Smart Roads

BNET reports on some details of intelligent traffic, interviewing the Utah Department of Transportation director,John Njord.

He said experimental stretches of DSRC are already employed around the Detroit area and in parts of California. Toyota announced last fall that it would soon be unveiling its latest DSRC system on a still-unnamed vehicle in its home market.

Further buildout will come down to that familiar chicken and egg, which is why Njord doubts much will happen until there have been tangible commitments by the public sector. Because of how closely automakers review their costs for each car, they don't want to deploy something only to find out it's never going to happen, Njord said. "That's why none of them has pulled that trigger yet."

Once highway departments around the country begin installing the DSRC infrastructure, the auto industry has pledged to include compatible hardware, including GPS at a cost of about $100 per unit, in its vehicles.

Money drives this thing, money from congestion fees and money from lower insurance bills. Njord is projecting a $10,000 installation fee per intersection for vehicle to system communications. I think that is a little high and should be cut in half. Consumer demand in highly congested cities results from energy efficiency, lowering city gas usage by 20%, at least.

He talks about the system being installed in Utah.

UDOT is tiptoeing into the future by installing a $14 million electronic tolling system to charge drivers who want to use I-15's high-occupancy vehicle lanes as a convenience, rather than for carpooling or riding a motorcycle.

The new system, scheduled to be operational later this fall, utilizes electronic RFID. Antenna boxes placed about 20 feet above the lanes will send radio signals to credit card-sized transponders mounted on vehicle windshields, said David Kinnecom, UDOT traffic management engineer, when announcing the project last September.

Before a driver enters an HOV lane, signs will alert the driver to rates currently being charged. The cost of each zone will depend on traffic, Kinnecom said. There will be four HOV zones: from American Fork to 14600 South, from 14600 South to 7200 South, from 7200 South to Beck Street and from Farmington to Layton.

"It would be set dynamically, meaning it would be sensitive to the actual speed in the express lane and the volume of traffic," Kinnecom said. "The idea is to preserve an acceptable speed in the express lane. But as traffic becomes more dense, the rate would go up to discourage excessive use."

Stanford computer and robotics scientist Sebastian Thrun has been in the vanguard of pioneering and promoting self-driving vehicles. He estimates that within the next two decades, about half of new cars sold will offer the option of turning over basic driving duties to a computer. The question is whether humans will be willing to surrender the wheel.

Certainly drivers will surrender the wheel.

Oakland Airport Connector in trouble

Ran afoul of the civil rights law.

"After losing $70 million in stimulus funds last week because the agency failed to satisfy the Federal Transit Administration's (FTA) minority and equity standards for federal funding, BART lost another $25 million it was expecting from TIGER, money that was important for the agency to secure further federal loans to build the nearly $500 million OAC.

"Basically, it's just devastating," BART spokesperson Luna Salaver said about the OAC developments over the last week. "We had a triple-one project, a shovel ready project, and then it ran into this opposition that was using the Civil Rights Act make the region lose thousands of jobs."

More from the original notice:

"In a stern letter to BART [PDF], Federal Transit Association (FTA) Administrator Peter Rogoff informed the agency that it would not be able to develop a suitable action plan by March 5th to comply with equity and race requirements for the $70 million in stimulus funds for the Oakland Airport Connector (OAC), a move that may kill the project.

"Given the fact that the initial Title VI complaint against BART was well founded, I am not in a position to award the ARRA funds to BART while the agency remains out of compliance," wrote Rogoff.

In his letter, Rogoff said he was sure the project opponents that filed the original complaint with the FTA would proceed with further lawsuits, jeopardizing the tight timeline on stimulus funds. He advised BART and MTC to reallocate the money or the region would risk losing the funds altogether.

"The likelihood of protracted litigation with the parties that made the initial complaint is extremely high," wrote Rogoff. "Given this situation, and the fact that we are now only 3 weeks away from the March 5 deadline, I must bring these discussions to a close so that we can work together to ensure that the ARRA funds can create and preserve jobs in the Bay Area."

This suit concerned the taken of right away from local transit that served a mixed race community. But is really is concerned with the straight jacket that 40 years of contingent claims on federal money has caused. You can be assured that anything done with transit and the federal government will cost three times as much as when local funding is used. We can also be assured that the result will be technology embedding in transportation, because technology is cheap, does the job, and is unable to discriminate.

Unreality plagues California High Speed Rail

LA Times reports on the usual regarding large government transit projects.

Some fear California's high-speed rail won't deliver on early promises

There's concern that local, state or federal subsidies would be needed as projected ticket prices between L.A. and San Francisco have almost doubled. And building costs for the first phase have grown

All predictable.

Weatherization Stimulus fail

Five billion allocated for home weatherization, less then 5% spent what is the problem?

Well, the cost of doing it is much smaller than the cost of hassling with the tax deduction.

My story is typical, out on Rancho Relaxo I bought $20 of caulk and foam and left it with the tenants. Here in town, I lay down used towels to block the gaps in my doors.

For me to fill out tax forms is $100 of stress and time.

Technology's path in transportation

A few months ago there was some discussion that Ford had put "infotainment" displays on the driver side. The trade off is helpful driving information vs distraction. The solution will be increased automation of steering, acceleration and brake. This is the era we live in, permeation of technology deeper and deeper. Next year's model will include platooning by default because the solution include cruising and lane guidance. The technology comes built in with communications.

In inventory yards, the light weight trucks will be put on auto-pilot, this is next year, working with today's automated forklifts. UPS has got tweeter based package tracking, transport technology [GPS, Comm, sensor] will become standard for their trucks, they will operate automated warehouses. Precision farming by automation will continue to push yields up, and lower equipment costs as the driver's compartment disappears. Mining trucks already automated, as are railroads.

The consumer remains connected to the entire channel, and it is hard to notice that consumers must still drive the last mile. Technology, the Silicon Valleys, will push through the last mile within a few months. The Pizzabot will move a pizza to my curbside within 15 minute accuracy.

Transportation pays for the privilege of putting automation on the roads, congestion fees of hundreds of million per year for municipalities.

Automated autos have arrived

A Ford with automatic parallel parking

MSNBC has a round up:

"And the next generation of autonomy is already here. The 2010 Ford Flex boasts Active Park Assist — just target a spot and the car uses ultrasonic range finders to park itself.

The 2010 Toyota Prius has a Lane Keep Assist system that uses a camera to detect lane markers and automatically steers the car toward the center of the lane. And the Honda Accord comes standard with Adaptive Cruise Control, which uses a radar pulse to scan ahead for other vehicles and then increases or decreases speed to maintain a safe following distance.

Modern cars can steer, brake and accelerate all by themselves, but they still need a human driver behind the wheel."

