The Power and the Money

Pendejadas en la madre patria

I am beginning to believe that PM Rajoy wants to push Catalonia into a unilateral declaration of independence. For he is snatching defeat from the jaws of victory and it makes no sense. 

Around the time of my last post, before the earthquake, the Spanish State was winning the battle. Public opinion polls were trending against as late as June. Local officials were negating support for the referendum. Madrid was in a perfect position to sit back, watch the vote, and shrug its shoulders even if happened. A few kind words in favor of autonomy would have killed the whole damned thing.

Instead ... and I am posting this only because I suspect some of you do not read Spanish news obsessively ... Spanish national police just raided Catalan government offices and arrested 13 officials. This is ... crazy. If I were Catalan that would not get me to support secession, but by God it would make me angry.

In that, I suspect I am pretty well normal. But in my absolute ideological rejection of secession I do not think that I am pretty well normal. Meaning that you could not do better to push people towards secessionism than to raid their government offices and arrest their politicians. 

Imagine this in an American context. Calexit, somehow, gets on the ballot. Instead of ignoring this bit of West Coast silliness, the Trump administration starts insulting everyone in the movement. This is followed by Jeff Sessions mobilizing the National Guard to confiscate all pro-Calexit posters and pamphlets, ordering USPS and Fedex to suspend sending out any California election material, and sending in the FBI to arrest Californian officials. They grab a bunch of high-placed people in John Chiang’s office, grab a bunch of Betty Yee’s advisors for good measure, and top it off by arresting Gavin Newsom’s right-hand man. 

That could turn a sideshow into a serious independence movement. But Catalonian independence is already more than a sideshow. Madrid should be very quiet right now. They should be quietly making an active case for Spanish unity, with no reference to the illegal referendum. Government spokespeople shouldbe quietly pointing out that independence would bring economic disaster, but they should only point that out when asked. They should put out short declarative statements that the referendum is nice but of no import, but again only when asked. And ... end.

Instead, we have what looks like, what, an attempt to have a second Civil War? What in the name of God and the madre patria are they thinking over there?

This is all beyond stupid.

You can’t get there from here: path dependency and public health care

California just costed the proposed Medicare-for-all system. It came to about $400 billion. $200 billion would come from existing federal spending. The remainder could be financed by a 15% payroll tax (or something else). Of that $200 billion, $150 billion would displace employer-provided costs around $150 billion. The remainder would either replace out-of-pocket spending or represent the cost of getting the small remaining number of uninsured Californians into care. 

$400 million is nonetheless a huge number. It is a little more than $10,000 per person. The Canadian public sector, in contrast, spends about $3,200 (U.S.) per person. (Total spending was C$6,299 in 2016, according to the Canadian Institute for Health Information; about 70% of that was public.) 

And therein lies the rub. The United States has seen years of runaway health care costs, driven by our odd hybrid system. That means that whether you like Canada on the left, or Singapore on the right, any sort of transition will be very expensive.

Which is why, at the end of the day, I favor making Obamacare work. The Dutch have shown how: automatic sign-ups, direct deductions, and high penalties. And more subsidies to push up affordability. At the same time, slowly expand Medicaid eligibility while reducing the Medicare age. It is incremental and messy ... but anything else would require a big bang at big cost, as California just discovered. 

The year 2049 in a parallel universe

President Trump fired James Comey today. Comey did engage in malpractice over the Clinton investigation and he did misrepresent what was on the Weiner laptop to Congress. But we all know that is not why he was fired. So as America slips a little further into dystopia, we can take some solace in that fact that things are better than they were in 1919. For now. 

But I come to discuss the year 2049, not 1919. Here is the new Blade Runner trailer:

There is a lot going on. But stop on second 48 and note that the holographic ballet dancers are above a rotating chyron that reads: “Soviet Happy: Product of CCCP.” Add that to the Atari logo, and it is clear that the movie is not set in our universe or our future. Kudos to the writers and producers for not trying.

Still, you gotta wonder. What would turn the suburbs of L.A. into a desert with broken freeways but leave the USSR around to make, uh, Soviet Happy?

I miss pointless discussions. Never thought that I would, but I do.

Governor Moonbean taxes ships to the Moon

When Jerry Brown was governor of California the last time around, he received the moniker “Governor Moonbeam,” in part because he proposed that the state start its own space program back in 1978. Now he’s back, with regulations that would tax space launch companies.

More accurately, the regulations specify how much of the income earned by a space-launching company should be considered to have been earned in California. The state could legitimately say, “Launch in California, earn in California” and be done with it. But they are instead doing something clever. (And, in effect, a tax break for SpaceX.) 

First, multiply income by a mileage factor. For California launches, the numerator of the mileage factor will be 62 miles. That is, all launches within the state will be considered to travel 62 statutory miles before leaving the jurisdiction of California, regardless of where they actually launch from. The denominator will be the distance traveled by the time of final payload separation. That is, the company will considered to be selling travel to Low Earth Orbit (more or less) with the portion of that travel within the state of California being taxable. 

The formula gets a little more complicated than that, but not much. For those of you who want to know, the mileage ratio is multiplied by 0.8. Then the ratio of all launches from California to all launches by the company is multiplied by 0.2. Those two things are added together, and then total revenue is multiplied by that to determine gross taxable revenue. 

Anyway, it is simple, clever, and a big giant tax cut for California-based launch companies. Go figure! The Hoover institution would approve.

Not Trinidad, but schadenfreude

More Trini posts coming. But right now, behold the failure of the Calexit nonsense.

And as California resident (but not native, as he will angrily point out) Will Baird (hat tip!) pointed out, you cannot help but relish the way the organizers’ obvious ties to Moscow brought the whole thing down. I don’t blame the Russian government: why not throw a hail Mary against an apparently-vulnerable opponent? But this was all too stupid for words on the part of anyone who took it seriously.

As opposed to transferring membership from the United States to the Dominion (:p) of Canada. That, well, that does not involve the creation of any new countries, to which I am opposed, and that I could get behind. It’d be more like annexing Canada than joining it, anyway. The entire northeast could follow, and what would there be to not like? Although I would be sad should New York and Pennsylvania wind up in different countries.

(Says the man who joined the U.S. Army out in order to be a human hostage to U.S. foreign policy, as then-2LT JKR pointed out in far pithier language.)

What makes a nation?

