Philip Greenspun’s Weblog

Eclipse Aviation, the company that brought Microsoft ambition to the very light jet market, is in the news again. Apparently the engines on a new Eclipse got stuck at full throttle and the pilots were lucky to get it back on the ground in one piece. Note that Eclipse, contrary to the New York Times article on the incident, uses the same engines as many other very light jets and they are not the cruise missile derivative that Eclipse attempted to use back in the late 1990s. One difference between the Eclipse implementation and the other VLJs is that Eclipse wrote its own engine control software. Everyone else relies on Pratt and Whitney’s old-school engine control system.

Full story: http://www.nytimes.com/2008/06/13/business/13air.html

[Note the implication of this story is that if you own one of these airplanes it is not useful for anything other than soaking up hangar rent and insurance premiums.]

[Saturday update: It seems that the New York Times, as they do with most aviation stories, got the significant facts wrong. The AD does not ground the Eclipse fleet, but only requires a paperwork addition to the checklists, requiring the pilot to check the thrust levers somehow. It is apparently pretty simple. In its early years Eclipse did great managing the press. The stories were always much rosier than the reality. Now as the Eclipse market implodes the newspaper articles are darker than reality.]

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Back in the 1990s I used to wonder, often in public forums, why the phone companies didn’t offer location-based services such as were available in Japan. For example, I thought that it would be nice for a phone to show a traveler nearby available hotel rooms and allow the handset user to book one. It seemed that all of the pieces were there. The phone company, through tower triangulation, knew where you were to within a few miles. Services such as Expedia maintained a list of available hotel rooms in the U.S., sorted by location. The business infrastructure was there to make it pay for the phone company, with hotels accustomed to paying commissions to booking services. Why wouldn’t the phone companies hire a couple of programmers to connect up the last few feet of wire and deliver a service that would save consumers time and hassle?

The other thing that I wanted was a service to notify me that a friend was hanging out in a nearby coffee shop and/or that a stranger with similar interests had some free time.

Has Apple delivered these basic services with the new iPhone? Have the other American phone companies truly done nothing in these areas for all of these years?

[In http://philip.greenspun.com/panda/money, most of which was written in 1998, I wrote

It may take the full 50-year horizon of this chapter to come to pass but eventually there will be a usable wireless Internet. When that day comes imagine Joe Traveler, getting tired after a long day of sightseeing, pulling out his cell phone and saying “show me the nearby available hotel rooms for tonight”. The phone company knows approximately where you are, based on which tower your handset has connected, and they ought to have enough marketing clout to establish links with hotel chains’ room reservations systems.

We still don’t have a usable wireless Internet, so maybe we need another 40 years…]

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Massachusetts State Senator James Marzilli, a Democrat representing Arlington, just north of Cambridge, has been a tireless advocate for increased taxation and spending, notably for higher taxes on corporations, apropos of an earlier posting. He may also have joined Governor Deval Patrick in trying to impose a new sales tax on aircraft in Massachusetts.

This article describes the Senator Marzilli leading Lowell police officers on a”foot chase” after sexually assaulting one of our voters. The obligatory photo of the long-suffering wife side-by-side with the offender is included…

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… in price. Eclipse announced last week that they are raising the price of their original model from $1.65M to $2.15M June 2008 dollars (aero-news.net story). A Cessna Mustang ordered today would deliver in mid-2011 at a fixed $3.14M (maybe $2.5M in today’s dollars the way that inflation is going). The Mustang is a much larger plane, comes from a company with a history of meeting commitments, and is certified for flight into known icing conditions (i.e., the Mustang is useful for instrument flight).

Separately, Eclipse announced a four-seat single-engine jet that should be very fuel-efficient. They are promising to deliver the thing in “late 2011” for $1.35M (inflation from June 2008). If their company history proves to be a useful guide, the plane will be delivered in 2015 and cost closer to $2M. What about the fuel burn? The company says less than one pound of Jet-A, which is similar to diesel fuel, per nautical mile. That should be just under 10 mpg or about the same as an SUV when you consider that the jet flies in a straight line and doesn’t idle in traffic jams. Not too bad for carrying four people at nearly 400 mph.

More: very light jet comparison

[This price increase comes on the heels of Dow and Kodak announcing increases of up to 20 percent on thousands of products. Loose related to this posting on inflation in the price of luxury items, there is a New York Times story about the struggles of the no longer quite as rich.]