Arriving ten years before many pundits predicted. Technology knows no political boundaries.

More pitchforks

Including this photo I stole

What started as a nighttime, open-air dance party in Upper Sproul Plaza with up to 200 people quickly soured into a riot as protesters vandalized a vacant university building and then lit trash cans on fire and clashed with police on Telegraph Avenue.

Read more at SF Gate

Taxpayer subsidies for rich bankers

The Pragmatic Capitalist lays out the financial bailout strategy, including the pump and dump operations of the Fed.

Bill Gross has personally elaborated on PIMCO’s interactions with the Fed and their use of the Fed’s handout. In an interview with TIME in January he said:

“Just speaking about Pimco’s general portfolio strategy, we’ve sold our agency mortgage securities, Fannie and Freddie, in the billions to the willing check of the Fed. They’re buying a trillion dollars of them, or have over the past nine to 12 months, and so we sold them a lot of ours. Now, what did we do with the money? We bought Treasuries, we bought corporate bonds, and so the bond markets in general have benefited, as have stocks, because this available money effectively flows through the capital markets.”

It’s that simple. Toxic assets get exchanged for cash and cash gets exchanged for whatever the banks feel like buying on a particular day.

Dean Baker has more here.

My take:

Toxic waste gets turned over to the taxpayer for losses, held by the Fed. Most of this is bag mortgage debt, and Congress has so far covered about $170 billion in losses. The banks, unloading this bad debt, use the money to buy stocks. The result ultimately is a disruption in government operations, because government can only inflate away about 20% of this debt before hyperinflation.

Good post on municipal bankruptcies

Sovereign and semi-sovereign default.

Here is another tidbit on Federal deficits and debt:

WASHINGTON (AP) -- The federal government fell further into the red in 2009, with its financial position hitting a deficit of $11.46 trillion.

That figure is 12.3 percent higher than the previous year, according to a new report issued by the Treasury Department on Friday.

The annual report shows that the government's big entitlement programs such as Social Security and Medicare are facing a deficit over the next 75 years of $45.88 trillion, an increase in that deficit of $2.9 trillion in just one year.

My take:

The problem here is that state and municipalities have begun their delever process, but Congress still hopes to inflate the government sector. We end up with a mis-match that has to be resolved, and the debate becomes centered around local government funds vs federal entitlements. Government, as a production system, is readjusting the deliverables in terms of frequency and quantity. I takes two or three years, and will likely extend the recession.

California Gov pushed out of the bond market?

So says Zero Hedge after the latest cancellation of a bond offering.

Bloomberg expands on the debt doomsday cycle.

Give congestion tolls to the cities

Says this research paper from UCLA. By distgributing funds back to the cities where tols are charge the city politicians will lobby for congestion systems. LA stands to gain $5 billion a year in congestion pricing, a tidy some for politicians along the routes.

What happens to the curve?

It is the five and ten year squeeze on the yield curve where we should look. If investors find solutions to five an seven year constraints, then the yield curve widens along the bend, a flattener.

What constraints? Actual investment periods for return on investment with capital need to be established at those terms. Assuming the positive, we need to get pay-offs in five to seven years for investments so those terms can take up more space on the curve. As those terms spread, the curve inflates to a nominal normal.

So, a clue. What is the most likely, continuing constraint we are facing over the next five years? I would look for companies that seem to be realistic solving major problems over this this time scale.

Chasing down the young and healthy

We have a competition going on between Obama Progressives and the Young and Healthy. On one side, Obama wants to corral those young paychecks to cover the cost of government payments to the AMA. On the other hand, the young have powerful technology that lets them self select into homogeneous health groups for minimizing insurance.

Tyler Cowen has the contradictory price controls that result.

My take:

Insurance premiums will fall, for the young and healthy in combination with the retail clinics. Obama will forever be looking for the last young person not yet captured by a self selected insurance program. Technology will win, it will find ways to coagulate healthy groups in efficient high deductable insurance systems.

Krugman predicts Fiscal Catastrophe

"So now the de facto [Republican]strategy is to oppose any responsible action until we are in the midst of a fiscal catastrophe. You read it here first."

We, the voters, have only a limited fear budget allocated to bankruptcies, and that budget is being occupied by state bankruptcies at the moment. We will eventually except a much weakened federal budget in trade for stronger local budgets. Hence, by the time the bankruptcy rolls up to Congress, voters will have learned that local politics trumps federal entitlements.

The Doomsday cycle

From the VOX blog, they have a mechanism that explains dropping interest rates. Basically there mechansim is a variation of the debt cycle. Yields drop because of the increasing overhead of debt service. Debt increases with the constant bailing out private sector groups by the taxpayer.

Small Robots from MIT

HT Instapundit

Playing around with wage settings

What is crucial in government benefits is understanding them in term of wage subsidies for private firms. If we consider a medium sized firm of 3125 assembly workers, who receive a pay equal to 1/170 of the CEO pay, say the CEO of GM getting 9 million while worker at final assembly gets 52,000; then the CEO ratio is made up of about 173 of the assembly worker wage. If the CEO personally pays less than 5% of government benefits to his worker, then his firm and his wages gain in real terms for each additional dollar of government benefits. If the CEO pays 6% or more of the total benefits, then each additional dollar of government benefits does not pay.

This is a cost shifting incentive, when the firms are efficient, more efficient than the progressive tax rates, then the firm seeks to move as much wage overhead to government as possible. Hence, for a given set of progressive tax rates, any firm that can efficiently stack wages and organization steeper than the progressive rates, will always see a gain from more entitlements that offset wages normally provided by the firm.

The solution is to make sure the progressive rate is precise up to the standard error of the firm such tha tmanagement sees no gain from the government expansion.

Supply/Demand and information

Standard supply/Demand curve

This chart assumes money, and price is a comparison between the firm inventory of cash relative to the firm inventory of goods.

If we want to go to entropy norms, and eliminate money, then price becomes "redundancy", the complement of entropy. Redundancy is lowest when the production chain delivers at the maximum channel rates, where the channel rate are all transactions along the supply chain. So quantity is the "bit" rate, where the bit is the smallest observable quanta of good for the supply chain.

The first observation is the Austrian one, supply and demand makes no sense until one talks abut the whole distribution channel. The way we bridge the gap is, in the case of the peach business, is assume that everyone in the peach supply business ultimately counts in units of peaches. So, in effect, the researcher must first verify that the chain of distribution does seem to obey the Quant requirements, if so, then Shannon channel analysis can be used.