Florida is a bizarre state. Not only is it different in extreme from the rest of the country; different parts of Florida are different in the extreme from each other. It just should not work. But somehow it does. Every so often somebody idly proposes splitting the state, but it’s never gone anywhere. Ditto secession. Despite the enthusiasm with which non-Americans jump on news of secession movements in California, Texas, Hawaii and Vermont, none of them show even the slightest sign of going anywhere.

Why then is the European Union in trouble or the United Kingdom under threat? It isn’t political oppression, despite what the people in England (regards Europe) or Scotland (regards England) might tell you. Both polities are acceptably democratic, no matter what objections you might have to the constitutional particulars. Is it language? Obviously not in the case of the United Kingdom, and almost-certainly not in the case of the people demanding Brexit, since the European Union has done nothing to weaken English. (Nor any other language; quite the reverse, by demanding full translations from everything into everything.) 

So what is it? Why is the U.K. under strain and why is the E.U. under strain? The obvious answer is that the cultural splits in Europe are much bigger than their equivalents in the United States. 

Alberto Alesina (Harvard), Guido Tabellini (Bocconi), and Francesco Trebbi (U. of British Columbia) decided to answer that question. What did they find? Well, simply put, cultural differences within Europe are less than within the United States. You got that? Texans and New Yorkers differ more in their beliefs about family, religion, trust, sexuality and the state than do Castillians and Dutch or Greeks and Germans. Moreover, cultural differences within European states are bigger than the differences between European states. 

(Amusingly, you can use their methodology to compute the most European part of Europe. You get Germany and Austria. But you also get the Belgium, the Netherlands, and oddly enough big chunks of Spain and Portugal. So much for stereotypes.)

In summation:

A comparison between the E.U. and the U.S. suggests that fundamental cultural differences among Americans are not bigger than that amongst Europeans. Along this dimension, if Americans can share a well functioning federal union, so could Europeans. Needless to say, the United States had 250 years of nation building and 150 years have gone by from the Civil War. Europe has had a much shorter common history and only 70 years have gone by since the last inter-European war. Americans share a common language and geographic mobility in the U.S. has been much higher than within Europe, or even within individual European countries. Mobility helped creating a melting pot and thus a common identity, but apparently did not dampen cultural heterogeneity.

In other words, you are left with nationalism as a defining force by itself. Which leaves you with two possible implications:

1. It might be easier to build a European polity than the current troubles imply;
2. Building any multinational polity is impossible. Two political communities can be identical in every respect, but as long as they define themselves as nations then it will be very hard to create a shared polity;
3. We are reading too much into all this. The stability of the United States and the problems of the United Kingdom are both contingent. Give the U.S. a few bad breaks or give the U.K. better politicos and none of this would be happening. 

Thoughts? It certainly seems as if nationalism has a mysterious strength of its own. But maybe not! Maybe it is all on (3): political communities grow and disintegrate in hinky contingent ways; nationalism follows (or doesn’t.) Frex, you can’t get the near-identical West Indies to unite but you have no problem holding the unbelievably diverse United States together. 

This “news” is striking, even for Politico

Politico reports that President Trump “has come through on three big asks” for California. That was an interesting headline! So I read the story. And it turns out that the “three big asks” are disaster declarations. 

Think about that. It is newsworthy that President Trump didn’t set what’s left of his presidency on fire out of pure spite. And make no bones about it: denying disaster assistance to a state experiencing natural disasters would sink his presidency right quick. Not to mention the shot-in-the-arm it would give to that fundamentally ridiculous secession movement. 

Yet it was and remains plausible that he would do such a thing. What a goddamned time we live in.

More on the Calexit bubble

The sudden spread of the “California secessionism” bubble shows how the Internet has weakened our political discourse for the worse. First, if a multi-millionaire had wanted to announce that he was funding a referendum in 1995, he would have had to have called a press conference. (He would likely have had to do that as late as 2005.) Calling a press conference is not hard, of course, but it meant that nobody besides his drinking buddies would have seized upon an offhand remark.

Calling a press conference isn’t hard, of course. But the need to do so meant that stupid ideas from rich people that wouldn’t survive the cold light of day couldn’t get out to the press. Now, though, it goes out to millions of potential viewers, and just as importantly (still!) the press.

The tweets that started the brouhaha are now down, I should add.

Second, the Russian press could have covered a fringe secession movement as much as it wanted, but the American press would never have picked up the story. Any Russian stories would have been noted as dubious and ignored. 

Poof, a non-story.

Now, this particularly story is not all that important. But it seems to me that it points out a worrying weakness in our national anti-bullshit immune system. Is there a corresponding gain or a way to combat the vulnerability?

The big bear is interfering with the little one

Well. An NPR station in California reported that the head of the Calexit movement, Louis Marinelli, may be orginally from Buffalo but currently resides in, you guessed it, Russia.

Now, Marinelli says that he’s in Yekaterinburg to handle his wife’s immigration. Linking the Calexit movement with Putin on that basis would be unfair. But what would not be unfair is noting that Calexit appears to have been covered mostly by Russian outlets until November 8th. At that point, Shervin Pishevar tossed out his infamous tweet, which got journalists googling. They picked up the Calexit people, and poof, instant news of secessionist sentiment in the Far West.

Robert English (of USC) said it best: “This is what Russia is great at. Their media apparatus is so good at spreading disinformation. It makes the line between nutsos and normal people hard to draw.”

There are many ways in which the next four years could go dramatically wrong. Blue state secessionism is not one of them. But Russian attempts to weaken our tottering democratic institutions, well, that is a worry. Our immune systems are weak; consider how quickly this gobbledygook story spread.

For the curious, here is the proposed initiative. 

Relaxing zoning in California would not shrink Texas by 40%

I seem to lack Twitter-fu, because my questions to people on that platform go unanswered. And so, I pose the question here. 

Matt Kahn now claims that freeing up California housing markets would have caused Texas population to fall by 40%. His evidence? Uh ... well, I do not see any, save that there is a lot of migration into Texas from the West Coast. 

I went to the same IRS data source he used. In 2014-15, net migration into Texas from the rest of the U.S. came to about 59,000. Net migration from both inside and outside the U.S. was around 64,000. Of that total net inflow, about 19% came from California. Californians who moved to Texas earned about $71,000 per family; Texans who moved to California earned about $61,000. Both, interestingly, earned less than the $77,000 average income of Texan families who stayed put. 

How can you use that data to estimate a counterfactual population for Texas? I have no idea! Kahn did not say.

