/100km. A large car on LPG uses 15L/100km. Assuming cost of LPG is $0.45 per liter and cost of petrol is $1.10 per liter then the small car costs $6.60 per 100km and the large car on LPG costs $6.75 per 100km. So the large car on LPG costs 15 cents more per 100km! Now of course LPG prices and fuel prices fluctuate a bit and so a small 4-cylinder petrol car and an large LPG car will roughly be the same. However, think about the LPG tax coming and think about the fact that usually a large car costs about twice as much to buy as a small car. For a new Falcon you'd pay in the mid-$30,000s and for a Holden Barina or Toyota Yaris you'd pay about $15,000 or so.

There are a number of second-hand cars you can convert to LPG. However, conversion to LPG only makes sense if you do very many kilometers per year. Suppose you only drive to the shops to do the grocery every now and then. You are better off putting your LPG conversion money into shares and getting a higher return from that. If you put $500 into shares last year you'd get $610 back now because of 22% growth in the ASX200. If you put that $500 into LPG conversion then you'd have to do 14,896 km of driving in one year for your LPG investment to beat the investment in shares.

Furthermore, LPG conversion leaves you stuck with a red sticker on your car, which will invite sneers from BMW drivers.

03 March 2007

How Conservatives are Environmentalists

Slide 9 of the lecture notes for third-year environmental economics at Melbourne University says the following:
Environment regarded as a luxury good: for poor people who are struggling with starvation, environmental issues take a backseat. As people become richer, quality of the environment becomes important to them.
But is this really the case? Rich people who drive luxury SUVs seem to go against this statement. What does the word "environment" mean? I think it means "the area in which something exists and lives." It is the external things around you. This doesn't really say anything about how the environment is, just that the environment is external to you. For example, for one person, saving the environment may mean that a lake should be filled with nothing but clean water. Another person may consider water a pollutant and not value the aesthetics of that water in the lake and so he may consider clean water in a lake as an environmental problem.

If we generalize, environment then can mean things other than trees, lakes, wild animals, etc, and can also include things like people, society, and community. A person may not like prostitution because he may consider sexual activity as social pollutant. Therefore, those conservatives who have traditional values are environmentalists as well. It's just that instead of valuing trees, mountains, and lakes they value religion and family. We are talking about different things but the same concept. If you drop a ball from one meter and then drop a ball from ten meters you are talking about different things (because of different dropping distances) but you are talking about the same concept (gravity). Same thing applies here. Many conservatives are environmentalists just as the green environmentalists are, it's just that they value different things, but they still value something external to themselves and that is why the conservatives want to get into other people's businesses and stop them, say, having homosexual sex in the same way that some green environmentalist wants you to stop cutting down your own tree.