The trajectory of redundancy would become a series of large and small exponentials as the supply chain goes through a Ramsey Search (the allocation of limited precision along the supply chain) to adjust lot sizes and transaction rates at each term. There really isn't a supply and demand side, because the inventory unit moves through the supply chain, each processing step being conceived of a buyer of input and seller of output. Only the household at the tip of the network buys the basic unit of good, at the highest transaction rate allowed.

When traditional economists see a shift in household demand, they see a shift in the relative ratio of household cash and good inventories. The Information theorist sees the household, instead, shift to large lots sizes at lower transaction rates, which triggers a deflation and Ramsey search of the entire supply chain of the good. The household changes the basic good quant, the smallest quanta of good observable.

Let us construct the Caplan/Twieg fear budget hypothesis as a Shannon Channel. When we fear large terrorist events, more often; we see a deflated terror network, fewer steps is the production of terror. This is a low information rate channel with high quantization error relative to other distribution channels. The goal of the military is to provide much more precision to the terror network. So, in 2001, the production of terror required a combined Taliban and Al Queda, and a two stage network. Today, the production of terror from that region requires many more steps because of the requirements of precision imposed by counter military actions. So, today, we understand the terror network much better, the observable total number of steps in the production of terror is greater; the terror network is forced to be more informative.

So rather than a fear budget, maybe we need a minimum knowledge precision about threats to keep us comfortable.

More pitchforks

Greek Customs Workers’ Strike Dents Exports, Cuts Fuel Supplies

How far can I deflate?

My Shangri La

I could move out to Rancho Relaxo, grow most vegetables, generate $800/month from residuals. Easy.

A favorable report on containing health care costs

Rdan at Angry Bear digests the Maryland plan for managing health care costs:

One answer might be Maryland’s solution, a regulatory commission of seven governor-appointed-commissioners serving 4 year terms and having the responsibility of setting appropriate rates for hospital inpatient, outpatient, and emergency department care to manage its rising healthcare costs by limiting payment to the minimum amount necessary to cover hospital operating expenses, and requiring all payers (both private insurers and Medicare) to adhere to the rates set. This regulatory commission is nothing new for Maryland and has been in place for years. At one time, 30 other states regulated hospital rates only to have them fall by the wayside in the late seventies and earlier eighties with the deregulatory movement.
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So what’s in it for Maryland hospitals? Hospitals are reimbursed at a higher rate for treating those who are uninsured and result in being charity cases; Medicaid and Medicare accept the Commission’s pricing and pays Maryland hospitals at the same rate as private insurance. The standardization of pricing goes a long way towards eliminating operations in the red; offers greater financial stability for hospitals as variation caused by the economy is minimized; prevents leveraging by insurance or hospitals and creates comfortable operating margins; lowers hospital administration costs with standardized pricing by eliminating insurance payout variation; and creates transparency for hospitals and patients on pricing.

NASA invents rotating prayer mat

In their effort to attract Muslin austronauts, or Jihadinauts perhaps, NASA is building a rotating space station module for prayer that constantly points to Mecca.

The Fake Onion has further details.

Egad, another deflationist

The new Normal post says:

The Western world is likely to have a low output performance in the next 2-3 years because the financial systems in US and European countries has broken down, while the fiscal burden and public debt arising from the economic and financial crisis is quickly mounting, and these would contribute to credit restraint and private sector being crowded out.

Self selecting health insurance

Krugman complains about what we do out here in California, healthy people are not attracted to long standing health plans with a back log of the sick.

It is information technology again, allowing health consumers to connect and create their own deductible health channels. It is push pull, greater knowledge of who has likely conditions; and better ability to organize.

The problem doesn't go away, so Krugman can remain hysterical; onlythe current structure of health insurance goes away. As the new consumer model takes hold, Congress has the same choice, they simply make their choices with self selected, more efficient insurance pools.

That's why we let him teach

Great discovery in Bryan's graduate class.

Update:

let me explore this a little. Bryan and his student found some economic verification that one level of fear is fixed, and must be apportioned among the threats. Imagine a large number of agents with this constant fear budget. How do they organize such that all members operate within their fear budget? They use a production line and implement a Shannon channel coder such that market events between stages of production produce the same, constant, level of surprise.

Estimating the stimulus, the accuracy of macro

How do macro econos measure the effect of the stimulus? Macro Advisers compare the predicted path of GDP from weighted history with the measured GDP path after the stimulus.

Going along with them, then, I must assume that GDP (money) measurements are valid right after the crash. These numbers come from the BEA, how have they been doing on the revisions of late? Late last year a revision from 3.5 to 2.2, over quarterly periods. GDP is not very self similar over this time.

I have a better instrument, miles driven, as discussed in this Calculated Risk post. From Calculated Risk, lets look at his miles driven graph, it seems very self similar over the period. If we think the stimulus nudged miles driven, then, OK.

I am looking for a match, some inventory measure mostly self correlated, and overly correlated with the stimulus.

Producer prices up, consumer prices flat or down

What is the meaning of it all? Consumer are still deleveraging, producers are bottlenecked, the yield curve is trying to maintain an unsustainable steepness. We have two choices, get more efficiency in distribution, or more deflation.

A better tax approach

Mankiw's prescription for fiscal reform:

1. Substantial cuts in spending. Ensure that the commission is as much about shrinking government as raising revenue. My personal favorite would be to raise the age of eligibility for Social Security and Medicare. Do it gradually but substantially. Then index it to life expectancy, as it should have been from the beginning.
2. Increased use of Pigovian taxes. Candidate Obama pledged 100 percent auctions under any cap-and-trade bill, but President Obama caved on this issue. He should renew his pledge as part of the fiscal fix. A simpler carbon tax is even better.
3. Use of consumption taxes rather than income taxes. A VAT is, as I have said, the best of a bunch of bad alternatives. Conservatives hate the VAT, more for political than economic reasons. They should be willing to swallow a VAT as long as they get enough other things from the deal.
4. Cuts in the top personal income and corporate tax rates. Make sure the VAT is big enough to fund reductions in the most distortionary taxes around. Put the top individual and corporate tax rate at, say, 25 percent.
5. Permanent elimination of the estate tax. It is gone right now, but most people I know are not quite ready to die. Conservatives hate the estate tax even more than they hate the idea of the VAT. If the elimination of the estate tax was coupled with the addition of the VAT, the entire deal might be more palatable to them.
   

Let us start with 1 and 4. If Republicans get 4 then they have no bargaining power for 1. Republicans have a choice here, and they will make the wrong choice, you can bet on that. Substantial spending cuts come when the progressive rates are more progressive, not less.