But he ended with a challenge. “My critics must answer the counter-factual of; what would be the population of Texas if it were easy to build in progressive coastal states?”

Challenge accepted!

So let’s stress-test the hypothesis that alt-Texas would have a population of 15.4 million in 2010, rather than 25.3 million.

In 1970 the state had a population of 11.2 million. If its population growth plunged to the national average and stayed there from that point on, Texas in 2010 would have 17.0 million. That is more than 15.4 million, but in the ballpark

How likely is it that an open California housing market would have pulled all those people out of Texas? Well, if Californian development restrictions were biting, then one would expect housing costs in California to rise dramatically relative to Texas during this period. The census measure of median rent is flawed, but it is easy to find. Assuming it measures housing costs reasonably well, what does movement in the California-Texas ratio tell us?

  

Well, that it is unlikely that the migrants to Texas were choosing to go there because California was too expensive. Certainly not during the 1970s or 1990s, at least. By 2000, Texas already had a population of 20.9 million.

In other words, unless something is wrong with the measure of housing costs, it is unlikely that the migrants pulled into a zoning-free California would have come from Texas, at least not before the year 2000. 

My answer to the question “What would be the [2010] population of Texas if it were easy to build in progressive coastal states?” is: at least 20.9 million (the 2000 population), plausibly 23.0 million (no net migration to Texas after 2000), and most likely exactly the same 25.1 million that it actually is. 

Did Jane Jacobs swing the election for Trump?

Added clarification: This post argues that freeing up Californian housing markets after 1970 would not have caused the California population to grow enough to swing the 2016 election.

This idea comes from Matthew Kahn at USC. In 2010, he published a paper showing that more liberal cities in California reduced the number of housing permits they issued, all other things being equal. That is to say, liberal antipathy to housing came from ideological preferences; it wasn’t a secondary effect of liberals being better-educated or concentrating in more geographically-constrained areas or whatever. 

Kahn’s mechanism is that urbanites vote more Democratic, but zoning has constrained the number of urbanites. Without housing constraints, California would have 80 million people with the corresponding number of electoral votes.

But is 80 million likely? Brad Delong has an amusing back-of-the-envelop calculation for what California would look like with an unconstrained housing market. It assumes that Los Angeles is reasonably unregulated and produces a rough estimate of 8 million more people in the state, all in the Bay Area. That would give you 47 million Californians. 

But his supply curve also assumes that Los Angeles is unconstrained save by its population size. Consider the below graph, from Greg Morrow’s (U-Calgary) dissertation. It shows the population that existing zoning would have allowed to live in Los Angeles if completely built-out:

The thing is, zoning restrictions certainly prevented the population of the Westside from doubling or tripling; it is less certain that it kept the population of the entire Southland from growing. Fewer people in Santa Monica, more in Riverside County.

There is another back-of-the-envelop calculation that favors a 47 million counterfactual. Growth restrictions became significant around 1970 and began to bite by 1980. Well, if California had grown at the same rate as Texas since 1970, it would have 48 million people today, not too far off the Delong counterfactual. (If it had grown at the same rate since 1980, California would have 45 million people.) 

Now, to really figure out if this swung the electoral college you would have to guess at where the extra nine million people came from. Some might be from states that received Californian outmigration; others might be immigrants who would go to California rather than elsewhere. But we will ignore that for now. 

Well, 37 million people got California 55 electoral votes in 2010; 45 million (remember, the 2010 population would be below 2016) would have gotten it 65-66 electoral votes. 

No, not really enough to swing the election. 

But if you assume that New York, New Jersey,  and Massachusetts would also be much bigger, then you start getting somewhere ... and there is a completely different channel by which Jane Jacobs could be blamed for the outcome ...

Strange phrasing in an article about Calexit

Okay, “Calexit” is strange phrasing by itself. But that’s not what I’m talking about.

The New York Times ran a story on a fringy California secession movement given newfound momentum by the election result. California secession, whatever, terrible stupid immoral idea. And predictable bloviation, considering the election outcome. No cause for a blog post.

But what I noticed was the way the Times discussed the secession process. They actually laid out how it would work. “California cannot, of course, just pick up and leave. Even if the state wanted to, an exit would require two-thirds approval of both the House and Senate in Washington, along with the blessing of 38 state legislatures — a feat analysts say is implausible.”

Something seemed ominous in actually laying that process out. Not about the prospect of a divorce, but about the state of mind of the people interviewed by the author. 

Has Google captured the Obama administration?

I am in Snoqualmie, Washington, outside Seattle, talking about intellectual property and hanging out with the same GOP-centric establishment crowds I always hang with on the West Coast.

One interesting comment came up in a discussion of whether, when and how to start lobbying the next administration against weakening patent rights: 

“The Clinton donor map and the Obama donor map are similar but not the same. The Clinton map skews south and east, with the hope that the next administration will be less Silicon Valley dominated than this one.” 

This is interesting on three levels. First, the belief that the Obama Administration is in Google’s pocket. Second, the belief that Hillary will not be in Google’s pocket. Third, that donor maps are determinative of political positions, at least on small-bore issues like patent reform.

Are these things true?

(These are Meg Whitman’s peeps. Only one Trump supporter among them.)

What does “bias” mean?

The Washington Post publicizes a lot of good political science these days. (Thank you, Mr. Bezos!) They recently ran a column entitled, “Americans aren’t biased against Latino immigration. Here’s what they actually fear.” 

Short version: Morris Levy (USC) and Matthew Wright (American) surveyed a bunch of white Californians about their attitude towards immigration. They humanized their questions by asking the respondents about a particular individual, either a Mexican immigrant named “Juan,”  a Chinese immigrant named “Yuan,” or a German immigrant named “Johan.” In addition, half of all respondents were told that the immigrant they read about had lived in the United States for two years. The other half were also told that Juan/Yuan/Johan speaks English and has worked steadily as a waiter.

Here is what they found:

In other words, when there was no information about the immigrant, more white Californians supported legalization when thinking about somebody from Europe or China than from Mexico. But if they were told that the immigrant worked and spoke English, the gap disappeared.

The authors then conclude, “Discrimination against Latinos may grow not from hostility against an ethnic ‘outgroup,’ but rather stereotypes about whether they will contribute to the United States or become a burden.”