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Here’s a piece from New Yorker about how restricting trade to help American workers ends up hurting the poorest Americans: “The Free Trade Paradox” (May 26, 2008). The point is that keeping imported calculators (for example) out of the U.S. would be great for a handful of guys who work in a calculator factory, of little consequence for the BMW-driving professionals, and ruinous for ghetto schoolchildren who would pay $100 for a calculator that used to cost $12 (though maybe they would learn how to do arithmetic?).

Harvard egghead Gregory Mankiw argues for cutting the corporate tax in a June 1, 2008 New York Times editorial. The stated goal of the corporate tax is to rake off money before it gets into the hands of wealthy investors. Mankiw cites studies from Europe that found that 92 cents of every $1 in corporate tax came out of the hides of workers in the form of reduced wages. Mankiw argues persuasively that the corporate tax discourages economic growth. The one example that he does not cite is the massive economic boom achieved by Ireland. You could argue that the Irish are simply much smarter and harder working that their counterparts in England and Western Europe. Alternatively you could note that a company in Ireland pays half as much corporate tax as one located anywhere else in Europe. (Artists, such as musicians, did not pay any tax for a long time. When Ireland tweaked the law to exempt only the first $320,000 per year, U2 and Bono moved all of their assets into an offshore trust (story).)

In 1948 we started laughing at Wile E. Coyote, but perhaps over time we have become him. Wile E. Coyote, unable to run as fast as the Road Runner, came up with elaborate schemes that invariably backfired. A Martian looking down at the Earth might think “the only way for the U.S. government to collect more taxes is to have a larger economy from which to slice off a share; the only way for the U.S. to grow is to work harder, improve education, streamline transportation, stop paying $1 trillion every year for oil that is mostly imported, etc.” Here in the U.S., though, we can’t get organized for the tough jobs. We watch kids come out of the school system barely able to write or do arithmetic and argue over whether or not their teachers should get a 5% raise or 10% pension increase. We watch cars burn millions of barrels of imported oil sitting in traffic jams and never ask ourselves why we can’t put down a wireless Internet along our road system so that the cars would have routed themselves around the problem. We watch our money and ownership of our assets disappear overseas to fill up cars whose engines operate almost exactly the same as the engine in a 1908 Model T Ford (25 mpg; somewhat more efficient than today’s average passenger vehicle) instead of thinking about investing our oil budget in technological innovation.

Let’s look at Barack Obama’s economic policy idea page:

• he will raise the minimum wage, an action that economists find serves mostly to discourage the employment of teenagers
• he will give a mortgage credit to people who are not currently able to write off mortgage expenses, further transferring money from the pockets of renters to the pockets homeowners and further inflating the cost of buying a house in the U.S.
• he will “create a fund to help people refinance their mortgages”, i.e., more money taken out of the pockets of renters
• “ensure freedom to unionize”; our public school teachers have the freedom to unionize, but it doesn’t seem to have helped students learn anything; autoworkers in Michigan have the freedom to unionize, but it doesn’t seem to have made Detroit a vibrant growing city
• “fix NAFTA”; presumably this is cutting down on imports from Canada and Mexico
• “Obama will invest in rural small businesses”; tax people who walk around energy-efficient cities to help encourage folks to settle in places where the supermarket is a 30-mile drive away
• “Expand the Family Medical Leave Act”; companies with 25 employees will now be required to read through the fine print of this law
• “Obama will initiate a strategy to encourage all 50 states to adopt paid-leave systems. Obama will provide a $1.5 billion fund to assist states with start-up costs”; Americans who are working will be taxed to give money to Americans who aren’t working. Everyone will pay for the lawyers who draft and read these new regulations. Government employees who are currently paid not to work at their desks will now be paid not to work at home.
• “Obama will also make the federal government a model employer in terms of adopting flexible work schedules and permitting employees to request flexible arrangements.” Government employees who currently do no work 9-5 will be doing no work 10-4. Maybe this will cut down on traffic in D.C.
• “Obama will enforce the recently-enacted Equal Employment Opportunity Commission guidelines on caregiver discrimination.” More new regulations to read and argue over.

If one were considering emigrating to the U.S. to become a worker, some of this sounds pretty good, though maybe not as good as a 10 percent pay raise or 10 percent income tax cut. If one were trying to figure out where to set up a new business, it is tough to see how these proposals would provide an incentive to locate in the U.S.