The VAT is a good idea, it allows us to reduce the revenue from income taxes. So take a lower total share of income taxes, but make them more progressive. As it is, the very wealthy get way more gain from government than the 2% share they pay. History shows that when the rich have progressive rates up to the Clinton level, then they began to take government responsibilities inside the firm, government deflates. Mankiw's prescription will have the opposite effect he envisions, a lower progressive tax allows the firm to rely on government to handle much of their labor overhead.

Remember Reagan cuts the progressive rate, government takes 23% of the economy, under Clinton progressive rates go up and government share goes down to 19%, then Bush takes us back again to big government. Mankiw the economist is asking for the economy to violate supply and demand.

Communist Party Convention

In Washington DC, Cheney is the star speaker.

1994 was a good year, and Dems aim to repeat it

Says the Hill:

If the midterm election was held tomorrow, Republicans would retake control of Congress, Democratic pollster Stan Greenberg said Wednesday.

I voted for split government in 2008. It takes two years for my vote to count!

Macro economic modeling works badly unless

we are severely constrained in which case the macro modeler can reduce the number of factors. This is in response to a quote of Kling's, to wit:

An observational study can be of scientific use if the conditions are right. One condition is that there are many observations relative to the number of factors that must be controlled for. In statistical jargon, this is known as the degrees of freedom.

But Kling's Recalculation must involve the ability of agents to perform some macroeconomics. Agents can accomplish this without direction because agents are faced with few, or perhaps one, severe constraint (in a severe recession). Hence macroeconomics devolves to solving that particular constraint.

DMI reports on the Congestion pricing debate for Manhattan

John Petro reports on their latest research:

An $8 daily charge on cars entering or leaving Manhattan below 86th St. between 6 a.m. and 6 p.m., Monday through Friday, would generate $400 million or more a year in revenue to keep fares reasonable and support vital maintenance, repair and expansion of subways and buses. It would also reduce costly traffic delays on overburdened city streets as drivers change their habits to avoid paying a toll during peak hours. On this, the facts are clear and striking: Drivers in London enjoyed a 30% drop in traffic delays once the city implemented congestion pricing.

Congestion pricing is coming very soon to NYC because it cuts out the Statehouse. Using this mechanism, metropolitan planners can avoid the State bankruptcy issue.

My first embedded video

A robot that solves the Rubik's Cube. HT Carpe Diem

Consumer group self organization via Internet

Channel 3 of Philadelphia reports on Flash Mobs:

Similar to the "flash mobs" near South Street in June 2009, investigators believe Tuesday's brawl might have been organized on the internet.

My take:

This is the way the new consumption works, though it will become refined and efficient over time. I notice a similar problem with truckers using GSP directions that do not take into account bridge height. All of this is the consumer directing inventories with greater power then ever before. Vendors and Governments need to understand the new consumption model and adapt. Like, getting bridges, trucks, and street lights all talking to each other. Like stores organizing their own mass consumption mobs by enabling the direct remote link between an inventory and a consumer. Transit riders having instant trajectory information of the transit vehicle and the direct link between current congestion and road pricing.

This is not a fad, it is a transformation of the distribution model by technology.

How is the yield curve?

Looking at my Universal Economic Calculator, I discover there are now five independent term structures active where a month ago there was four. The current active are 3 months to 2 years, 2 years to 7 years, 7 -10, 10-20 and 20 -30. So, all the bets are in, and Finance is trying a little inflation on for size. Will it hold?

If technology comes out with a good story on beating oil, then yes, it might hold. The key is that if we suffer information technology shock, then information technology cannot be held back. Even as we move forward with restructuring of local government, technology should move into transportation unhindered.

Real and nominal treasury yields

Good work by George Hall and Thomas J. Sargent

Note: The blue line is our computed interest payments on the debt. The red line is the officially reported interest payments. Both series are reported as percentages of the total market value of publicly-held Treasury debt. The black line is the red line minus the inflation rate.

My take:

Inflation affords a continuous default for federal borrowing. The black line is the real yield on Treasuries, and it has been declining. Hence the problem for foreign dollar holders, finding a better yield.

The period from 1980 to 2006 economists like to call the Great Moderation. My guess as to the cause is simple, the deployment of personal computing in the hands of business and financial planners. Their measures became much more accurate.

He said what?

"There were promises of transparency and of a new kind of collaborative politics where establishment figures listened to ordinary Americans. We were going to see net spending cuts, tax cuts for nearly all Americans, an end to earmarks, legislation posted online for the public to review before it is signed into law, and a line-by-line review of the federal budget to remove wasteful programs.

These weren't the tea-party platforms I heard discussed in Nashville last weekend. They were the campaign promises of Barack Obama in 2008.

Mr. Obama made those promises because the ideas they represented were popular with average Americans. So popular, it turns out, that average Americans are organizing themselves in pursuit of the kind of good government Mr. Obama promised, but has not delivered. And that, in a nutshell, was the feel of the National Tea Party Convention. The political elites have failed, and citizens are stepping in to pick up the slack. "

Says Glenn Renyolds who some like to quote.

Then, I give Obama inspiration for the Tea party founding. His health reform has been analyzed over, revised, reanalyzed through more analysis than any other program proposal in recent memory. Consider the divergence between the OMB and CBO on forecasts, never before have they been so studied in real time. The administration is almost naively transparent.

Where is Obama from here? Dunno, but if his inner libertarian comes out in the mid terms, he has a great case and Republican Conservatives are budget busters. Obama wins the Tea party. We still remember Bill Clinton and the end of big government, that is a card no recent Republican can play.

A Socialist victory on Health Care

I put on my Socialist hat.

Congress would take on the AMA directly with a wage setting plan.

Take on medical training directly and recast the wage settings using its socialist force. Target the already socialist the emergency room services. Take over the system, nationally and define the emergency room intern to be educated four years out of high school. Define the resident to have another two years. You get at least one other lower wage set.

Then, with the billion dollar emergency room business across the USA, the fed's Medicorp Military Complex invades. The effect will combine with the technology of learning to deliver a high quality stream of medical practicioner's, at the clinic level with large economies of scale. The net return for the states is nearly proportional to population, and consists mostly of gains from scale. So, politically, it has the virtue of being a socialist act which might redress an imbalance in state/federal power.

My plan is the best Socialist plan for medicine.

Economic Comment

Zero Bound: A myth, an excuse, does not exist.
Health Care: It is a battle of wage setters, the AMA vs Congress.
Inflation: We can tolerate 2%, then the channel distorts.
Stimulus: Same problem as Inflation.
Global Finance Correlations: A result of there being no better investments.
Real Problem: Severe distortion in a basic input, relative to other goods. Elasticities are suddenly not as smoothly distributed. Some, mostly one thing, is constraining the economy.
Real Solution: Technology, mainly digital. Technology is low cost, technology can sub-divide portions of the constrained good, allowing us better accuracy in its use. Result, nothing really lost, problem solved.