It’s a neat result, but I don’t understand the conclusion. They find that when told a male immigrant has assimilated, white Californians don’t care about his ethnic background. But they also find that without any information, Californians assume that Mexicans are much less likely to assimilate than other immigrants. They conclude that people stereotype Mexican immigrants as less educated and more likely to become a public burden. 

That is possible. But there is another explanation. They found that white people in California don’t consider Mexicans impossible to assimilate. But their results are consistent with the hypothesis that white people consider Mexicans to be intrinsically harder for the American melting pot to melt. 

Wouldn’t that make them an ethnic outgroup?

The Shame in San Jose

 Rarely do I agree with Conor Friedersdorf. Today, I agree completely with Conor Friedersdorf. What happened in San Jose was a damned disgrace. Everyone who participated should be ashamed of themselves. Many should be arrested.

We can expect more of this should we elect Fat Crybaby to the presidency. When you push people into believing that they are not only not part of the polity but something that the polity actively rejects, then you get reactions like yesterday.

But understanding that does not mean exculpating the violent. And while the idiots who burned an American flag have every right to do so, it is mind-bogglingly stupid politics. 

The new California minimum wage in historical perspective

 This is not all the historical perspective that I would like. I would love to get some periodic estimates of the wage distribution. What percentage earned the minimum? How many jobs bunched up at the minimum? How did that vary across industries? There is a lot that you could do.

But in lieu of that, I will just give here the real California minimum wage from its beginning in 1918 to the final phase-in of the new plan to raise it to $15 nominal by 2022. (See the text of the bill here.) All numbers are in 2015 dollars. The wage is deflated by the California CPI back until 1956, and the U.S. CPI before that.  

An explanation is in order for the projections. Note how the real minimum wage blips downwards in 2023 before stabilizing? That’s because the law has scheduled the wage to reach $15 nominal in January 2022 for large employers (barring a recession) but doesn’t start automatic inflation adjustments until August 2023. (See 1182.2, subdivision (c).)

I will admit to being very surprised that the minimum wage was that high in the 1920s and 1930s. 

The problem with San Francisco is ...

 No points for guessing!

This essay (hat tip: Jon Rabinowitz) is a great read. Yes, the econometrics are pretty basic. Sure, the data is a little less-than-robust. (The guy collected rent data for S.F. back to 1949, but did not adjust for quality.) But the basic conclusion seems pretty good: letting development rip will at best hold back the tide. 

I would add two points, however.

First, I worry about the model, simply because San Francisco is part of a metropolitan housing market. It really needs to include suburban development. Of course, the Bay Area has slammed suburban building shut even further than the County of San Francisco, but it is easier to imagine doubling the number of housing units in San Mateo and Alameda than it is to imagine doubling them in S.F. proper. Surely that would have a major effect.

Second, S.F. may be setting itself up for a major recession some day. I suspect not, to be honest: a gilded metro area looks depressingly plausible, particularly for the center of the computer industry. But a combination of a tech boom bust combined with an exhaustion of the supply of skilled people willing to live in the world’s first gilded metro area will kill the place dead. 

At that point, New York will get another filip and the people who didn’t buy in Upper Manhattan and the Bronx when it was still relatively cheap will regret it. You know who you are. It isn’t too late. 

How big is the threat that oil exports will be seized in a Venezuelan default?

 It is pretty clear that oil exports could be attached if PDVSA defaulted on its bonds. It would work as follows. PDVSA would sell oil to a refinery in the United States. Creditors would sue. The refinery would still get the oil, but a U.S. court would attach its payment to PDVSA and transfer it to the creditors. PDVSA, therefore, would get nothing from its exports.

If the Venezuelan government defaulted, however, the legality would get a bit dicier. It is possible that American courts would “pierce the corporate veil” and conclude that PDVSA is an instrumentality of the Bolivarian Republic, but that is not certain. Still, it is the way many investors and lawyers (inclduing myself) would bet. 

So in theory sovereign default would lead to a fall in oil prices, as exporting countries with state-owned companies cast around for alternative markets.

In practice, however, the courts are slow and (as mentioned above) the legalities are far from certain. It is quite possible that a defaulting country would merrily continue selling oil while its buyers merrily continued buying. After all, the buyers might not care. They would still get the oil; what do they care if the seller wouldn’t get its money?

But the seller would still want its money. It would likely therefore sell to middlemen who would demand a discount and then resell the oil at some legal risk to themselves. In other words, the price of oil exports would certainly go down.

The empirical question, however, given all the legal uncertainties, is how quickly it would go down. It is quite plausible that the export price of a country’s oil would not be affected by default for months or years.

Well, Ecuador provides a nice test of that question!

Let me walk you through the data. This is going to be a little chart heavy, so I ask readers to comment if it is ever unclear or you lose the chain of the argument.

Ecuadorean oil generally trades a discount to the WTI benchmark price. That is because its oil is heavier than WTI and needs to travel from Ecuadorean fields to (mostly) Californian refineries. The below chart shows the percentage discount on Ecuadorean oil between the start of 2006 and the end of 2009. It shows a very steep fall in November 2008.

That seems convincing, until you add a control. Mexico also exports heavy oil to the United States. Its discount on WTI also widened in November 2008, although Mexico did not default.

Still, the increase in the discount on Ecuadorean oil was greater than the discount on Mexican oil. Might that have something to do with the default? Certainly! But to be sure of that, you need to also account for the fact that Ecuador and Mexico sell into two different geographic markets. Ecuadorean oil goes primarily to refineries in California, whereas Mexican oil goes overwhelmingly to the Gulf Coast of the United States. The price of crude oil can vary by several dollars per barrel between the two locations, given transport costs and varying demand conditions. 

The below chart, therefore, compared the export price of the two countries’ blends to the price paid by refineries in California and the Gulf Coast (60% in Texas), respectively. Once you account for the fact that the price of oil in California fell more than the price of oil on the Gulf Coast, then the oil price dynamics in the two countries look pretty similar between 2006 and the end of 2008. This chart compares the price received by the exporting countries and the price paid by their primary customers:

 

The dynamics look similar when you express the discounts in dollar terms, rather than as percentages of the sale price. The stark increases in November 2008 go away completely, as artifacts of the general fall in oil prices. Mexican crude is a bit more volatile in the lead-up to November, but otherwise looks similar to Ecuadorean:

It is true that Mexican oil recovered faster than Ecuadorean oil. In fact, after January ‘09, Pemex managed to sell its oil for roughly the average price paid by all Gulf Coast refineries, elimating a long-standing discount. PetroEcuador also managed to improve its position relative to the pre-crisis era, but it took rather longer. 

