Art Diamond – Page 461 – artdiamondblog.com

Case for Wind Power is “Absolute Baloney”

I once heard a top MidAmerican Energy executive express considerable, articulate, scepticism about the economics of wind power. (Wind power is unreliable, so that electric companies still must stand ready to provide the electricity by other means.) If wind power made economic sense, you wouldn’t need subsidies to promote it—profit maximizing power companies would pursue it on their own. MidAmerican now invests in wind power, not because it has become an efficient energy source, but because wasteful government subsidies, make wind power profitable for MidAmerican.

Glen Schleede, a retired power company executive, has nothing to lose by speaking the truth:

(p. 1B) The turbines do bother some folks, including Glenn R. Schleede, a retired power company executive from Round Hill, Va., who said the wind power industry puts out "absolute baloney" to justify its existence.

"I’m tired of subsidizing Warren Buffett companies," Schleede said, referring to federal tax subsidies that go to MidAmerican Energy Holdings Co., a division of Omaha-based Berkshire Hathaway Inc. that is headed by Buffett. Those are MidAmerican’s turbines in the fields around Schaller.

Schleede’s criticisms, mostly in academic-style papers he writes, concentrate on the economics of wind power and what he called "false claims about how this is good for an energy system."

"In fact, these things, because they’re intermittent and volatile and unpredictable, they don’t really add a lot of capacity to an electric grid," he said. "When you see these things advertised, they talk about how many megawatts of capacity, the number of homes served and all that garbage.

"I would maintain that they don’t serve any homes."

For the full story, see:

Jordon, Steve. "Harvesting Wind;Farmers like payout, but critics of wind power point to costs." Omaha World-Herald (Sunday September 3, 2006): 1D-2D.

Added Evidence for Weidenbaum’s ‘Birth Dearth’

Source of book image: http://www.aei.org/books/bookID.497,filter.all/book_detail.asp

Ben Wattenberg had already been predicting a world population decline for years, when he published The Birth Dearth in 1987. Back then, scepticism was widespread. Governments and philanthropists spent billions promoting birth control to restrain population growth. Many were still convinced of the wisdom of Isaac Ehrlich, darling of the environmentalist enemies of economic growth, who had predicted disaster in his Population Bomb.

(Note that the plausibility of many environmentalist disaster scenerios is based on the assumption of continuous population growth.)

The current decline in birth rates is not a total puzzle. Nobel-prize winner Gary Becker long-ago claimed that quality of children is what economists call a ‘normal’ good, which means that families invest more in quality as their incomes rise. As families invest more in quality, they invest less in quantity.

Whatever the reasons, the evidence continues to accumulate that Wattenberg was right:

After a long decline, birthrates in European countries have reached a historic low, as potential parents increasingly opt for few or no children. European women, better educated and integrated into the labor market than ever before, say there is no time for motherhood and that children are too expensive anyway.

The result is a continent of lopsided societies where the number of elderly increasingly exceeds the number of young — a demographic pattern that is straining pension plans and depleting the work force in many countries.

For the full story, see:

ELISABETH ROSENTHAL. "European Union’s Plunging Birthrates Spread Eastward." The New York Times (Mon., September 4, 2006): A3.

Source of graphic: online version of the NYT article cited above.

Iranian Cartoon Exhibit Ridicules Jews

“Visitors to the Palestinian Contemporary Art Museum in Tehran Thursday viewed entries in a contest for cartoons ridiculing the Holocaust.” Source of caption and photo: online version of the NYT article cited below.

I believe in free speech, which includes freedom of expression in cartoons, and art, even when that freedom produces results that I find distasteful, outrageous, or evil.

What is strange, is the hypocrisy of some radical Islamists, who cause death and destruction in rioting over Danish cartoons depicting Mohammad, but who only smile at cartoons attacking Jews.

The Iranian cartoon exhibition attacking Jews, is documented in:

MICHAEL SLACKMAN. "Iran Exhibits Anti-Jewish Art as Reply to Danish Cartoons." The New York Times (Fri., August 25, 2006): A1 & A8.

(Note: the online version of the article has the title “Iran Exhibits Anti-Jewish Art.”)

Salt Lake Mayor Violates “Ridiculous” Zoning Law

Salt Lake City Mayor Rocky Anderson, whose "xeriscape" yard violates a Salt Lake City zoning ordinance. Source of photo: scan from a paper copy of the NYT article cited below.

SALT LAKE CITY, Aug. 21 — Covered as it is by red bark and dotted with ornamental grasses and purple sage shrubs, the front yard of Salt Lake City’s mayor stands out in contrast against the other, uniformly green lawns on the tree-lined street.

Not only is Mayor Rocky Anderson’s yard distinctive, though. It is also illegal, one of hundreds of drought-friendly yards and gardens here that are in violation of zoning ordinances.