Minnesota Conservatives want more debt!

What Would Reagan Do? they ask. Here is what Reagan would do:

Reagan was the modern reincarnation of bloated government. I would suggest to Conservatives that if they demand less government debt, then they quit advocating more government debt.

The Illinois Public Pension Debacle

Terry Savage of the Chicago Sun Times reports:

Public pensions vs. taxpayers

This is a nasty story I've followed for years. I wrote about the "accounting legerdemain" in 2003, when under Gov. Blagojevich the state borrowed $10 billion to make required pension contributions, with some of the borrowings to be invested in the stock market. The belief was that stock market investment returns would beat the 5 percent cost of interest on the bonds, helping to fill the gap between promises and reality. Unfortunately, the stock market didn't cooperate.

Then in January 2009, this column highlighted the growing budget deficits and late payments to state providers, such as nursing homes, pharmacies, day care centers and other providers. We called it the "Coming Pension Wars" -- as the state and municipalities are forced to raise taxes or cut services to pay the promised pensions, along with current bills. In just the last year, the situation has become even more dire.

In November 2009, the state's Pension Modernization Task Force sent its recommendations to Gov. Quinn. The Task Force concluded that Illinois' unfunded pension liability exceeds $61 BILLION! And that number is growing exponentially.

The report points out the "deadly combination of nearly 30 years of systematic state underfunding of its employer contributions to the pension systems" as the main cause of the gap between promises and reality. It's also exacerbated by longer life expectancies and payout periods, not to mention the second-worst decade ever for investment returns.

So what is the solution:

In early January, while everyone was busy watching the nasty campaign commercials, the State of Illinois pulled an end-run on the budget process. On Jan. 7 the state sold $3.5 billion of "pension obligation notes." In simple English, the state borrowed money to finance the state's contribution to its five retirement systems.

This is a flailing government sector with no financial underpinnings.

The Radio boom and economic effects

Madison Avenue comes of age

The radio boom from 1921 to 1928 was an unprecedented media explosion. The 1920’s in America were rapid years, packed with fads and speculations and climaxes of every sort. The American public in the 1920’s flocked to novelty; fascinated by radio technology, millions of Americans rushed out almost at once to buy radio receivers. In 1921 there were nearly seven thousand radio sets in use throughout the United States. By 1928 there were nearly ten million. Corporations such as Westinghouse, RCA and General Electric built hundreds of stations to fulfill the public's demands for radio. Only a handful of radio stations sprinkled the nation in 1921. By 1922 there were 670. The Department of Commerce was overwhelmed with applications for radio station licenses and did not know how to handle the assault. Initially the Department prearranged all stations the same frequency and told them to work out frequency-overlap arrangements with the neighbors.

"A Godlike Presence"

By the end of the decade, the period of awe, it was clear to all that radio was changing the interior life of the country in ways that few could have envisioned. The invisible sinews of electromagnetic waves were binding the country together as never before. Those waves crossed the nation without regard for regional or state lines, often leveling cultural lines in their path. Increasingly, people ceased to refer to themselves just as Pennsylvanians, Coloradans, Californians, Oregonians, or Texans; radio brought the nation into their homes and gave them a national identity. A single event, a boxing match, an inauguration, a football game, a concert, a comedy sketch, a political speech, or a sermon, gave Americans the chance to share in a common experience. Whether the show took place in Washington, Chicago, New York, or San Francisco, radio allowed the nation to be a part of it the moment it occurred. Though those same listeners might relive the event later through the newspapers or the newsreels in movie theaters, it was radio that brought it to them first.

OK then, the continuing series on information shocks.
By 1927 it was clear that the successful household had a radio and a car. The effect on downtown traffic was such that NYC cops would have to block traffic when radio advertised boxing Golden Gloves, one of the first sports promotions. Go back and look, like toothpaste ads on radio made the toothpaste industry literally in a few weeks.

Radio and the car raised the utility of the household by removing intermediates in goods distribution, hence it was essential and the suburban pattern was established. This all occurred between 1924 and 1927. Unfortunately the road system wasn't there.

Dick Cheney to Washboard Dirty Underwear

Expressing his concern for the deficit, Dick Cheney today suggested that government officials washboard their underwear to save money. I agree.

Some thoughts on Deliverbots

We see them in public today, in hospitals, in warehouses, nursing homes, private living grounds. So, already we have a market, probably growing in the 10-20% range. My idea on making this development more efficient.

• The industry should standardize on the short range digital com link, organize some basic common standard for mobility coordination. Promote the low cost telecom on even the smallest of deliver bots
  
• Promote the use of human detectors for safety.
  
• Standardize lane markings for both robots and humans to observe.

Then what we do with it today in the nursing home, we can also do in the gated community or the golf course, with lightweight deliver bots. Then, how far until we can send deliver bot to the neighborhoods, delivering a bag of groceries for a buck?

Krauthammer's love for communism

Here he yearns for Big Government in space. Krauthammer, just another Nanny government type running up the deficit.

Delivery vehicles in the warehouse

Wired Science has a post I retrieved. These robot working in a clothes factory are well liked by employees, like useful pets. In the street they are a little bigger, but just as friendly. Why is this technology not available in our neighborhood streets?

Brad's Graph of the Day

The CBO Reports on various aspects of stimulus spending options

I have a hard time understanding why there are no negative effects. Is this a bias, or is there some theoretical reason why all stimulus spending has all positive effects?

No, this is strictly unconscious bias on the part of the CBO. If various government spending programs move growth back to the near term, then the entire yield curve must adjust a bit, and that must cause some prior bets to go negative. There has to be a temporal shift from what we previously planned for longer term and what government now plans for near term. Any shift positive from baseline implies some negative shifts.

Refer back to consumer energy consumption.



Notice the sharp rise in energy consumption on the consumer balance sheet since 2009. If the CBO gives credit to stimulus for much of the potential new growth, then the CBO gives the stimulus credit for the increase in energy share. If the stimulus did not cause negative net effects, than that share should be dropping. Energy is not a good substitute for food and clothing.

But what if the stimulus made energy use more efficient? Then we would see increased energy use higher up in the chain, at the producer level. However, I suspect that what really happened is that the stimulus had its Keynesian effect, if gobbled up the temporary bulge in oil supplies.

Everyone talking about sovereign debt.

Menzie ae Econobrowser and Dylan on Zero Hedge. Same numbers different interpretation.