I do not know what happened in the Gulf Coast oil market. There are two hypotheses to explain the Ecuadorean recovery, however. One is that the Ecuador announced the form of its default in mid-2009 — a form brilliantly and perfectly designed to leave creditors without legal recourse. Freed of fears of attachment, therefore, the discount fell.

The other is that May is around when PetroEcuador began selling its oil to state-owned Chinese middlemen at a significant premium. The discount on Ecuadorean oil fell because Chinese companies absorbed it. 

It is still possible, of course, that without the default Ecuadorean oil prices would have bounced back in January 2009 like Mexican ones and without the need to involve the People’s Republic of China. But there is no direct evidence for that story.

The next thing to do would be to nail down an explanation for the disappearance of the Mexican discount in January 2009. If an explanation for that can be found that Ecuador could not possibly have replicated, then the hypothesis that the Ecuadorean default affected the export price of its oil is likely incorrect. On the other hand, if the strategy employed by Pemex was one that Ecuador was prevented from using because it was in default, then the default cost Ecuador.

To be frank, my prior is that whatever happened to Mexican oil in January 2009 was likely idiosyncratic. I doubt that Ecuador suffered in oil markets for its big sovereign default.

Now, this is not to say that default would be costless for Venezuela. It could prove very costly! Eventually, Venezuelan receivables would probably be attached; sooner if PDVSA debt goes into default rather than Venezuelan sovereign debt. But in both cases Venezuela could continue to sell oil.

In short, the evidence from the Ecuadorean default of 2008 is not completely clear-cut ... but the preponderance of the evidence seems to be that any fall in oil prices will take some time to manifest.

Sources tell me that Venezuelan ministers fervently believe that default will lead to cut off in immediate oil exports, or at least a drastic fall in realized oil prices. I suspect that they are wrong ... but it is a good thing for creditors that they do not know that they are wrong.

California’s new minimum wage is not quite unprecedented

 California just announced that it will raise the minimum wage to $15 per hour by 2022. It will go up from $10 now to $10.50 in 2017, increase by another 50¢ in 2018, followed by one-dollar increments until it hits $15. After that, it will be fixed to inflation.

Assuming that inflation runs at 2% per year between now and 2022 (using the IMF projection), the new minimum wage will be only 8% above its 1968 peak in 2015 dollars, using the California CPI:

To be fair, the minimum wage was only briefly in that range, so it is quite possible that it will have bad effects on California’s economy. But it is not as unprecedented as it looks if you remember that American inflation in not likely to drop to zero over the next six years.

Maybe terror attacks didn’t help Drumpf

 In comments, Logan suggests that perhaps the Trump surge wasn’t due to the Paris attacks, but rather Ben Carson’s collapse. It certainly does look like most of the support for Trump came from Carson:

The Pollster data isn’t as fine-grained as the Fivethirtyeight data, but it casts some doubt on the hypothesis that terror helped Trump. It is still possible, of course, that Carson lost support to Trump because frightened Republican voters decided that Trump was somehow stronger. But it is also possible that Carson crashed for other reasons and those voters went to Trump as the other anti-establishment candidate in the race.

Back to you, Logan. 

Fear of a Black Canada, part 2

 I am working on a research project with that title. Genesis can be found here. And a (not particularly deep) look at the topic (that misses the most interesting parts) just appeared here.

The second link discusses, of course, Americans thinking about moving to Canada if the Donald wins the upcoming election. No one will, of course. But that didn’t stop people at a San Diego airport bar from talking about it on Saturday afternoon. (I was on my way back from a conference.)

The bartender said that his wife wanted them to move to Canada, so he proposed northern Washington as “almost Canada.” He was joking (I think, his delivery was drier than the surface of Mars) but the nice white Texans from Austin to my left and right were not. (My flight home went through Dallas.) Well, their tone was not joking. The substance, not as much. One woman had a son at U.T. and a daughter starting her first job in Houston; I have trouble imagining her packing up for Canada. A young man had a daughter of his own on the way and a good job as an animal trainer. Maybe that is the sort of career where you can just pack up and jump international borders ... but I have some doubts. A third Texan, to my right, could have been Californian: his affect was totally SoCal bro. But he was studying petroleum engineering. And while Alberta isn’t quite in free-fall, Texas is doing rather better. 

I really wish liberals would stop it with the whole  “I’m to moving to Canada” schtick. It’s only slightly less annoying than the conservative “time to secede from the Union” crap. 

Although, really, it is weird that there are any labor market restrictions between the U.S. and Canada at all, no? 

More on why northern California is turning into a terrible place

 Citylab just published a nice piece on why San Jose generated so much upward mobility compared to other American metropoli ... and why it will be dystopic in a few more decades.

Why was it so good at fostering upward mobility?

1. Poor people in proximity to Silicon Valley exposed children to opportunities and role models they would not have had;
2. Factor (1) in reverse: weathy people contributed directly to helping poorer neighbors;
3. Housing was cheap and affordable;
4. Commutes were short (this in particular has statistical backing).

And all of that is going away because people do not want to build more houses.

I have an old friend, Kris M., whose thoughts I would really like to hear on this issue. Why is NIMBY, so strong across America, even stronger in California? 

Housing prices and upward mobility

 Two years ago, this blog noted that San Jose, California, had incredible upward mobility. But it also suggested that rising house prices put that upward mobility at risk, by reducing geographical mobility. That in turn might prevent people from taking advantage of educational and job opportunities.

Now, the Atlantic voices the same worry: “Today, young Americans increasingly have to choose one or the other—they can either settle in affordable but stagnant metros or live in economically vibrant cities whose housing prices eat much of their paychecks unless they hit it big.”

In California, for example, the problem has only gotten worse. The very same 3-bedroom apartment in Mountain View that we rented for $1,724 in 1993 (in 2015 dollars, $1,040 at the time) now rents for $3,750 — a real increase of 118%. 

There are cities where housing is still within the grasp of young middle class people. For example, my 20-something cousin Adam and his girlfriend just purchased a very nice 2-bedroom townhouse in Philadelphia for what amounts to a monthly payment of roughly $1,700, before the interest deduction. But that is not as easy as it sounds. It is true that said monthly payment is basically flat (in real terms) since 1999. (The price of the house has risen by 124% in nominal terms, but interest rates were a lot higher back in 1999.) But because the nominal price of the house has more than doubled, you need a bigger down payment to qualify ... and student loan burdens are a lot heavier now. 

