Have you seen the new sunscreen arms race?

It used to be that buying sunscreen was a boring affair, an annual visit to that particular store aisle on your way to the first summer barbecue. But now, there's an arms race in sunscreen reminiscent of the blade-count battle in men's disposable razors (a race that the Onion eerily predicted).  SPF 30?  It's for chumps.  How about Neutrogena's SPF 100+?

Of course, it's all marketing shill:

The difference in UVB protection between an SPF 100 and SPF 50 is marginal. Far from offering double the blockage, SPF 100 blocks 99 percent of UVB rays, while SPF 50 blocks 98 percent. (SPF 30, that old-timer, holds its own, deflecting 96.7 percent).

Two week wrap

A few interesting news items this past two weeks:

• Became a dad - welcome BAF!
  
• Rep. Michele Bachmann continues to lie when it suits her, discussing swine flu or the budget reconciliation process  in Congress.
• Friedman thinks it's a decent compromise to out those who tortured but not push for prosecutions, but Krugman says it's nothing short of keeping our legal and moral standards to fully prosecute.
• Opponents to climate change legislation tend to think markets are best to solve everything, except carbon emissions (too costly!).  Gotta love the smell of cognitive dissonance in the morning.
• We may have moved beyond "she asked for it" in our perceptions of rape, but the U.S. shows poor attention to justice when it leaves "rape kits" untested for years.
• A nice chart on income concentration in the U.S. shows that we're (hopefully) coming off the peak of another Gilded Age (Roaring Twenties).  Both this period and the prior one were highlighted by spectacular financial speculation and shenanigans.
  

Capitalism's quote of the day

A financial writer was trying to track down the source of the financial crisis, from greedy loan marketers to failures at rating agencies overseeing complex "collateralized debt obligations" (CDOs), and heard this from a hedge fund manager that had seen the problems early:

[Eisman, hedge fund manager]: ‘Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.’ He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S.& P. couldn’t say; its model for home prices had no ability to accept a negative number. ‘They were just assuming home prices would keep going up,’ Eisman says.” [emphasis mine]

These are the guardians of our markets.  

Oil: on the other hand, we're not producing as much

Congress is holding hearings on oil speculation, the process where big institutions and individuals bet on the price of oil via the futures market. The issue, of course, is the sharp spike in oil prices in the past year. My previous post links to Paul Krugman's argument, that speculation is not a big factor.

On the other hand, a lot of folks are pointing fingers at the recent deregulation of oil commodity trading, at the end of the Clinton administration:

Several changes over the past decade have relaxed the agency's oversight of commodities markets. The Commodity Futures Modernization Act of 2000 (CFMA) allowed energy commodities for the first time to be traded on deregulated "exempt commercial markets," meaning exchanges exempt from CFTC or any other U.S. government oversight. This law was a departure from the Commodity Exchange Act of 1936, which had confined commodities trading to CFTC-regulated exchanges.

I'll let you decide for yourself. Here's a chart I threw together with oil prices ($/barrel, normalized for the falling value of the dollar v. the Euro), oil stocks (days supply in OECD countries), and the supply margin (world oil supply minus demand). All oil price, supply, and demand data is from the EIA. The dollar-Euro exchange rate is from FXHistory.

The supply margin has decreased in the past four years. But is it enough to have driven the price up over double in 12 months?

Oil market - speculative nonsense?

Economist and NY Times columnist Paul Krugman has been tackling the issue of high oil prices and he soundly debunks the notion of speculator-driven oil prices.

Any effect [of speculation] on the spot market has to be indirect: someone who actually has oil to sell decides to sell a futures contract to Joe Shmoe, and holds oil off the market so he can honor that contract when it comes due; this is worth doing if the futures price is sufficiently above the current price to more than make up for the storage and interest costs.

As I’ve tried to point out, there just isn’t any evidence from the inventory data that this is happening. (emphasis mine)

So there's no hoarding. And to boot, spot prices (what people actually are paying for oil based on supply and demand) have been higher than futures prices. In other words, it's supply and demand.

The danger (and cost) of carbon markets

This post at Triple Pundit notes that a study of the largest carbon market, the Kyoto Clean Development Mechanism, finds that most of the carbon offset money is being sent to coal and oil companies and that "much of the market does not reflect actual reductions in emissions."

This is why a world offset market - as opposed to a local offset market - is a really bad idea. And why we shouldn't be giving carbon emissions credits away for free.

