Above All Earthly Powers | Category Archives: Impact of Ideas

The Reality of the Volt

Posted on January 20, 2012 by David Kotter Posted in Environment, Impact of Ideas, Individual Bias

The Chevrolet Volt electric car from GM invariably is mentioned in my economics classes whenever the discussion turns to alternative energies. It is often held up as the “car of the future” and a paragon of the green economy transforming the United States. While I would be delighted to see the Volt reach these aspirations, I question whether those who have pinned high hopes on this vehicle have actually considered the data.

Readers of Above All Earthly Powers are encouraged to research the data rather than be swayed by headlines and soundbites.

GM expects sales to fall short of 45,000 Volts this year. This likely will prove true, given that only 7,600 were sold last year. In other words, of the 12.8 million vehicls sold in the United States last year, 99.95% of them were not Chevy Volts. It is also safe to assume that essentially 100% of the 18.5 million automobiles sold in China last year were not Chevy Volts.

What could account for this failure to revolutionize the auto industry by this innovative green product? One contributor could be the $41,000 price tag on a vehicle smaller than the Ford Fusion (2011 record sales: 240,000 vehicles). Of course this steep price is partially offset by a $7,500 government rebate which is coerced from non-green taxpayers who otherwise might not donate to save the planet. This sales incentive seems reasonable in light of the fact that the federal government still owns 26% of General Motors outstanding common stock.

Another contributor to low sales might be concerns about having batteries of the Volt spark or burst into flame several weeks after being involved in a collision. Though this happened to three vehicles that were tested by the National Highway Traffic Safety Administration, GM “took unprecedented steps to reassure Volt owners and the public that it was taking the matter seriously.” Based on engineering fixes, the NHTSA closed its investigation saying it “found no reason to believe the car poses an unusual risk of fire.”

Gentle reader, we should care about the environment. For this reason, future posts will address how to care for the creation with ideas that keep individuals safe from fires, are cost-effective in light of poverty, and produce actual change rather than “green washed” corporate public relations.

How Fracking is Changing Your Life

Posted on January 12, 2012 by David Kotter Posted in Capitalism, Impact of Ideas

If the term “hydro-fracturing” or simply “fracking” is not already familiar to you, gentle reader, then you are missing one of the significant economic developments in our lifetimes.

This new technology for using water, sand, and chemicals to fracture shale formations deep in the ground is releasing enormous quantities of natural gas from unexpected parts of the country. The production of onshore natural-gas in the United States has increased about 50% over the past five years, while the price has fallen more than half, from $8 to under $3 per million British Thermal Units (the standard unit for natural gas purchases).

What does this mean? More than half of American households (who use gas to heat their homes) can expect to save hundreds of dollars as the cost of staying warm is forecasted to fall by about 20%. Steel companies and plastic makers are building new facilities in the United States (think jobs…) so they can take advantage of the inexpensive fuel to compete globally. More natural gas power plants also means cleaner air for everyone. Of course, many companies are earning increasing profits from drilling wells.

It also means that we are better obeying the creation mandate (Genesis 1:28) to subdue the earth and make it useful for human beings. Therefore, the newly developed “fracking” techniques seem to be fundamentally good and pleasing to God. What do you think?

Don’t Undersell U.S. Manufacturing

Posted on January 6, 2012 by David Kotter Posted in Impact of Ideas, Individual Bias

Outsourcing of manufacturing jobs has haunted the economy of the United States for decades, but this trend is now reversing with the increasing productivity of American workers. The Wall Street Journal reports, “Though the U.S. is hardly a low-wage country, it has become much more efficient, making it more attractive for global manufacturers.”

Manufacturers have used automation and flexible work practices to make far more goods with the same amount of people. This increased productivity results from ideas which make the unit labor cost of goods lower without reducing wages to the workers. The Journal reports that costs in the United States have declined by 13% over last decade compared with increases of up to 18% in Germany, Canada, and South Korea.

The United States also benefits from lower energy costs from the shale-gas boom that is underway (look for posts on this in the near future — DSK). Logistics and transportation are better in the United States than most countries. Though it goes counter to the prevailing sentiment, manufacturing and United States is growing more attractive to companies around the world.