In light of a five-year drought that meteorologists say ended last year, Mr. Anderson is one of a growing number of homeowners in desert cities across the West who have traded in their manicured lawns and colorful flower beds for ground cover and gardens that require little water.

In Salt Lake City, though, all front yards must be completely covered with flat green grass, which needs to be watered often to keep it from turning brown and strawlike. Although the zoning ordinance is rarely enforced, some Salt Lake City leaders — including the mayor — want to bring the letter of law in line with current landscaping trends.

“I think the zoning ordinance is ridiculous,’’ Mr. Anderson said. “It clearly needs to be changed.”

For the full story, see:

MELISSA SANFORD. "Salt Lake City Moving Toward Less Thirsty Lawns." The New York Times (Fri., August 25, 2006): A12.

Planners Attack Cul-de-Sacs

A cul-de-sac in Eagan, Minnesota. Source of photo: the online version of the NYT article cited below.

City planners think they know how other people should live their lives, and the planners believe that they have the right to impose their "knowledge" on others. I believe that there are pros and cons to living in a subdivision with cul-de-sacs, and on balance, I don’t like them. But I understand why others might decide differently, and I think they have a right to use their own money to buy into the kind of neighborhood they prefer.

The New York Times ran an interesting article that focused on the debate on cul-de-sacs in Northfield, Minnesota:

. . . here and in other areas across the country, this staple of suburban development is drawing criticism from a growing number of planners and government officials, who say it should become an endangered species.

Highly popular after World War II, the cul-de-sac is essentially a dead-end residential street, often but not always ending with a large circular patch of pavement allowing vehicles to turn around. The form was initially embraced as something that promoted security, neighborliness and efficient transportation.

Homeowners found that the cul-de-sac limited traffic, creating a sense of privacy, while encouraging ties among neighbors, who could hardly avoid one another. Developers liked the cul-de-sac because it made it possible to build on land unsuited to a grid street pattern and because home buyers were willing to pay a premium to live on one.

. . .

Don Mitchell, professor of geography at the Maxwell School of Citizenship and Public Affairs at Syracuse University, grew up on a cul-de-sac in Moraga, Calif., and has seen both sides of the debate. “It’s a quiet street that all us kids could play on without too much fear of traffic,” he said. “And there was pretty good surveillance by our parents when we were out in the street.”

But those advantages can also be disadvantages. “They’re quite insular,” he said. “They tend to almost induce a circle-the-wagons sort of atmosphere, so anybody becomes a stranger who’s on the street. They don’t often act like public streets. We always knew when there was someone who wasn’t a regular on our street, and yet they had every right to be there.”

. . .

Although planners may be turning away from cul-de-sacs, people who actually live on them are willing to fight for them.

For the full story, see:

CARLA BARANAUCKAS. "NATIONAL PERSPECTIVES; Why Some Towns Place Roadblocks on Cul-de-Sacs." The New York Time, Section 8 (Sun., August 27, 2006): 20.

A cul-de-sac in Eagan, Minnesota. Source of photo: the online version of the NYT article cited above.

Obama Says Africa Needs Less, and Better, Government: More on Why Africa is Poor

Senator Obama in Kenya. For the source of the photo, see: http://www.nytimes.com/2006/08/26/world/africa/26obama.html

NAIROBI, Kenya, Aug. 28 — Barack Obama strode into a packed auditorium in Nairobi on Monday and attacked an issue that notoriously bedevils Kenyan society: corruption.

He urged people to reject “the insulting idea that corruption is somehow part of Kenyan culture” and “to stand up and speak out against injustices.”

. . .

During his speech on Monday, he laid out a tough prescription for Africa’s ills, calling for government cutbacks, more openness and less ethnic politics.

Kenya is one of the more developed countries in sub-Saharan Africa and one of the closest to the West, but it is consistently ranked by international organizations as one of the most corrupt. Mr. Obama said this corroded its ability to attract investment, fight terrorism and provide security for its own people.

Most of all, he told Kenyans to stop complaining about the injustices of the colonial past and to accept responsibility. “It’s more than just history and outside influence that explain why Kenya is lagging behind,” he said.

He ended by telling the crowd, “I want you all to know that as your ally, your friend and your brother, I will be there in every way I can.”

Many in the audience left in high spirits.

“He’s inspiring,” said Miriam Musonye, a literature professor. “He really seems to believe what he says.”

For the full story, see:

JEFFREY GETTLEMAN. "Obama Urges Kenyans to Get Tough on Corruption." The New York Times (Tues., August 29, 2006): A10.