Moreover, there are two other drawbacks. First, one of the reasons why housing is still affordable in that part of Philly is that the schools are awful (albeit improving). You want better schools — and upward mobility with it — you pay more either in housing or in tuition. Second, Philadelphia, for all its charms, is not a first-tier job market the way that Boston, New York and Washington have become. (Let alone San Francisco!) You have to give up other opportunities in order to have decent housing within reach of a normal 20-something income.

America’s coastal housing shortage is good for me, as a homeowner, but terrible for the country. 

Baby steps in California

 My last post was not real. There is no such legislation and there is likely to be no such legislation. Nor is there likely to be any sort of judicial intervention along such lines, which would be one upside to a severely conservative Supreme Court. Sadly, judicial conservatives are not likely to support such interventions. Thus my plaintive call to the Koch brothers.

So we are in the world of baby steps towards turning Palo Alto into East New York and building $50,000 homes. One came from Sacramento, California, in October 2015. The Density Bonus Act of 2015 reduces the maximum parking requirement for affordable developments within a half-mile of a major transit stop to 0.5 spaces per unit. At a cost of $24,000 per space ($34,000 if inside the structure) that is a big saving. Hooray!

But it is a baby step. First, not a whole lot of developments devote 10% of their units to low-income households. Even if they do, they will only get a 20% density bonus. In other words, if you could have built ten units on a parcel, adding a low-income unit will let you bump that number up to 12. This is less than huge.

Second, major transit stops are rail stations or stops serving more than two bus routes with 15-minute frequencies. A half-mile from them does not cover a whole lot of places. 

Finally, the underlying zoning code is still the underlying zoning code. For example, the entire southwestern half of the ½-mile circle around the Palo Alto Caltrain is unbuildable for residential housing. (See map.)

So, yeah, a baby step. Nice, yes, but nothing will change.

The war on fuel efficiency continues

 It is true that as an abstract economic principle, the case for tightening fuel-efficiency standards in American cars will remain strong even if oil prices remain low. 

But this is a case where politics matters more. The rules are up for review in 2017. President Clinton will maintain them. President Rubio will not, although he may not weaken them by as much as people think for the simple reason that the automakers prefer national rules than the segmented market that would result if the feds loosened the 54.5 mpg-by-2025 target.

The basic problem is that California can set its own air-quality rule, which are then automatically followed by Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington. It does not set fuel-efficiency standards per se, but it can reject federal rules that are not consistent with its goals. If the feds loosen the 2025 standards, then California is likely to tighten its air-quality regulations in a way that effectively raises the fuel efficiency standards.

Auto companies will not like that. The upshot is that President Rubio would likely loosen the goals if oil prices remain low, but not abolish them altogether. 

Anyway, Saudi Arabia still seems to be aiming for low oil prices. Whether that is a sensible bet remains to be seen.

Ecuador is still not a colony of China

 Now that the New York Times has breathlessly put Chinese imperialism in Ecuador on the front page of its Sunday edition, I feel like I must point out that China is securing neither physical supplies of Ecuadorean oil nor favorable prices. And it is certainly not earning rents on the money it lends the Ecuadorean government. China may be buying goodwill and it may be buying the rights to develop some of the last untapped conventional oilfields on Earth ... but it is getting neither cheap.

We covered physical shipments back in 2012. Nothing has changed. Most of the molecules pulled out of the ground in Ecuador wind up in Californian refineries.

What about price? The oil might physically end up in California, but most of it passes through Chinese ownership. In theory, that would give the Chinese middlemen monopsony power. In practice, it does not. In fact, the Chinese overpay for the oil.

Up until 2012, the loans-for-oil deals required the Chinese lenders to take Ecuadorean oil in repayment valued at a premium over the WTI price. In December 2012, Ecuador stopped charging a premium for its oil. That sounds like maybe perhaps now the Chinese were finally taking advantage of their position ... but such a conclusion would be wrong. Traditionally, Ecuadorean oil traded at a discount under WTI because it was of low quality and could only be sold to California refineries unless it was shipped through the Panama Canal. In 2012, however, for the first time ever, Ecuadorean crude sold at a premium over WTI around US$4 per barrel. (Californian refineries needed that heavy oil.) The Chinese buyers did not wish to pay a premium over the premium, and so the Ecuadoreans agreed to deliver the oil at the market price.

Maybe the contracts were just folderole? Perhaps canny Chinese traders managed to squeeze out monopsony profits regardless? Well, we can check that. PetroEcuador sells its oil mostly to Chinese buyers. The private companies operating in Ecuador do not. (They technically turn their oil over to the Ecuadorean government for a per-barrel fee, which then sells it back to them, at which point they sell it again at a further markup upon which they pay taxes.) The prices at which PetroEcuador and the private companies sell their oil is publicly available. And what do those prices tell us?

The blue line shows the difference between the price charged by PetroEcuador (which sells to the Chinese) and the price charged by the private producers. PetroEcuador generally receives more money per barrel. In fact, PetroEcuador managed to take advantage of a spike in Californian prices in early 2011 that passed the other producers right by.

The red line shows the difference between the price received by PetroEcuador and the landed price of oil in California, which is the relevant market. It shows no trend: the increase in oil sales to Chinese middlemen does not drive up the spread between the price paid by Californian refineries and the price received by PetroEcuador. (The spread does increase at the end of 2014; that is an effect of the general oil price crash, as all Ecuadorean producers tried to keep up their market share.) 

OK, then. The oil is still going to California and the Ecuadoreans are receiving a good price. So maybe the Chinese are charging extortionate interest on their loans? It certainly could be. But again, that is easy to check. 

How do the terms on the Chinese loans stack up against those offered by private creditors? The red bars show the lending rate on the Chinese loans. The blue bars show the yield on Ecuador’s 2015 bond at the time the loans were made. In every case, the red line is below the blue line. The last loan, from the Chinese Ex-Im Bank, uses Ecuador’s new issue due in 2024 as a benchmark ... which brings home just how incredibly cheap that last loan happens to be. 

The New York Times article mentions “steep interest payments” on the Chinese loans. I have no idea what they are talking about.

The Times article also states, “Along with taking the bulk of oil exports, the Chinese companies also collect $25 to $50 in fees from Ecuador for each barrel they pump.”