From a conversation about high gas prices

Shadoweyes and I frequently shoot the breeze about politics, energy policy, and inanities of western civilization. Today we discussed how the average American doesn't really get the idea of supply and demand (see: bitching about high oil prices). I see the following as the epitome of the average American's support for capitalism:

Capitalism is great until it makes you pay too much for something you want.

Science and drug companies: follow the money

A new cholesterol drug, Zetia, was being studied in the past two years. It got FDA approval for lowering LDL (bad cholesterol) more than statins alone, but was being studied for its efficacy at reducing arterial plaque (the actual goal of a cholesterol drug).

The findings weren't what the company hoped for - despite hitting lower LDL targets, it turns out that it was no more effective than existing drugs.

So what was the big deal in the recent announcement?

1. The lag time - the study was completed two years ago (April 2006), but the company only released preliminary data in fall 2007 under intense public pressure.
2. The money factor - Merck/Schering-Plough made $5.2 billion off the drug last year. Why tell people it was no more effective than other drugs?
3. The science issue - how can we trust the efficacy of our medicine when so many studies are funded by those with a financial interest in the outcome?
4. The regulatory issue - the FDA approved the drug because it lowered LDL, but it turns out that's not sufficient to improve health. It's like approving teeth whitening toothpaste because it makes teeth look better, not because it makes teeth stronger or healthier. Should this practice continue?

In the end, no one's health was harmed by this company's action, though no doubt a lot of folks paid more for medicine that was no better than the alternative. Science was stymied by the company's financial interest, and the FDA gets egg on its face for fast-tracking approval of a drug that doesn't do much.

Sounds like free market health care is working great.

Bush administration cut red tape, and safety lines

Many people act as thought the subprime mortgage crisis and Bear Stearns collapse were inevitable motions of the "invisible hand." But the truth is that regulators deliberately turned their backs on the problem, touting the reduction of onerous regulation.

Nice work, fellas. Some Scotch tape is in the mail for all those regs you slashed.

The welfare queens...

...don't live in the ghetto. They live on Wall Street.

Your music will be "free"

If you've joined the iPod (or "portable music player") revolution, then you've probably encountered digital rights management (DRM). It's that thing that asks you to "authorize" the playing of iTunes songs on different computers (if you paid for them via the iTunes store). The whole business is pretty much designed to make copying harder to do. It also has the side effect of making legitmate backups difficult, as well as sharing music with friends.

It's started with some individual artists, spread to iTunes, and now Amazon.com is planning to sell music without DRM. That means you'll buy an mp3 without any kind of copy protection. You'll be able to copy it to three of your home computers, two music players, and burn it to CD.

Many folks have argued that this sort of music copying falls under fair use provisions of the Digital Millennium Copyright Act (DMCA), the godfather of DRM. It seems that the argument's likely to become moot, since the Southern slaves of DRM will be able to escape to the free North of unprotected music.

So share in the free music revolution. Check out the music of Jonathan Coulton, an artist who's been providing his music free for a long time, and making money doing it.

When capitalism meets electricity

For many years, so-called free marketers have insisted that the key to driving costs down, creating competition, and generally improving efficiency in the electric market means deregulation of energy companies. Of course, the Enron debacle and the 2000-01 California energy crisis have provided a sharp education that deregulation is not the best way about bringing free markets to electricity consumption.

Instead, it's time to try smart meters on a large scale. By allowing consumers to see the exact price they are paying for electricity at any given time, smart meters allow customers to tailor their electricity usage to off-peak hours, when utilities generally have excess capacity. The difference between peak and off-peak rates is 10 cents per kilowatt-hour for one Colorado utility, but can be as much as 40 cents per kwh (the average retail rate for electricity is around 11 cents/kwh).

In other words, consumers can choose to do laundry, wash dishes, or charge portable electronics at night, when rates are very low, and minimize their use during the day. Not only do households save money, but utilities can more effectively balance their load, reducing the need for new power plants. That's a win-win.

Fuel-efficiency-come-lately

Many economists will use this article as proof that the market can effectively regulate fuel efficiency. Prices are up, and demand for efficiency rises. Unfortunately, the economists will miss a few points:

• For the poorest Americans, a tripling of gas prices (as has nearly happened since 2000) creates a disproportionate burden on poor families, who have little discretionary income to cover them.
  
• It overlooks what we could have done with a sizable gas tax in 2000, driving fuel use down and banking the money for mass transit and car-alternatives to save even more fuel, as well as providing people with transportation options.
  
• If nothing else, we could have used the extra money to help balance the budget.

In other words, I'm delighted to see that people are turned on to more fuel efficient vehicles. It's just too bad we've waited until those high pump prices mean more money for Saudi madrasahs instead of American metrorails.