How often do we expect the government account to go into primary surplus? Menzie quotes a chart that says about 20 years, 10 from now. During that time, interest cost grows, and needs to grow slower than the whole economy. What interest rates? Given the size of government, we might think it should act as a competitive private enterprise, and minimize constrained resources. Hence, meeting the condition, government deficit investment should raise government productivity in the use of the constrained resource, mostly, decorrelate with itself.

So, all this history of Congressional action on medicare counts into unsurprising productivity gains. That becomes the median likely result of government productivity gains over the next 10 years.

WSJ Reports: Peak Oil within 5 years

A British Industrial group of energy users reports on their analysis.

The International Energy Agency, in its World Energy Outlook report last year, estimated global oil demand, currently running at just over 85 million barrels a day, could reach 105 million barrels a day by 2030. The Taskforce, assimilating various opinions, believes 92 million barrels a day will be the most that global supplies will be able to generate, "unless some unforeseen giant, and easily accessible, finds are reported very soon."

It may be that the oil companies are keeping some giant secrets from us but that seems unlikely. So what lies ahead is a mismatch between supply and demand. According to Chris Skrebowski, of the Peak Oil Consulting firm, mid-2015 is when the crunch hits. "This is when capacity starts to be overwhelmed by depletion and lack of new capacity additions."

We will have energy efficiency when peak oil reports continue to appear every few years.

Another deficit hawk

Says Jeff Frankels:

"I am not even sure why it is considered anathema to run up [Greek]default risk a little more, to help force Greek citizens to see the need for painful reform, including fiscal retrenchment at least as severe as what Ireland has recently done."

I still like high speed buses

There is no reason not to have dedicated lanes for buses on LA freeways, in which top speeds of 160 MPH can be reached. Buses, even BRT, could easily collect $20 per ticket, making an amazing, high energy efficiency commute. Passenger loads should support revenue income of $1,000 per day per bus. Converting lanes may mean better paving for speed, but conversion cost are $10 million per mile or less. But, a thousand buses runing a day is a million a day, enough to cover.

High speed buses, even high speed freight, can also navigate city streets at lower speed, a huge advantage.

Another deficit hawk

CBS Channel 2 reports:

"Calling New Jersey's budget a "shambles," Gov. Chris Christie announced Thursday he is immediately freezing all state spending.

Saying New Jersey is on the verge of bankruptcy, Christie declared a fiscal emergency, announcing drastic cuts. Among them, aid to school districts that have excess surpluses.

"Today we are going to act swiftly to fix problems too long ignored. Today I begin to do what I promised the people of New Jersey I would do," Christie said.

The move had Democrats in an uproar, angry the governor used his executive powers instead of working with the Legislature.

"What that's going to mean is that those school districts without that money are going to be raising property taxes in the upcoming year to make up for that shortfall," said Assemblyman John Wisniewski, D-19th District."

Maybe the Communist Party does quite extend all the way to the state level.

Progressives are simply ignorant

Kevin Drum seems surprised that the average citizen thinks government is 50% inefficient. Kevin has no clue because progressives and conservatives stopped the BLS from taking government 1nefficiency measures about 15 years ago.

Government is very inefficient, progressives are simply surround themselves with fiction to justify their views. That is why bloggers like Yeglesias live in a dream world, their world view does not allow them to measure government productivity, they just assume it the way they like.

Where do Progessives go to get a measure of government productivity. They turn to economists like DeLong and Krugman. Where do I go? I go outside on garbage day and check how full the bins are for our flat rate garbage service. They are in fact, 1/3 full and would be completely full if the government servicde was not flat rate, like the water around here.

Did you know that Bill Clinton ordered the BLS to quit collecting statistics on government profuctiivity. Why?

Skymeter

Making the first dashboard devices for intelligent auto, mainly for congestion pricing. Still primitive, but the second generation should be coming soon.
HT Felix Salmon

Tom Cambell deficit hawk?

He wants to:

We also need leaders in the House, Senate, and White House who agree that the time is now, and the responsibility is ours. I propose that we not only restore Gramm-Rudman-Hollings, but that we dramatically cut the federal budget deficit proposed by the President by more than half. We not only can achieve this, we must.

Here’s how we can achieve this:

First, cap non-defense discretionary spending to fiscal year 2009 levels for a savings of $101 billion. The White House Budget caps this item at fiscal year 2010 levels of $690 billion, but this category already grew from $589 billion in fiscal year 2009—a 30 percent increase. They let it rise by 30 percent before deciding to cap it. We should cap it at once.

To achieve this overall cap, many specific budget items in this category could be eliminated entirely including the $3 billion annual expenditure in subsidies for corn ethanol. And we should sell the portfolio of Freddie Mac and Fannie Mae, and end any future government subsidies for them.

There is no evidence that the stimulus bill has produced the 2 million new jobs the President claims, over what the private sector would have produced if the same funds had been allowed to stay with the private sector. Yet the White House proposes increasing the amount spent from $202 billion in [delete FY] fiscal year 2009 to $353 billion in fiscal year 2010 and $232 billion in fiscal year 2011. I propose cutting this increase in spending over fiscal year 2009 in half for a savings of $292 billion.

This savings could be used to forgive the FICA tax for businesses that hire employees who have been out of work for at least two moths. Add this amount to the $33 billion the President has already proposed for tax relief to small business hiring, and we will have increased targeted assistance for new jobs ten-fold

Use the TARP money the banks are returning to pay down the debt for a savings of $200 billion. The money was approved for a specific purpose: to buy the bad mortgages from banks. Since the banks are now returning the money, it should be used to reduce our federal borrowing. It’s not “free money,” available for other uses, as the White House has proposed.

Medicaid and SCHIP are 7 percent of the federal budget and spending in this category rose nearly 30 percent from fiscal year 2009 to fiscal year 2010. We need to approach Medicaid and SCHIP the way we did welfare in 1996: don’t trim at the edges but announce that there will be a cap and stick with it. Doing so would save $45 billion.

Taken together, these proposals would save an estimated $750 billion in fiscal year 2010 alone, well more than half of the entire projected deficit. The time to act is now. The clock is running — for our children, our national security and America’s greatness.

Unusual for a Republican to do anything but run up deficits, we will see.

More Wonkish

My interest in economics advances to this Aoki, M, and here is a summary of his work.


Here is another.The graph of an economic simulation shows a characteristic recession, which the authors of the second paperattribute thus:

can suddenly punctuate its time path, due to bankruptcies of great firms that origin remarkable impacts on the business cycle via the financial sector

The approaches use statistical mechanics.

More later.

Der Speigal reports on another Goldman Sachs fraud

How Goldman Sachs Helped Greece to Mask its True Debt

Basically the idea is to use fake currency rates and currency swaps to disguise future debt. Borrow in one currency, then fake the currency rates, exchange for the Euro, and only later when exchanged back into the borrowed currency does the true debt level appear. So, it is hard to rescue the Greeks when they have colluded with GS to defraud the rescuers.