Against Malaria “DDT Works in Weeks or Months”

Recently I highlighted hedge fund philanthropist Lance Laifer’s efforts to fight malaria in Africa. Here is a letter-to-the-editor of the Wall Street Journal, in which a distinguished physician strongly endorses Laifer’s advocacy of the use of DDT against malaria:

Impoverished Africans should be grateful to philanthropist Lance Laifer for his effective outreach to reduce the tragic, needless toll of malaria in sub-Saharan Africa ("Malaria’s Toll" by Jason Riley, editorial page, Aug. 21). For his attempt to focus complacent Americans, Mr. Riley also deserves thanks — such clarity is obviously desperately needed, as even with all the publicity accorded to the ravages of malaria, someone as educated and intelligent as Mr. Laifer remained blithely unaware of this scourge until last year.

Both Mr. Laifer and Mr. Riley note the lack of attention given by official organizations to the more widespread use of DDT as a malaria control method, despite its long and honorable history for this use. Even with his money and other resources, Mr. Laifer has been unable to persuade Africans to utilize DDT. African exporters legitimately fear economic repercussions from wealthy Western trading partners, who continue to demonize this lifesaving insecticide despite the lack of evidence of DDT’s adverse health effects in humans.

And where is the Gates Foundation’s massive resources in this ongoing struggle to save a half-billion from sickness and millions from death? This organization asserts its devotion to reducing the toll of TB, AIDS and malaria — yet none of its funding is aimed toward the cheapest and most effective way to deal with malaria: increased indoor spraying with DDT. Maybe Warren Buffett can persuade his friends Bill and Melinda to target their contributions where they will do the most good, in the shortest time, for the most people. Malaria vaccines are many years away — DDT works in weeks or months.

Gilbert Ross M.D.
Executive and Medical Director
American Council on Science and Health
New York

For the source of the letter, and for other letters, see:

"Malaria Kills Millions — We Have the Cure." Wall Street Journal (Mon., August 28, 2006): A13.

Feds Slowed DSL by Forcing “Open Access”

Here is the background. From the earliest days of broadband service, controversy raged over whether the physical networks used to transport data should be allowed to control content. Thus open access rules, which forced telcos to allow broadband company rivals to use their networks at regulated rates. Cable TV systems, meanwhile, also provided Internet connections via cable modems, but without any obligation to share their facilities. If an independent Internet Service Provider (ISP) like Covad or Earthlink wanted to connect customers via Comcast’s lines, they could negotiate a deal but had no legal club — as they did under open access.

There was a vigorous campaign to mandate open access on cable similar to DSL; regulators under both Presidents Clinton and Bush refused. The inevitable litigation ensued; but the Supreme Court set the matter to rest in FCC v. Brand X (2005). Its 6-3 decision upheld the FCC’s classification of cable broadband as an "information service," placing it beyond the scope of common carrier regulation.

For a number of years, therefore, DSL service was subject to open access while cable was not. Unsurprisingly, DSL providers were blown away early in the race for market share. By the end of 2002, cable-modem subscribers numbered 11 million and DSL just 6.1 million, according to Leichtman Research.

Then DSL began its deregulatory trek. The first critical reform was a surprise FCC decision in February 2003 to end "line sharing" rules. This dramatically raised the prices which ISPs would have to pay to use phone company facilities to provide retail DSL service, dealing a severe blow to companies like Covad. Echoing conventional wisdom, the New York Times news story forecast a consumer defeat: "High-Speed Service May Cost More."

It hasn’t. Average DSL rates, according to Kagan Research, dropped from $39.51 per month in 2002 to $34.72 in 2003. Telcos also expanded the scope, capacity and quality of advanced networks, even improving its endemic customer relations problems.

Consumers responded. DSL, holding just 35% market share in 2002, pulled even with cable among new subscribers in 2004. Leichtman Research reports that "DSL providers have added more broadband subscribers than cable providers in each of the last six quarters," and that overall, "the first quarter of 2006 was the best ever for both DSL and cable broadband providers." Unleashed from open access, DSL is attracting customers like never before — and the overall growth of broadband subscribers (DSL and cable) is notably higher.

For the full commentary, see:

THOMAS W. HAZLETT. "RULE OF LAW; Broadbandits." Wall Street Journal (Sat., August 12, 2006): A9.

Vinod Gupta: the Democrat’s Ken Lay?

Much has been made of the good will between the Bushes and the late Enron CEO Ken Lay. But not all of those who fall short of sainthood are friends of Republicans. During the Clinton administration, Vinod Gupta slept at the White House. He is a major donor to Democrats, and has been a delegate to the Democratic National Convention. Yet Gretchen Morgenson of the New York Times suggests that Gupta may not be an exemplar of sound management practices:

(p. 1) ANYONE who says that the Midwest is dull and monochromatic has obviously never been to Omaha. The city of Warren E. Buffett, the investing great who has generated huge gains for his shareholders over the years, is also home to Vinod Gupta, the colorful chief executive of infoUSA, who has destroyed enormous value for outside shareholders in recent years. Now that’s diversity.