What it does not tell you is that said fee is in fact a triumph of Ecuadorean resource nationalism. Remember how private oil producers (Chinese and Western) in Ecuador turn over their production to the government and then buy it back? Well, that fee is what the government pays them for their oil. The difference between that and the market price is pure rent for the Ecuadorean state. It is the exact opposite of imperial exploitation. (The contracts are quite clever; the newest ones give the companies a higher price if they reduce costs.) The government also takes 70% of the profit on oil sales. (Page 178.) 

The article’s phrasing, however, makes it seem as though Chinese companies take the oil for free and then charge a fee on top of that. Very misleading.

The article also says, “China’s terms are putting countries in precarious positions.” But that doesn’t make any sense! The terms of the loans are great for the borrowers. Falling oil prices are what is putting Ecuador in a precarious position. As for China’s ability to threaten trade or other sanctions should Ecuador default ... well, tell that to the Argentines or the Greeks. Western creditors, public and private, are also pretty good at that sort of thing. (I wrote a book about it!) 

Ditto the way that China forces the recipients of its finances to buy its products and contract with its companies. My co-blogger knows more about development aid than I ever will, but from what I saw on the ground in Afghanistan and Africa that sort of thing seems to be the rule ... even if it is technically disallowed. (Doug?) And I must also admit that while the anecdotes about Chinese labor and environmental practices are quite telling, I also doubt that they are much worse than the Western record. (Setty?)

Finally, love it or hate it, the Refinería del Pacífico is a purely Ecuadorean idea. If it turns out to be a bad one (I suspect it is) then perhaps one could blame the Chinese for going along Ecuadorean desires. But the refinery is not a boneheadedly stupid idea. There are real reasons to support it; opponents (like myself) are making a judgment based on the risk of failure; reasonable people can disagree about whether the potential reward is worth the risk. Moreover, most of the debt for the refinery will be effectively collateralized. Many of the losses will fall on Chinese banks.

The above, I think, is the opposite of imperialism. Ecuador sold the refinery idea to China and looks as though it might get the Chinese to put up most of the money and take on most of the risks. 

If this is a Chinese empire, it makes the American empire look well-run and logical. Which is saying a lot.

The green energy revolution arrives now

 I went to Israel a few months back. One of the reasons for my trip was to investigate the Arava Power Company. Arava operates a solar farm in the Negev desert. As you can imagine, the Negev has great conditions for solar; the cost for the local utility is less than the wholesale price of the electricity from other sources. Here is their demonstration plant.

And here is the next phase of the project.

Pretty impressive, no? What, no, you say? It isn’t impressive? I guess I can see why you’d say that, considering as it is just an empty field. I have two answers for you. The first is that Arava finally started work on the new project, with the first panels installed in October; serious work got underway jointly with ET Solar and EDF this month.

So the project is underway. But that answer isn’t interesting. The interesting answer is why the company has had so much pushback against its plans to build utility-scale solar in an environment where it should be cheaper than the alternatives.

The simple answer: from the utility’s point of view, solar power is not cheap. The reason is intermittancy. Not just intermittancy in the sense of the sun not shining at night, but intermittancy in the sense that passing clouds (and even the Negev has passing clouds) can cause output to drop 95% in a matter of minutes. That means that the utility needs to keep gas plants ready — and on days with the risk of clouds those plants will need to be spun up and burning fuel in order to start generating quickly.

The Israeli government has been abetting the utilities, holding up permits and unpredictably altering the feed-in tariff for solar. Arava officials told me that the government also weirdly decided to raise the land rent (land in Israel is state-owned) on solar farms. (The link is worth clicking; it corroborates what the Arava people told me.) Solar in Israel is moving, but not that fast.

But now from California comes news that could change everything. 

Cheap storage would, of course, utterly transform the economics of renewable energy. Intermittancy would no longer be that important. Even at a small scale, it would be worth it: no more worries about passing clouds. And on a large scale, of course, cheap storage would no longer matter that the sun doesn’t shine at night.

So what happened in California? It wasn’t a technical breakthrough; those are always being announced. Nope, it was that storage won bids put out by Southern California Edison for new capacity in the wake of the decision to close the San Onofre nuclear plants.

That is big news! If storage really has become competitive with peaker plants, then the door is open to an entirely new energy landscape ... as long as storage continues to fall in price. Keep an eye out.

$50,000 homes in Palo Alto?

 Courtesy of Alex Harrowell, here is an interview Larry Page gave to the Financial Times. The interview is full of a lot of blather and show Page’s resolute determination to avoid thinking about the negative consequences of technological unemployment. Most of the interview should make you a little angry, even if you agree with his contention that there is not enough innovation around making cheaper goods and physical services.

But not all of the interview is content-free. At one point, Mr. Page says: “Even more than technology, he puts this down to policy changes needed to make land more readily available for construction. Rather than exceeding $1m, there’s no reason why the median home in Palo Alto, in the heart of Silicon Valley, shouldn’t cost $50,000, he says.”

Alex asks, “Does anyone know what Larry Page means by this?” In comments, Alex adds, rightly, “He’s [Larry Page] confusing incremental and order-of-magnitude changes, which is actually a very un-codery thing to do.” 

That’s true, but Page isn’t being crazy. He’s off-base, likely by a factor of two, but acceptably so for an offhand comment in a general interview. Consider:

Imagine the city allowed as-right floor-area-ratios above ten for the whole city, with no setbacks other than the sidewalk right-of-way and no parking requirements. Multifamily 4-7 story housing in the less-regulated parts of the Sunbelt costs about $150 per square foot. In suburban Miami, basic modular construction (no frills, but in code) can go as low as $100. The reason construction costs are higher in California is not fully understood but much is due to the cost of planning delays — you need to line up financing in order to get a building permit. The more uncertain the planning, the higher the costs. So also imagine that the planning delays were gone.

In Brooklyn in the 1980s the Nehemiah Housing fund put up 1150-square-foot rowhouse for a cost (in 2013 dollars adjusted using the average wage index) of $93,100 ... that’s about $81 per square-foot for a block-long row of small homes. That gets you a small apartment for $50,000; one upstairs and one downstairs. Later houses went up in Brooklyn for about $110 which is the ballpark for the $133 all-in unsubsidized cost for housing that went up in East New York in 2009.