Virtue from Capitalism

Posted on January 2, 2012 by David Kotter Posted in Capitalism, Impact of Ideas, Incentives

I live, work, and study in Louisville, Kentucky. The local Courier-Journal newspaper reported this weekend about a new option for travelers who would prefer to rent a room in a private home than stay in a hotel room. Residents in Louisville and in thousands of cities around the world are listing rooms for rent through a new website exchange.

The new service is provided by airbnb which links travelers with more than 100,000 hosts across the globe. Travelers can utilize Facebook for a rapid background check on potential hosts, and airbnb provides an insurance guarantee to protect the owners.

This is a delightful development at several levels. First, it provides competition for the hotel industry and consumers generally benefit from more competitive markets. Second, the impersonal Internet provides a way for people to develop personal relationships. The newspaper provides many accounts of people enjoying community with others because of this service.

Most important, this website demonstrates that capitalism (as opposed to socialism and communism) tends to develop or enforce virtue. People tend to emulate biblical values in competitive markets. The article states, “Airbnb’s concept is that people behave well if it’s in their economic self interest. To get more customers, airbnb hosts need good reviews, so they say they treat their guests well. In turn, airbnb guests are also reviewed by their hosts. If guests want to keep renting airbnb rooms, it behooves them to impress the hosts.”

The common perception is that capitalism solely breeds greed and wicked behavior. On the contrary honest competition forces companies to serve the needs of customers in ways that imitate a biblical understanding of virtue.

Fear of Flying?

Posted on December 23, 2011 by David Kotter Posted in Impact of Ideas, Individual Bias

Do you know someone who is a “nervous flyer”? Is it dangerous to fly in the United States? Once again, it is helpful to look at the statistics rather than relying on our personal inclinations.

The Wall Street Journal reported today that there were no fatalities on scheduled U.S. flights in 2011. In fact, the fatal-crash rate for scheduled carriers is down 80% since the late 1990’s. A plane crash is always headline news; few papers report, “America’s skies are the safest they have ever been,” according to Transportation Secretary Ray LaHood.

As a result, we can be grateful to God that for the average person the fastest way to travel great distances is also the safest — likely for the first time in the history of mankind. This mobility is of inestimable benefit for commerce, recreation, and family ties. Also, this shows us how our individual views can be biased in the absence of wider statistical information.

In this way economic data — properly interpreted — can help finite individuals better see the world from the perspective of an omniscient God.

Ideas Matter

Posted on December 20, 2011 by David Kotter Posted in Impact of Ideas, Socialism

The Impact of Economic Ideas in North Korea Stand Out in a View from Space

The vibrant and prosperous economies of Japan and South Korea are evident from the city lights radiating into space. The white outline added to this satellite photo highlights the “missing” cities of North Korea. Surrounded by prosperity, the people of North Korea have been literally starving by the millions.

The people of the Korean Peninsula share a common geography, a common culture, and until recently, a common history. The only significant difference between the North and South was an economic commitment to communism or to capitalism. Ideas matter. Economic ideas matter to the lives of millions of people.

Gentle reader, I am grateful that you have found this blog and hope you will join in the dialogue as we explore the theological significance of economic choices for people around the world.

Crime Falls in Half

Posted on December 20, 2011 by David Kotter Posted in Crime, Impact of Ideas, Individual Bias

Crime in the United States continues to fall, though most people do not recognize this trend. FBI data in the graphic below from the Wall Street Journal shows the one year trend of major categories. James Fox, a professor of criminology at Northeaster University in Boston, says people “simply won’t believe” crime is roughly half what it was two decades ago. Partly this is because pockets of lawlessness are still common in some neighborhoods, but more because news and television programming highlights criminal activity.

Drop in Crime for 2011 by Category (WSJ 12/20/2011)

How do we interpret this information? First, we can be grateful to God and the police who serve (Romans 13:4) for making this one of the safest societies in the history of mankind. Second, this reminds us of the value of aggregated economic information that can help us overcome biases introduced by our individual perceptions. In the same way, economic data can provide a broader overview to guide wiser decisions.