Unfortunately for the shareholders of infoUSA, a database marketing concern, much of its story is a throwback to the pre-Enron days of cozy boards and entitled executives. Mr. Gupta, who founded infoUSA in 1972 and owns 38 percent of its shares, doesn’t seem to recognize that he is running a public company and needs to look out for his non-Gupta shareholders. His board has done little to help him see the light.

InfoUSA shares hit a 52-week low Friday, closing at $7.98. They are down 27 percent for the period.

Mr. Gupta is, shall we say, a piece of work. He often prevents large shareholders from asking questions on conference calls. He has received compensation that was not earned under the terms of the company’s executive compensation program, according to a lawsuit that Cardinal Value Equity Partners, infoUSA’s largest outside holder, filed against the company. And, the suit alleges, his board has given him free rein to dispense stock options to whomever he likes.

Related-party transactions are also routine at infoUSA. The Cardinal lawsuit contends that infoUSA paid a company owned by Mr. Gupta about $608,000 in 2003 to buy his interest in a skybox at the University of Nebraska’s Memorial Stadium. The university is Mr. Gupta’s alma mater and home of the Cornhuskers football team. In June 2005, the suit says, infoUSA paid $2.2 million for a long-term lease of his yacht. The yacht, named American Princess, is 80 feet long and has an all-female crew, according to a report in The Triton, a monthly publication for boat captains and crews.

Leases on an H2 Hummer, a gold Honda Odys-(p. 8)sey, a Glacier Bay Catamaran, a Mini Cooper, a Lexus 330, a Mercedes SL500 — all used by the Gupta clan — as well as rent on a Gupta family condominium on Maui have also been financed by infoUSA shareholders, the suit said.

Shareholders also paid a company owned by Mr. Gupta’s wife $64,200 for consulting services in 2003 and 2004. Shareholders have also covered the Gupta family’s personal use of a corporate jet — leased by infoUSA from a company owned by the family — to have fun in the sun in Hawaii and the Bahamas. Mr. Gupta apparently wasn’t in a mood to return the favor: during a four-year period ending in 2004, infoUSA paid $13.5 million to Mr. Gupta’s private company for use of the aircraft.

What to make of all of this? The Cardinal lawsuit contends that the carnivalesque spending amounts to unregulated perquisites and evidence of a somnambulant board. Sleepy, perhaps, but always on the move. Some 15 directors have spun through infoUSA’s boardroom door over the last decade; five of them stayed less than a year.

For the full story, see:

Gretchen Morgenson. "That Other Guy From Omaha." The New York Times, Section 3 (Sun., August 27, 2006): 1 & 8.

Source of graphic: online version of the WSJ article cited above.

Needed to Save New Orleans: Less Local Government Corruption and More Local Capitalism

Source of graphic: online version of the WSJ editorial cited below.

New Orleans’ plight is not the result of federal underspending. Uncle Sam has spent some five times more on Katrina relief than any other natural disaster in the past 50 years. Both parties in Congress and the White House opted for the status quo by relying on federal bureaucracies to oversee the rebuilding effort. If Uncle Sam were deliberately trying to waste these funds, it is hard to imagine a better way than to funnel the money through the Department of Housing and Urban Development, the Small Business Administration and the Federal Emergency Management Agency. Both HUD and the SBA have been on the chopping block back to the early Reagan years.

The post-Katrina spend-fest in Louisiana will be remembered as one of the greatest taxpayer wastes in U.S. history. First came the FEMA $2,000 debit-cards fiasco intended to pay for necessities that were used for things like flat-panel TVs and tattoos. Then came the purchase of thousands of mobile homes that cost as much as $400,000 per family housed; the $200 million for renting the Carnival Cruise Ship millions more in payments that went for season football tickets, luxury vacation resorts, even divorce lawyers. Federal flood insurance policies surely will encourage many to rebuild in the same flood plains and at the same height as before.

. . .

After the hurricane, newspapers around the world showed photos of New Orleans under headlines that shouted: "America’s shame." In truth, New Orleans was America’s shame long before Katrina. In large part the residents of the Big Easy were victims of the predatory behavior of their own politicians. Louisiana already ranked among the bottom five of all the states in crime, poverty, health care and school performance; the murder rate in New Orleans today is 10 times the national average.

For all the finger-pointing this week, Congress hasn’t spent much more than a dime to clear away the debris of corruption, patronage, welfare dependency, high taxes and racial division of decimated neighborhoods. What is still lacking in the life of New Orleans is the vital architecture of local capitalism.

For the full editorial, see:

"The Tragedy of New Orleans." The Wall Street Journal (Tues., August 29, 2006): A14.