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Economists Vs Politicians, Energy Is Good, & Bernie/Trump 2028
What I'm Watching, Reading, and Listening To
Alan Pentz
September 18, 2024
Welcome back to The New Rules
A quick message before we jump in:
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Let’s dive in…
Glenn Loury talks with Larry Kotlikoff about how economists would shape policy if we could just get rid of these pesky politicians.
I agree with Larry about most things: we should invest social security contributions in the markets. He’s got a great proposal on health care: essentially extend the Medicare Advantage program to everyone. I’d even vibe to a certain extent with a broad consumption tax vs corporate and income taxes.
But we have one major disagreement. He’s a pretty prototypical free trader and deficit hawk (see 23rd minute). I think he doesn’t acknowledge the connection between these two things or more precisely I think he has the causality backwards. We run large deficits because we allow free trade and movement of capital.
Free trade definitely works but not if countries with huge economies like China conduct massive industrial policy. Still he gives the counter point to what I believe so important to acknowledge it.
Thomas Pueyo writes about the future of renewable energy. It’s a great piece overall. I took two new ideas away from it. First, as solar costs have plunged, it is what are called the “soft costs” that are the issue now. Soft costs are the land, transportation, and labor involved in installation. These costs aren’t coming down like the hardware costs. Over time, they’ll be the only costs that matter.
Second is the Henry Adams Curve. I’m a regular reader of a Substack newsletter called Doomberg which focuses mainly on energy and topics related to commodity production. Doomberg is famous for saying, “Energy is life.” Your quality of life is 100% correlated with how much energy you consume. I largely agree with that.
That’s why the Adams Curve is so disturbing. It shows where we should be in terms of energy consumption assuming we had stayed on a long term trajectory of using 2-2.5% more each year.
We diverged from the Adams curve in the 1970s. How much better could our lives be today if we’d followed the Adams Curve? A lot better. If you want to sit in a cold house in a cardigan, be my guest but please move to Europe. In America we turn up the heat!
The ultimate message is a positive one. He sees ways to deploy solar that can reduce even the soft costs by 75% and eventually a day when solar panels are just an adhesive roll you can stick on anything to produce energy. I hope he is right but until then we need more natural gas and nuclear.
Echelon Insights shows that US voters cluster into 8 different groups rather than just the two parties. This was the money slide:
If you think Nikki Haley will come in to save the Republican Party after Trump goes, think again. Reagan Conservatives like her are far outnumbered in the party. This is true for elites in general. I consider the elites to be Reagan Conservatives and Staunch Progressives. Together they amount to only about 27% of the electorate.
Overall, the Right-leaning groups make up 38% of the electorate, the Left-leaning groups are 39%, and then there’s 24% up for grabs. The question is if the primaries hurt you with that 24%. Republicans need to get through the MAGA group and Democrats need to get through the Progressives.
The real competition is for the Big Government Populists. Who can capture them and motivate some of the Apolitical Moderates? In the end this means Big Government spending will stay front and center. The winner is a fiscally liberal and socially conservative politician who can navigate the abortion issue.
That’s essentially Trump without the crazy or Bernie circa 2016 with a nationalist streak.
The world is changing,
Alan
P.S.
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