One Republican that gets my vote

From the Political Empire:

"I think it should always be considered," Fiorina [California senate candidate] said. "Whether that is the right approach now, I don't know. I think bankruptcy, as a possibility, at the very least focuses the mind on what has to be done to salvage a situation."

Carly has it right. A California bankruptcy, being the most likely option should be planned ahead of time. The other Republican, the Gubinator, runs around the state touting a $120 billion Bullet Train that is going nowhere.

The Economist discovers the energy crisis

In this post regarding oil and the current account:

The bottom line is that Chinese revaluation would only make a minor dent in the American current account deficit. A potentially bigger problem is oil dependence. American demand for petroleum is relatively inelastic, so rising oil prices will tend to push up oil imports and the deficit.

Basically what Jim Hamilton and others (me?) have been saying for over a year. The depression ends when Government and the Private Secter figure out how to reorganize around oil constraints.

Until we solve the problem, deflation continues. At each step of the deflation a greater proportion of the production can reorient around more expensive oil. Eventually a majority comes to the conclusion that better energy efficiency is the stimulus, not more government.

DOT fact finding on congestion pricing

Grush Hour reports on a fact finding tour (taxpayer funded junket) by leading DOT officials. Among the issues was this:

Something new that I learned from the Webinar: “Singapore estimates that the gas tax would need to be raised by $3 to achieve the same traffic reduction results as a $1 increase in their electronic road pricing system due to transparency of the charge.”

The transparency means more precision. Drivers can pick among more than one congestion option, each additional option inflates the production system generating more matches to the travel requirements of the drivers. The transaction costs of delivering more basic congestion options from a larger single option is minimal, subdivision is lanes over periods is simply software.

The Information Shocks

The upheaval caused by generation advances in information tech since 1820. The big one was the sudden appearance of broadcast radio in 1926. Television was a bit more nuanced in economic effect, most of the damage being done by radio.

TV let production and consumption agree into precisely measured tribal associations, as in McLuhan. The consumer demographic agrees to join a tribe and gets to share in the economies of scale. So, if the young sect agreed a sports car was a Mustang, then the cost of Mustangs came way down. The medium of agreement being TV.

The web breaks the mold again. The web commercializes the last mile, I think, unavoidably. Transportation will seek huge gains by pushing the web into its vehicles and cargo, driven by consumer enhance knowledge of where the goods are.

Let me update this post with a side note about radio in the early 20s. The first economic impact was felt in agriculture as the amateur radio became an essential tool for broadcasting crop rices. Information about crop inventories now arrive three days earlier, allowing the fine tuning iof harvest, But that, in turn, put pressure on farm transportation which now favored farmer owned trucks. Agriculture became more capital intensive because the farm could use transportation more timely.

The second note here is that the first amateur radios used Morse code, which all the farm operators learned. Yet again communications technology compounding n the electrical revolution. One can trace a very clear development path from Samuel Morse to the Internet web.

Peaches and economics

Am I allowed to just move pics around the web?

Anyway, the subject is the distribution of peaches and why that should be viewed as a Shannon information problem. I start by assuming that peaches, as they move from orchard to consumer, is a minimum spanning tree over some geography. It is a finite stage, directed graph

So, under what conditions and how can the research model peach distribution as an information channel?

First, the how. View the entire production of peaches as a series of transactions of the form rate*volume. When viewing the whole channel, each transaction from orchard down, all transactions should be equally surprising.

The why is because any predictable change in some type of transaction would be noticed as a low entropy event, a free lunch, and soon disappear. For example, if I notice that peach jam is over stocked two years after a warm Georgian winter, then I would play the peach jam futures.

So, in the smooth world of variances, cyles would not exist. The EMH would say that noticeable cycles on goods flow would soon be corrected by inventory flow adjustments. The yield curve, the inventory growth of the production line, as the distribution of rates, should be Gaussian, right?, because that is the maximum variance container.

So we say that the peach network is computing the maximum entropy yield curve estimate of a drunkards walk. We also say it is a Gaussian noise Shannon channel.
But to human agents in the process it is best view as a Huffman encoder. The reason for the last is information rate over time wants to be minimized, moving stuff is expensive. So, the lower the precision, the sparser the spanning tree, so total information rate, the rate of one quant of information per time, is lowest.

When peaches are combined with the rest of the economy, they use the same size semi-trailer as other fruits. The food processors making jam, re-distributors, and all the rest, share equipment standards, energy systems, government, and money with each other. But if the economy is at all efficient, even these should be workable with cross entropy information type analysis. Say, oil. If the aggregate economy was working with finite low entropy, then most of the "bit allocations" would be in energy distribution. So, total dimensional should still be small enough for analysis.

Distorted channels have quantum restrictions, there is a minimum shelf space for most fruits at the grocer. Or the total shelf space changes with the season. These limits reduce precision, but they limit the dimensionality of the problem. Generally what that means is that peach distribution is smooth within a certain range; but a shock, like a cold winter, has non-linear effects. These enforced low entropy restriction appear on the spanning tree as unbalances. These cause variance estimations to suffer from non-smooth distributions.

Darrel Steinberg will drive California to a near term bankruptcy

The Orange County Register discusses his numbskull theory:

"When asked by radio host Ronn Owens, "Why not make benefits less generous," Mr. Steinberg was quick to defend working for the state as one of the "last bastions of middle-class employment." He said California shouldn't lower public employees' pay but, instead, create an economy where everyone has a good retirement."

In other words, Mr. Steinberg will drive the economy to bankruptcy if necessary, to protect his campaign funds.

Tea partiers are another bunch of government expanding Communists

Though more polite, Andrew Sullivan makes the case.

These groups are simply deficit expanding Cheney activists who want to revive and expand government nanny power. Typical members of the Repulican Communist Party. Every one of their compaints wants to be solved with government activism, never a hint at the libertarian view of small government.

Connecting sovereign risk and oil prices

Dian Chu does it for us in Economic Forecasts and Opinions.

A steep drop in crude-oil prices triggered declines across the commodities spectrum, as investors nervous about the pace of the economic recovery gravitated back to the dollar. Crude oil tumbled to a seven-week low of $71.19 a barrel last Friday, down 14% since the 2010 high of $83.18 reached on Jan. 6.

Investors’ fled for safety drove the U.S. dollar near a nine-month high against the euro. Emerging market currencies also weakened in Asia, while U.S. stocks fell a fourth straight week, the longest streak since July.

The Goldman, Bush, Paulson, Geithner fraud

Summarized by the Washington Independent.