Obama is supposedly our nation’s best hope and these are his best ideas.

How about McCain? His economic plan starts off with a section by Wile E. Coyote. He is going to cut gas taxes. He wants to tax renters to help homeowners. He wants to put more money into student loans (most of which ends up inflating the cost of attending college). He wants to tax people who suffer from infertility to give big tax credits to parents blessed with a bunch of children (combined with the gas tax holiday, that family of six can finally help boost the economy by buying a 7-passenger SUV). Buried after a couple of pages is a section that Ronald Reagan might have written, proposing to cut taxes in order to generate economic growth. The apparent schizophrenia is not addressed.

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George W. Bush, with an eye toward influencing all of the Arab countries, recently lectured some folks in Egypt: “Building powerful economies also requires expanding the role of women in society”.

The May 28, 2008 New York Times carries an article on a Moroccan-born Belgian woman who has become a prominent Muslim leader. It isn’t clear that this is what W. had in mind…

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How much would it cost to convert the entire U.S. fleet of passenger cars, which collectively burn 40 percent of the oil that we use, to electric cars? Let’s look at some numbers:

• total oil consumption in the U.S.: 21 million barrels every day (CIA Factbook)
• cost per barrel: $130
• days in year: 365
• total spent per year: $1 trillion
• percentage of oil consumed by passenger cars: 40 (source)
• total spent per year on oil for passenger cars: $400 billion [refining into gasoline, distributing, and retailing add even more to this; looking at the 138 billion gallons the U.S. consumed in 2006, at $4 per gallon this is about $552 billion every year (subtract perhaps 5 percent for gasoline used by non-diesel trucks; add 1 percent for oil used by diesel-powered cars)]
• at 5 percent interest, how much we could we borrow and pay $400 billion every year in interest: $8 trillion [current 10-year T-bill yields enable government to borrow at 3.84 percent]
• number of registered cars in the U.S.: 250 million (Wikipedia)
• cost of a new electric car, if mass-produced: $20,000
• value of a used car, if exported to Latin America or China: $5,000
• cost to upgrade average existing American car to a brand-new electric car: $15,000
• number that could be converted for $8 trillion: more than 500 million cars (i.e., twice as many as we have now)
• percentage of electricity in the U.S. currently being generated from burning oil: about 1 percent (the rest is coal, natural gas, nuclear, hydro, wind)

Instead of sending $400 billion each year to countries such as Saudi Arabia and Venezuela, we could spend it on electric car production in the U.S., Mexico, and China. At current oil prices, it wouldn’t cost us a dime extra to stop importing and burning oil for passenger cars. In fact, if the goal were to end up with the same number of cars on the road, we would have a few trillion dollars left over. One or two trillion dollars would be sufficient to build nuclear, solar, or wind electric power plants to replace all of our plants that currently burn coal and oil (note that less than 1 percent of current electricity generation in the U.S. is from oil (source); most electricity that we use today is from coal, natural gas, or nuclear).

So… simply by stopping our purchases of oil we could finance the construction of power plants that emit no CO2 and electric cars that emit no CO2.

[Many folks quickly commented that I did not figure in the cost of electricity to run the electric cars. I thought that it was common knowledge that electric cars cost very little to run, even at today’s high electricity rates, somewhere between 1 and 4 cents per mile. The gas engine in a car is much less efficient than the generator in a power plant, about 20 percent for the car versus 40-60 percent for fossil fuel plants and 80 percent for hydroelectric. The electric motors in an electric car are often quoted as roughly 90 percent efficient. The U.S. has a near-infinite supply of coal for generating electricity and plenty of existing surplus electric generating capacity in the evening hours (see wikipedia). As noted above, oil is so expensive now that we could use the leftover trillions of dollars to build solar, nuclear, or wind-powered generating plants. http://en.wikipedia.org/wiki/Electric_car offers some numbers for electric car running costs. Periodically replacing the batteries in electric cars costs more than buying the electricity to run them. Of course, nobody has ever seen what would happen to battery costs and reliability if there were a multi-trillion market for batteries.]

[Some other folks noted that it might be tough to borrow between $4 and $8 trillion to finance this conversion. To that I would say that the Three Trillion Dollar War authors claim that the U.S. government has borrowed $2 trillion for our wars in Iraq and Afghanistan. Perhaps our creditors would be even happier to lend if it were for something that might pay some dividends.]

