Larry Hagman of 'Dallas' fame becomes the new face of SolarWorld

The Oregonian article "Larry Hagman of 'Dallas' fame becomes the new face of SolarWorld" (July 13th, 2010) makes no effort to correct an utterly ludicrous statement by a solar energy spokesman:

"When affordable oil gives out, we're in real trouble -- I mean the collapse of civilization, within 15 to 20 years."

If oil companies thought that the price of oil would skyrocket in the next couple of decades, then they would hold on to this storable asset and sell only when the price skyrocketed, causing supply to decrease and current price to rise. This continues until oil companies are indifferent to selling now or later. What does this imply about an oil "shortage" in the coming years? It implies that quantity will fall predictably, based on the shape of the demand curve.  As price rises, quantity demanded falls.  When it becomes optimal, we will substitute into new energy sources.

In the figures below, the red dotted lines represent a theoretical "renewable energy only" world, while the solid red line represents the observed portion of renewable energy use in a world when both renewable energy and nonrenewable energy is available. The solid blue line represents observed nonrenewable energy prices and use in a world in which both renewable and nonrenewable energy are available, while the dotted line represents price and use in a theoretical "nonrenewable energy only" world (click here to enlarge).

We see that the price of energy should go up, in our simple model, at the interest rate, while we use oil. Consumers will buy renewables when they become cheaper than energy (the red-line price in the top figure).  Energy use falls gradually to a stable level (click here to enlarge).

In this model, there are no sudden shocks to oil consumption and no unexpected price increases. Rather, oil prices increase predictably, and the amount of energy we consume falls gradually and predictably. To predict the "collapse of civilization" in an article about new technologies is completely misguided.

When Passengers Spit, Bus Drivers Take Months Off (May 24th, 2010)

New York Times article "When Passengers Spit, Bus Drivers Take Months Off" (May 24th, 2010) offers a foolish quote with no rebuttal. The article deals with the reaction Metropolitan Transportation Authority bus drivers take to being spit upon. The article notes that of the 51 spat-upon drivers last year, each driver took an average of 64 days off work. It quotes a union official offering the typical refrain that incentives don't matter:

'Being spat upon — having a passenger spit in your face, spit in your mouth, spit in your eye — is a physically and psychologically traumatic experience,' said John Samuelsen, the union’s president. 'If transit workers are assaulted, they are going to take off whatever amount of time they are going to take off to recuperate.'

Corrections believes that incentives matter, and that the union president's quote is ludicrous and deeply un-economic. John Samuelsen is deeply wrong. We would add, to our two other predictions (1) and (2), a third: bus driver leave-taking is not completely inelastic. We predict that drivers would take fewer days if it cost them to do so. If we find data, we will make a note of it.

The Magic Potion

New York Times editorial "The Magic Potion" (March 29th, 2010) appears to have no factual basis for its claim that poverty and homelessness are rising. Corrections conjectures they are falling, (we lack current data).

Poverty and homelessness are increasing.

Corrections has been unable to discover either current data or news articles on poverty or homelessness in 1Q 2010 (today being the second to last day, this is reasonable). We conjecture that Bob Herbert has made this current trend up, and look forward to posting data on this (just as we hope to do for the IHRSA , which has yet to post new data). We will use HUD's definition of homelessness and the census's definition of poverty, absent a change in how government publishes its statistics. We posit that both will be falling over first quarter 2010, at which Bob Herbert is writing at the tail end.

There is reason to believe we are correct. We graphically display GDP below up to and including the fourth quarter of 2009 (click to enlarge). We conjecture it will continue in much this trend. We will update this figure, along with homelessness and poverty statistics, when available.

Resolution: Get a Deal on a Gym Membership

New York Times article "Resolution: Get a Deal on a Gym Membership" (December 25th, 2009) requires incorrect assumptions on the U.S. fitness industry.  The article seems to assume that gym membership is procyclical (it increases when the economy is strong and decreases when the economy is weak). Corrections suggests that the opposite is quite possible.

But this year the frenzy has been ratcheted up a notch as clubs try to make up for the recession, which caused many corporate sponsorships to evaporate and many individual members to drop out or cut way back on costly extras like personal training and massage.

First, Corrections notes that according to the International Health, Racquet and Sportsclub Association (IHRSA) in 2006, there were 42.7 million health club members. In 2007, there were 41.5 million members. In 2008, there were 45.5 million health club members.

This makes sense. When individuals consume most goods, there are two inputs--commodities that they buy (t.v. sets, or gym memberships) and time they use to consume the good (tv-watching time, or time at the gym). While gym memberships cost money, we expect the larger portion of their cost comes in the form of time.

In a recession, when unemployment is high and wages are low, we expect that people will move away from money-intensive goods, such as expensive meals, and toward time-intensive goods, such as gym time, and its complement, gym memberships.

We may, however, expect revenues to go down, as shopping around for a gym, and going to a gym farther away becomes more feasible and thus gym memberships become more competitive. The general trends for gym membership are displayed in tabular form below.

Corrections will be sure to post the 2010 IHRSA results from next month.