The key points copied:

• The people at Goldman Sachs invested in mortgage-backed securities they expected to decline in value in order to make money off the insurance claims.
• Due to a long-standing relationship, they went to AIG for a kind of insurance — credit default swaps — which were not regulated.
• They then used other companies, including Société Générale, to purchase more of the unregulated insurance that AIG might not have otherwise underwritten in order to manage its own risk.
• When Goldman’s investments declined, they submitted insurance claims for the losses, but insisted on determining the amount of their damages on their own, without any input from AIG, any auditor or the market.
• After Goldman got as much money out of AIG as they thought they could, their stock analysts issued a report about how AIG was bleeding cash and their creditors wouldn’t negotiate, without mentioning that AIG was bleeding cash because of them and that Goldman was the creditor that wouldn’t negotiate. AIG’s stock tanked.
• The government stepped in, took an 80 percent share in AIG and then paid Goldman and the other creditors all the money they’d asked AIG for at the start of the negotiations in 2007, without using their power to force AIG’s creditors to negotiate.

HT Yglesias

Let us go through the timeline, 2006. Bush reopens the long bond sales to leverage more deficit, Feb. Hank Paulson nominated for Treasury Chief, May. Goldman Sachs starting shorting and dumping Mortgage Backed Securities. The economy overheats and the yield curve goes inverted, the recession is on nine months later.

In mid 2006, Bush knew the deficit machine had run its course, Paulson takes the job supported by old friends in the Bush administration. Now GS has an insider, better to time the exit strategy. GS still trades on insider news from the Obama administration.

Shorts

A "for example" on congestiion pricing and the consumer

The consumer of a business item in Manhattan will know the arrival time of any cargo to much greater accuracy under congestion pricing. So there is this great reduction om transaction costs due to inventory mismatches. These efficiency gains come in the first generation, with no driver automation. Congestion pricing tends to choreograph traffic, accidents are much reduced and insurance can be bought by the tracked mile. Car rental risks drop.

Insurance wants a low cost set of sensors and warnings, congestion wants increased control of cruise control and steering. As the driver becomes redundant, his elimination brings huge cost savings for the poor man, who obtains the services of DeliverBot. A great mass of jobs are created as reduced transaction costs at the last mile make local value added an opportunity.

Consumers are made whole as the technology follows the goods all the way home. There is a cultural norm identified in Brad's electrical revolution. Since 1820, we have been listening to electrons, and soon learned that accuracy of the listeners increases without increasing marginal costs. Moore's Law has been known since 1870.

Oil breaks a support level downward

Says the teaser from a gated WSJ article:

(Dow Jones)--Crude oil futures fell sharply for the second day in a row Friday after breaking through a key support level that traders had been watching for a sign of whether the energy markets would continue to trend lower. The drop in crude prices spurred losses for other commodities, which worsened as the U.S. dollar gained strength.

Crude futures, which had been little changed throughout the morning after the release of anxiously awaited U.S. jobs data, fell below their January low of $72.43, which triggered further selling that pushed the benchmark March contract below $70 for the first time since ...

Imported oil, as a percent of consumer expenses is growing toward the 6% mark. But, the economy is tuning to that problem. This is our third go around since mid 2007, and the consumer is getting better at it. Each time gas hits that magic point, some large chunk of consumer redeploys the household in a deflated state, discounting the personal auto. They are aided by increasing information technology. Transportation needs to be planned farther out in time and space, it is constrained.

The new technology consumer increasingly commercializes personal freight. This is different than from the previous oil shocks fro the 1970s, in which engine and transmission changes did the trick. In the same way that the telegraph drove the development of railroad, these consumers push technology into transportation. As the technology invades transportation, efficiency soars because transportation and information are matched.

Cascading bankruptcies

Angry Bear has the rundown. Sort of like piling on.

NYC income from congestion pricing

Absent any research, I am computing the annual income from Manhattan congestion pricing to be around $200 to $300 million/year. Basically I am assuming the use of the dashboard device and a mix of traffic based on the typical commuter. If the most important commuters can save $100 per day, they split with the city. Then adding in bus convoys, freight, and blocks of company commuters, congestion purchases approach those numbers.

The technology is paid for within months, management fees remain.

Menzie's Graph of debt over time.

This chart is public debt, not including internal government to government borrowings. The graph tells me that the costs of government expansion for the Bush period were hidden, buried, not to see the light of day until the debt crunch came. This is typical war behavior by heads of state.

Brian asks fun questions.

Brian asks:

Of course the most popular stuff sells out first.” But that’s a feeble explanation. After all, if X is ten times more popular than Y, then you’d expect stores to simply carry ten times as much X as Y. Why would X sell out faster in a blizzard if stores have already taken its greater popularity into account?

Modeled Behavior tackles the issue in terms of shelf space. The question arose when Brian noticed the pattern of gocery shortages when customers stocked up for the Eastern seaboard storm.

I tackle the problem from the distribution network. When one of two equivalent products in is high demand, it is distributed in larger lots without the middleman. The grocery chain codes for the demand differences with lot size adjustments. Equivalent products with less demand are handled by an intermediate warehouse which can keep larger lots, then deliver smaller lots of less demanded good in combination with other goods having the same low demand.

This lack of precision implies that supply and demand have linear adaption only within a small range. Larger lot sizes tend to be delivered less frequently, and assume large shelving space by the grocer. When sudden changes in demand occur, there is no nearby warehouse to draw extra supply.

What should the Fed do?

If the economy is a signal processor, then the Fed's job is to compute the lower end of the yield curve such that the total curve is most like Normal, Zero mean. It computes the lower end of the curve with open market operations. The economy, because of finite precision, presents to the Fed a higher or lower basic sampling rate, at the low end. The Fed must assume a deflated or inflated economy, thus selecting the shortest sampling period, or highest sampling rate. It should deliberately sample at twice that rate, approximately.

Distribute a finite set of terms over an ex-post banker yield curve, allocating precision using Shannon. Then look at the optimum set, select the shortest of the terms, and shoot for that. The implicit assumption is that the bankers are doing maximum entropy spectral analysis along the axis in time.

What does that mean? At each term, the banker is trying to determine the "how often and how much", over a specific time period. Business plans compute that in predicted cash flow. The whole banking channel, wholesale, retail, and intermediates, in totality, should be considered an information channel. There should be some N independent terms along the banker yield, N the precision. The terms allocated so as to equalize the information flow for each bank loan. So, the steep portions of the curve will have more independent terms.

I would say to the Fed, target two year rates to be 1.5%, do this by trading in one year notes. Leave the long stuff alone. But I just eyeball the Treasury curve from my Universal Economic Calculator.