Rebound effect

Suppose a country subsidizes a device that would lead to more efficient energy use, then imagine this device is capable of reducing consumption of the fuel needed to run an energy conversion device (car, heater, etc) by 20%. After a year can we expect that the energy consumption related to the use of the energy conversion device be reduced by 20%?
Most probably not. It has something to do with microeconomics and consumer demand. Energy efficiency improvements generally mean a lowering of the cost of running the energy conversion device. Rational consumers would consume more of the good/service that is cheaper. If say, the new compact flourescent lamp (CFL) just needs 80% less electricity to provide the same lumens as an incandescent light bulb, would I after a year or a month save 20% electricity out of using CFLs? Probably not, because I will conveniently forget to turn it off if I am stepping out of the room. Or maybe I'll turn on the lights earlier in the afternoon.

What is a rough measure of this "rebound effect?" A good bit of thinking have been invested in estimating this effect. Check some of the academic energy journals...but it boils down (roughly) to the price elasticity of our demand for that fuel. Suppose you cut consumption of electricity by 50% everytime the price of electricity goes up by 100% (that is to say the elasticity of your electricity demand with respect to the price of electricity is -0.5), then the rebound effect in the case of the introduction of CFL is 50% which means, dont expect to reduce electricity consumption by 20%, most probably it would be less than that...perhaps only by 10%. Energy efficiency drives are not enough, policymakers still need to work with taxing and pricing policies to align the incentives of consumers to their policy goal of reducing energy consumption.

GW's crib

Rode the bike again and we started early this time...8:30 am. Followed the Mt. Vernon trail along the banks of the Potomac, passed by the Ronald Reagan airport and watched a couple of planes takeoff. It was tough towards the end as we were going uphill on the last 2-3 miles. 18 miles in total to reach Mt. Vernon. It was a good workout. Problem was on the way back, my right knee started giving me trouble. I was basically powering myself with my left leg. We were able to reach Old Town Alexandria though and had a good lunch there. Right knee was killing me so we had to ride the metro at the airport to salvage my creaking right knee.

Lance Armstrong was once quoted as saying "pain is just weakness escaping the body"...boy was there a jailbreak...

But I am stubborn as they come so I'll hop on that thing again this weekend.

Computer crimes

What's the real cost of theft? From a society's view point, the cost is not that somebody stole your bike because somebody stealing your bike is just a reassignment of ownership, the total number of bikes in the world didn't change and that your loss is totally offset by the gain from the theft. The real cost as identified many years ago by a Nobel prize winning economist is the waste that comes with you trying to protect your bike (i.e. checking it out from time to time, putting chain locks) and the waste that comes with a budding thief investing time and energy figuring out new and more efficient ways to steal (he could be doing something more productive for society).

Now what does that have to do with computers? With computer viruses and spams is the problem the same? I think it's greater. When your computer melts it does not get transferred to somebody else's cubicle (unless your information got stolen at the same time). When a virus wipes out your hard drive, not only the information lost counts among the costs but also the stuff that you need to be doing from now on (creating backups, firewalls, running virus checks from time to time). Is trying to learn how to hack a computer wasteful? probably not as much as we think if we think that skills learned to hack a computer is complementary to other supposedly productive skills (i.e. like being able to write code for a search engine).

An inefficient market

I dont know what it is, maybe it has something to do with the Sex and the City movie but conversations of late with friends always touch on the issue of how hard it is to date. These conversations though end up with a bunch of explanations and theories and I dont think it ends resolving all the questions...maybe that's the point, just to talk about it.

The problem with "dating markets" is that it's pretty primitive. It's not as efficient say as the capital market. Do you know how many transactions take place at the New York stock exchange? Why is the dating market inefficient? Because it still operates exactly like a barter exchange. Trade in the barter system happens when there is what we call a "coincidence of wants" Trade happens when you have something I want, and I have something you want. Now doesnt that sound like the dating market?

So I am still amazed when two people actually get together. Some people will call it magic. It is quite hard to have this "coincidence of wants." But it does happen, happens often enough that we all believe it will happen to all of us. Then we wonder why not when it doesnt...

Biking again

So I went on a bike ride again just this last weekend. The knees are feeling a lot better. No swelling, no strain, no pain. I was pleasantly surprised to discover this the morning after the ride. It's good to know that I can do this again without thinking about my knees.

Crescent Trail

Got on the bike today and went to the Crescent Trail. The bike trail starts in Georgetown, DC and ends somewhere in Silver Spring, MD--about 12 miles or so one way. Although the heat index was somewhere in the low 100s, it wasnt too bad a ride because the trail is covered with trees. Now I got to ice my knee and sit on a donut.

It's 7:10 pm and I am still at the office. Looks like it's still raining outside...would have been nice to either go to the driving range or ride the bicycle for a bit. I've been checking the bike routes around here and looks like it will be an interesting summer if I can cover all of them.

Arlington

DC and Maryland

Back in the saddle

I decided to buy a new bike today. Just something to use on the bike paths here around DC. Last year I tried biking but was unfortunately injured and had to go to therapy to get the knee back in shape...not fun. Well, let's see if it will hold up this time. I went to see a knee specialist today and after looking at x-rays of my knee, he says it looks fine and biking shouldnt be any problem.

The comeback

I am reopening this blog after a long absence. I'm not sure though if I would be able to find time to post as much and as often as I used to when I was still in school. There's definitely a lot to rant about...but I am also most definitely lazier this time to put them up here.

Let's see. I thought my earlier posts helped me with understanding more about economics as I was studying for the comprehensive exams around that time about 4-3 years ago. Lately, I have noticed that my sporadic posts have been about my various injuries haha.