Assuming a cost of $150 gets you a 300-square-foot efficiency for $50,000. (At $81 you get 625.) You could push the cost down to $80 by building to five stories and eliminating elevator requirements. For example, I was a teenager in a 670-square-foot three-bedroom one-bath apartment in a Manhattan walkup. You could build a similar unit pretty cheaply today. It would just happen to be illegal.

Land costs are an issue for Palo Alto and there are overhead costs. Land runs north of $3.9 million per acre, or $90 per square foot.  Google bought land for $75 per square foot. At a floor-area-ratio of five (e.g., five-story buildings covering the entire lot) that’s about $18 per square foot of interior space. And then there’s financing, sales cost, and profit … that will boost costs by 24% above development costs.

The total comes to $80 (construction) + $18 (land) + $23 (overhead) = $119 … or one small 420 square foot efficiency for $50,000. Assumes external staircases and corridors. Not a pretty building, no, but remotely possible. 

Now, I doubt that there’s enough demand to cover downtown Palo Alto with cheap five-story modular walk-ups filled with tiny efficiency apartments. So the claim that average costs in Palo Alto should be $50,000 is silly. But the claim that you should be able to buy an efficiency for $50,000 within a short commute is not. And you could cover Palo Alto with East New York-style rowhouses at a cost of $264,000 per unit for two 800-square foot units, including land. ($207,000 for the 2,321 square-foot lots; $133 per square foot construction for 1,640 square feet of building; 24% overhead.) Not bad. Hell, not bad at double that cost and maybe even doable for $202,000 at $80 construction cost and half the profit margin.

Eventually you can build this:

Which would look like this as you sped past on Highway 101 in your robocar:

That is completely awesome! I would live a couple blocks from that. Wait, I live Friendship Heights in D.C. near the city line with a certain part of Bethesda ... I do live a couple blocks from that! Too bad the local governments keep the development bottled up even where I live. 

Am I wrong? Did I make a math mistake? If not, a cheap Bay Area is possible! Hell, it’s easy. $50,000 efficiencies, here we come!

But I am a pessimist and doubt that it will ever happen. No two-story rowhouses, no five-story buildings. Be prepared for America’s first gilded metro area! 

More on America’s housing insanity

In 1993, I rented with some friends a large three-bedroom apartment on Whisman Road in Mountain View. We paid $1,690 per month in 2013 dollars. ($1050 nominal.)

For a bit of 1995, I rented a one-bedroom apartment on Treat Avenue in the Mission District of San Francisco. It had its own one-car garage attached. (A very tiny garage, but I could and did park my little 1980 Plymouth Champ in the spot.) I paid $1,220 in 2013 dollars. Four years later, in the summer of 2000, I re-rented the same place for the same nominal price; the real rent had declined to $1,030.

Most miraculously, I also rented a tiny one-bedroom in Mountain View between 1995 and 1998, with occasional sublets. The rent. Hold your breath: $604 in 2013 dollars. Yes, it was terrible (the “kitchen” was only big enough for a mini-fridge) and there was drug-dealing in the cul-de-sac. (Higdon Avenue, if you know the area.) So what? It was cheap.

It may be hard to believe, but back in 1992 you could grab a two-bedroom on Alma Street in Palo Alto for $1,330 in 2013 dollars without needing to search for more than a single day. A housing search consisted of driving around looking for the “for rent” signs and then calling the landlords. This situation briefly changed during the high point of the late-nineties Internet bubble, but appeared to return to normal right after the dot-com bubble burst in early ‘00.

I cannot find what the Treat or Higdon Avenue units rent for now (although both buildings still exist, unchanged from the outside) but the Whisman Road complex is professionally managed and can be found on the Internet. There are currently no three-bedrooms available,but the website states that the floor plan we rented for $1,690 (the Gramercy) now goes for between $3,030 and $3,580. (Two-bedroom flats can be had for $3,060.) That is a real increase somewhere between 1.8 and 2.1 times our old rent.

Think about the housing market in the Bay Area and weep for America. Then get really really really angry at every middle-class homeowner in the damn state of California.

For a well-researched article on how the Bay Area got to its currently surreal point, see this piece.

The article tries to find a bit of relief in the fact that the Bay Area has a great deal of intergenerational income mobility. In San Jose, for example, a child born into the bottom fifth of the income distribution had a 12.9% chance of making it to the top fifth; San Francisco was second with 12.2%. (Mountain View is considered part of San Jose for the purposes of these data.) This puts them in the top five, along with Salt Lake City, Boston, and Pittsburgh.

So how dire can the situation be? Sure, expensive housing is bad, but the Bay Area remains good for poor people.

Only that may be wrong. Consider that the study looks at people born in 1980-82. It then measures their parents’ income in 1996-2000 and their personal income in 2011-12. The problem with using the study dismiss the effect of the recently-created housing shortage is twofold.

First, the Bay Area does not do well in some mysterious unexplained California miracle sort of way. The spatial variation in intergenerational mobility is strongly correlated with : (1) residential segregation, (2) income inequality, (3) school quality, (4) social capital, and (5) family structure. Inasmuch as the current housing insanity affects those five variables, it will alter future intergenerational mobility. High rents, for example, make it harder for poorer people to live in good school districts or partake in the collective social capital of rich areas.

Second, a lot of poor households in the Bay Area owned their homes in 1996-2000. Those homes  increased immensely in value. It is quite possible to believe that the Bay Area overperformed places like Minneapolis and Houston because of that increase in wealth. If that is true, then the Bay Area will fall down in the rankings as home-ownership moves increasingly out of range. (And, presumably, as price increases slow down by pricing out even high-income buyers. Although who knows what the limit of that process actually is?)

In short: (a) The housing crisis really is never-explored territory for much of the United States; and (b) past performance may therefore not predict future results.

We have seen the future, and it is California

  I can’t really claim to having said it first, but it looks as though Richard Yeselson, Ezra Klein, and Kevin Drum all agree with me.  Political polarization plus a stupidly-designed legislature have broken the American government.  We have seen the future, and it is California.

I mean, when someone as patently irrational as Joe Lieberman controls a veto point, we have a problem.  Maybe not a failure mode, but a clear problem. 

As they say, “Destruction leads to a very rough road, but it also breeds creation.”  Problem is, it isn’t clear that we're headed towards destruction, per se, just a slow decline as the health system collapses, the fiscal pressures ratchet up, and the climate goes kablooie on us.  Eventually, we hit the end state, or whatever 2030’s version looks like.

Counterarguments?