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Economics 101
Externalities
Externalities are consequences of actions between economic actors.
Externalities occur when the true social costs of a good are not reflected in its market price. If the price is artificially low, economics explains we over consume the good.
The externalities associated with over consuming energy is global warming. The externalities of over consuming plastic are the deaths of millions of living creatures in the oceans.
Externalities of a warmer climate are less snow. Less snow cannot be good for snow leopards.
Big cats, sharks, birds of prey, butterflies, bees, the ocean, trees. Why trash the place? It's worth saving.
Example 1: Gasoline
Are the true social costs of gasoline represented in its market price? Is the cost of a gallon what you pay at the pump?
The oil companies are highly adept at producing gasoline. They are equally adept at foisting their products' clean up costs onto the general public.
The price at the pump represents the costs of converting oil into gasoline and getting it to the pump. The price does not include the costs associated with removing the carbon from the air after it is burned.
When the gas burns, carbon emissions result. Excess carbon heats the atmosphere and induces climate change. A 19 mpg car emits approximately one pound of carbon per mile.
Negative externalities associated with gasoline consumption include carbon emissions, smog, air pollution, respiratory issues, and climate change.
Negative externalities of gasoline production include wars, oil spills, polluted water, dead wildlife, and EPA superfund sites (refineries).
An electric vehicle (EV) eliminates the oil side of the equation, but if the electricity generated to power the vehicle is not clean, there are still negative externalities on the production side. The consumption side is much cleaner, however. When driven, the EVs have no carbon emissions from their exhaust systems.
Example 2: Electricity
Are the true social costs of electricity represented in its market price?
Much like gasoline, the price we pay for electricity is related to the cost of producing the electricity, but has little to do with the unintended consequences, or externalities, associated with its production and consumption.
About 63% of electricity is generated from fossil fuels, primarily coal and natural gas. https://www.eia.gov/tools/faqs/faq.php?id=427&t=3
The average household in the U.S. uses approximately 10,000 kilowatt hours (kW/hr) per year. To produce one kW/hr from coal requires 2.2 lbs of coal and emits 1.4 lbs of carbon when it is burned. So the average household in the U.S. emits 14,000 lbs of carbon every year just to keep the lights on! Add approximately .5-1.0 lbs of carbon for every mile driven and the scale of the carbon problem becomes clearer.
The negative externalities of fracked natural gas include devastating effects on groundwater. Water and highly toxic chemical agents are injected at extreme pressures to "fracture" underground rock and release the natural gas. The groundwater table is rendered unusable. How can we justify destroying our groundwater to reduce the price of our energy bills by a few percent?
Does that strike you as crazy?
economics 107.6
The MULTIPLIER
The multiplier is an economic term that relates to how often a dollar turns in the economy. The higher the number, the more beneficial for the economy.
Made in USA = the highest multipliers.
If you look up economic multiplier online, the results may be skewed in terms of how OFTEN the government spending multiplier is referenced.
Consumption + Investment + Government spending (C+I+G) is a way to measure or predict the overall size of the economy.
C+I+G is a core tenet of macroeconomics and pioneered by noted economist, John Meynard Keynes.
Think of numbers (multipliers) in front of each:
6.82 * C
2.14 * I
1.97 * G
Consumption
What we buy. Consumers and Corporations.
If you buy something Made in USA, your purchase:
- supports employees of the company
- generates tax revenue including local, federal, state, social security, etc.
- spreads the money around by whatever the employees buy
- restaurants
- dry cleaners
- car dealerships
- dance studios
- dollars keep circulating = the multiplier
If you buy something Made in Another Country, your purchase:
- supports the business selling the item and generates sales tax
- from there, the money goes out of the country
- No employment or social security taxes paid on production.
- The Multiplier effect stops
Investment
A theoretical return in the future. You save money in a bank and that money is loaned to a business and the economy improves because the business hired people or bought equipment, etc.
Another potential investment would be tax policy. Cut taxes. Put more money in the hands of the individual or corporations. How the money is spent has a big impact on the multiplier.
Is it going to the employees or to the CEO so he can upgrade the house in the Hamptons and his use of NetJets?
Government
When the government spends money, there is a multiplier involved.
We build roads and employ construction crews. Those persons spend money in their communities and generate multiple streams of tax revenues. We buy drones and B-2 bombers from Northrop Grumman and support its employees, suppliers, R&D, etc. Those dollars are spent and circulated around the country. The highest G multipliers bolster tax revenues.
Other Considerations
It's not only about the money. What about things we want that don't show up on the economic scorecard? Clean water, clean air, a biodiverse planet? Our health!
The multiplier turbocharges the economy. The higher the number, the more lives impacted.
Manufacturing jobs have some of the highest multipliers in the economy. Wealth is created. An example: six dollars worth of inputs create nine dollars worth of outputs.
Our plan is to manufacture in the United States utilizing world class talent from across the globe. Eventually, we will consider building turbines in other parts of the world for their respective markets.