[Others have objected that selling our old cars to Latin America or China is not environmentally correct and would not cut down on CO2 emissions. That’s mostly true but remember that this posting was not about cutting CO2 emissions. It was about using the money that we currently spend on oil to pay interest on a loan big enough to replace all of our passenger cars with electric. Why not convert existing cars? A 7000 lb. SUV is not that amenable to electric power. If we leave the 7000 lb. SUV on the road, piloted by a fearless teenager, it becomes a serious hazard to anyone in a 2000 lb. electric car. Exporting the old cars and driving electric cars still saves quite a bit of CO2. Folks in developing countries are going to buy more cars, whether or not we sell them, and they will probably make more efficient use of any cars they have (a 7-seat SUV in the U.S. is occupied by one person; a 7-seat SUV in Peru would be occupied by 10 people). Folks in the U.S. are going to buy newer cars, whether or not they are gas or electric. The entire U.S. fleet of cars will be replaced within 10 years. Currently we are on track to replace our gas guzzling fleet with a newer shinier gas guzzling fleet. I’m not sure that qualifies as progress.]

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File this one under “things are tough all over”… I know a guy whose booty from the 1990s bubble includes a mid-sized yacht in the Mediterranean, complete with full-time captain and crew.  It hasn’t been a major cash drain during the past 8 or so years because he has chartered it out much of the time.  With fuel and other prices going up and the number of people with the means to splurge going down, the boat has become a serious cash drain and, as I learned yesterday, he is planning to sell it.

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J.R. Simplot, the architect of the modern American diet and major supplier of frozen french fries to McDonald’s, died peacefully at age 99, leaving a fortune estimated at $3.6 billion in 2007.  According to Wikipedia, he was an atheist who dropped out of school during the eighth grade.

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Joseph Stiglitz claims that our Iraq adventure will cost the U.S. three trillion dollars and the rest of the world an equivalent amount, for a grand total of $6 trillion (source). Can this be true? Let’s look at some numbers.

The first number is population. Stiglitz talks about Iraqis being killed, emigrating, or being displaced. He cites the current population at 28 million, in agreement with the CIA Factbook, but fails to note that it was 24 million before the war. Iraq has a much lower death rate per 1,000 population than the U.S. and a much more rapidly growing population. The guy’s Nobel Prize was in economics, not in demographics. If we were worried about weapons of mass destruction and we’re sure which of the Iraqis were developing them, with $6 trillion we could have offered each of the 24 million pre-war Iraqis $250,000 to get them set up in a new country with no major weapons or Jihad industry (the typical Iraqi family has 4-5 kids, so that would be at least $1.5 million per family).

Let’s look at the economy. The CIA Factbook says that Iraq’s current GDP is $55 billion. The $6 trillion cost to the world would therefore be equivalent to 100 years of Iraqi GDP. Definitely not a very good bargain, especially since the world probably derives no more than 5 percent benefit from Iraqi GDP (i.e., it would take 2000 years to get a return on our $6 trillion).

Oil exports from Iraq are 1.67 million barrels per day, about $61 billion per year and, again, roughly 100 years to equal $6 trillion.

How about oil reserves? The CIA says 115 billion barrels. At $100 per barrel, this is worth $11.5 trillion, almost an entire year of U.S. GDP. Again, however, there does not seem to be a plan to confiscate Iraq’s oil and distribute it among the investors in this $6 trillion effort.

One thinks of government and the military as wasteful, but it is tough to believe that we are being this wasteful. When I first heard about the Iraq war and someone said “We’re spending $1 billion per day”, I thought “Who cares? The U.S. military spends about $1 billion every day in peacetime.” But $3 trillion or $6 trillion is real money.

In his essay, referenced above, Stiglitz cites a $2 trillion growth in U.S. debt as evidence for the cost of the war. This doesn’t make sense to me. As a nation, we’ve borrowed money for a lot of things besides Iraq. We’ve borrowed to pay for Medicare, Medicaid, and other entitlement programs. We’ve borrowed so that we could subsidize the melting down of corn into SUV fuel. We’ve borrowed so that we could give billions of dollars to America’s wealthiest farmers and agribusiness. We’ll soon be borrowing to bail out real estate and mortgage speculators.

Who has read this book? Is Stiglitz convincing? By winning the Nobel he has proven that he is smart. Could it be that the rest of us are actually dumb enough to spend $6 trillion on Iraq?

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