Quick Benefit Cost Analysis

Some of you expressed interest in an Excel Benefit Cost Analysis (BCA) calculator I have. This program will discount future costs and benefits and give you the net present value (NPV) and Benefit Cost Ratio (BCR). This follows Mungers chapters on Discounting.

If you want of copy of this calculator to do you policy analysis paper, email me and I will send it to you. derekjohnson@cc.usu.edu

A few rules of thumb: in general for a program to break even its BCR needs to = 1 and for it to make money it needs to be > 1. The NPV must be positive to make money. The greater the NPV the more money you make or save.

The tricky part is deciding on an interest rate - Munger covers this in his chapters. But if you stick around 5-7% you should come up with a fairly conservative estimate. Also, leave the inflation box empty.

This tool is to help you evaluate the feasibility of programs not calculate your mortgage.

Also, if anyone is interested in the equations behind this calculator I can email them.

This calculator was created by Nicole McCoy PhD.

Artificial Snow

Could it be a possible approach to solving global warming?

This news reminds me of artificial rain or snow. Growing up in China, I have heard many times, in Shenzhen, and in Beijing, that the rain or snow was artificially made by the meteorological station for some special purposes, such as cooling the air in hot summer, or when there is some special occasion going on. I have no ideas how they did that, nor do I know what the advantages or disadvantages it brings. Environmental modification, could anything be possible to go wrong with it?

Electric Car

In further giving away how scholarly my reading/viewing habits are, I will disclose that I can sometimes be found watching the Martha show (these days, mostly to enjoy how ignorant Martha looks when she bosses everyone around). Today Martha had a segment on about "green" cars. Apparently this whole week features something "green," in honor of Earth Day. (I don't think the clip can be found on her website, but the link is to the show).

Anyway, she had this lady on from GM talking about how hybrid cars and electric cars are the answer. We've already discussed hybrid cars, and Reason Magazine's thoughts on them. Martha and this woman were really gung-ho about electric cars though, frequently touting how there are zero emissions from these cars, and all you have to do is plug it in at night. They were really put forward as the answer to making yourself feel good about your American driving habits.

I sat there amazed that they made it sound so appealing, with no thought or mention of how electricity is supplied. Where are the zero emissions from a coal-burning plant? "And all you have to do is plug it into your wall. You don't use a drop of gasoline!" I don't think so! I'm also pretty sure Martha's fleet of Suburbans and Lincolns often shown on the show aren't very "green."


Americans are buying into this crap because they don't understand how it all works, and celebrities' "holier than thou" lectures on being green fuels it further.

Market for Numbers

I was just reading good ol' Sports Illustrated, and they have a little segment telling why different players choose the numbers they do. The article can be found online here.

I never knew that numbers had been assigned a monetary value (discussion of this in the Odom and Shaq segments), and that there is a market for buying certain numbers. I found it interesting.

Dilbert on Zero Sum Thinking

From David Tufte at voluntaryXchange:

As an economics professor, it's pretty hard to get across to people that the modern world isn't a zero sum game.

The April 10th Dilbert sums this up beautifully.

For those not in the know, a zero sum game is one in which the winner gains what the loser loses.

More broadly, the widespread viewpoint that life is a zero sum game is a motivation for envy, and a common justification for the belief that exploitation of the weak is a lot more common than it is.

It's important to limit this worldview, because all around us society is filled with positive sum games (where everyone wins): shopping, having kids, stopping at stop signs, being punctual, sex, blogging, speaking the same language as your neighbor, and so on.

Icelandic Fishing Policy Analysis

I am at a conference in Brazil where I met Hannes Gissurarson, the creator of the Icelandic ITQ (Individual Transferable Quota) system. It is one of the world's most successful. Here is a 2000 paper he wrote on the topic. He says that none of the conclusions of the paper would change if he wrote it today. Download the whole paper--it is worth reading.

Global Warming: a Security Threat?

After reading an article about how global warming could cause a security threat to the U.S., I had to wonder the threat it could actually pose. The article stated, “Unlike the problems that we are used to dealing with, these will come upon us extremely slowly, but come they will, and they will be grinding and inexorable”. This statement just made me think about stasis, and how Virginia Postrel said the government resists change and progress. Global warming could be a security threat to the United States if nothing was done about it, but it is a self proclaimed “slow process” by officials, couldn’t it be possible that in the years to come, technology and innovation could prevent some of the disasters anticipated? I believe there needs to be concern regarding global warming, but obviously it is a hot button topic, and I don’t see people just sitting waiting for disaster to come. Instead, I’m sure that some sort of innovation will be introduced to help prevent any real security threat to the U.S.

www.nytimes.com/2007/04/15/us/15warm.html?_r=1&oref=slogin

Lake Powell

Over the years, many individuals have been petitioning for the reclamation of Glen Canyon from the hands of the jet set house boat owners.

I visited the area to kayak last week and was informed of the lakes' retreating water levels. If current precipitation and water runoff continues to decrease as it has over the last 5 years, it appears that nature will reclaim Glen Canyon all on its own.

Property Right in Zoning Plan

Look at the Nail House story in NYTimes front page days ago, which has attracted much attention recently from western media and aroused heated discussion among Chinese people.

Dingzihu is a Chinese phrase that means a household or person who refuses to vacate their home to make way for real estate development, for "they stick out like nails, hard to be removed in an otherwise modernized environment". It has been translated as 'nail house' in English.

Should people move if the compensation is reasonable despite of their unwillingness in municipal or commercial zoning plan?

During the CCTV interview, the “nail house ” owner WU said (translated): Among the residents moving, I am the largest private property owner, furthermore you can basically say I am the only one who has complete papers, such as a property rights land right certificates, they both clearly indicated that it is a building zoned for business. At that time I had just finished renovations, and they (the developer) said they had to tear everything down and people had to be relocated, as a result this was really damaging for us. According to my property right certificate, I am clearly in ownership of 219 square meters, so for this use it should be returned to me.

According to Chongqing law, there are three possible ways to compensate owners in this type of situation: 1) provide housing on the same spot; 2) provide housing in another spot; 3) provide a sum of money. The city is only willing to provide Ms. Wu, the resident, with the third option, but she is not willing to accept a sum of money.

According to a survey by QQ.com (famous Chinese software media that rivals MSN, link not provided here for in Chinese), 81.46% of the netizens back up the house owner to protect his property, while 10.84% deem the issue as too complicated to come up with an idea, and 7.10% consider the house owner as "stubborn nails".

Settlement of the case: according to the Chongqing Court, the two-storey building was valuated at 2.47 million RMB while the real estate developer offered a replacement shop/home building valuated at 3.06m RMB; as a result, the house owners Yang/Wu will pay back the difference of 590,000 RMB to the developer. Furthermore, the real estate develop will pay compensation to the amount of 900,000 RMB for business losses plus 105,000 RMB for property damage and moving expenses. This is somewhat coming down from the 5 million plus RMB originally demanded by Yang/Wu. (From Hong Kong newspaper: Ta Kung Pao)

Report from other media:
http://www.time.com/time/world/article/0,8599,1606215,00.html
http://www.reuters.com/news/video/videoStory?videoId=47459

Interesting Links

I came across some interesting and fun links that I thought some of you might enjoy.

Tragedy of the Bunnies. This is a game that helps teach the concepts in Hardin's Tragedy of the Commons.

The Road to Serfdom. In circa 1950, GM published a comic book version of Hayek's The Road to Serfdom. The illustrations are my favorite part, particularly number 4.