These maps show the optimal road trips across every state in the contiguous US

• RANDY OLSON, CONTRIBUTOR

Last week, Tracy Staedter from Discovery News proposed an interesting idea to me: Why not use the same algorithm from my Where’s Waldo article to compute the optimal road trip across every state in the US?

Visiting every US state has long been on my bucket list, so I jumped on the opportunity and opened up my machine learning tool box for another quick weekend project.

Note: If you’re not interested in the technical details of the project, skip down to the Road trip stopping at major US landmarks section.

Planning the road trip

One of the hardest parts of planning a road trip is deciding where to stop along the way. Given how large and diverse the US is, it’s especially difficult to make a road trip that will appeal to everyone. To stand a chance at making an interesting road trip, Tracy and I laid out a few rules from the beginning:

1. The trip must make at least one stop in all 48 states in the contiguous US.
2. The trip would make stops only at National Natural Landmarks, National Historic Sites, National Parks, or National Monuments.
3. The trip must be taken by car and never leave the US.

With those objectives in mind, Tracy compiled a list of 50 major US landmarks — one in each state excluding Alaska/Hawaii and including Washington, D.C., and two in California. Tracy wrote about that process on Discovery News.

The result was an epic itinerary with a mix of inner-city exploration, must-see historical sites, and beautiful natural landscapes. All that was left was to figure out the path that would minimize our time spent driving and maximize our time spent enjoying the landmarks.

Dean Franklin

Computing the optimal road trip across the US

With the list of landmarks in hand, the next step was to find the “true” distance between all of the landmarks by car. Since we can’t just drive a straight line between every landmark — driving by car has this pesky limitation of having to stay on roads — we needed to find the shortest route by road between every landmark.

If you’ve ever used Google Maps to get the directions between two addresses, tha’s basically what we had to do here. Except this time, we needed to look up 2,500 directions to get the “true” distance between all 50 landmarks — a monumental task if we had to do it by hand. Thankfully, the Google Maps API makes this information freely available, so all it took was a short Python script to calculate the distance and time driven for all 2,500 routes between the 50 landmarks.

Now with the 2,500 landmark-landmark distances, our next step was to approach the task as a traveling salesman problem: We needed to order the list of landmarks such that the total distance traveled between them is as small as possible if we visited them in order. This means finding the route that backtracks as little as possible, which is especially difficult when visiting Florida and the Northeast.

If you read my Where’s Waldo article, you’re already aware of how difficult it can be to solve route optimization problems like this one. With 50 landmarks to put in order, we would have to exhaustively evaluate 3 x 10⁶⁴ possible routes to find the shortest one.

To provide some context: If you started computing this problem on your home computer right now, you would find the optimal route in about 9.64 x 10⁵² years — long after the Sun has entered its red giant phase and devoured the Earth. This complication is why Google Maps’ route-optimization service optimizes routes of no more than 10 waypoints, and the best free route-optimization service optimizes only 20 waypoints unless you pay a lot of money to dedicate some bigger computers to it.

The traveling salesman problem is so notoriously difficult to solve that even xkcd poked fun at it:

Randy Olson

Clearly, we need a smarter solution if we want to take this epic road trip in our lifetime.

If we’re willing to accept that we don’t need the absolute best route between all of the landmarks, then we can turn to smarter techniques such as genetic algorithms to find a solution that’s good enough for our purposes. Instead of exhaustively looking at every possible solution, genetic algorithms start with a handful of random solutions and continually tinkers with these solutions — always trying something slightly different from the current solutions and keeping the best ones — until they can’t find a better solution any more.

I’ve included a visualization of a genetic algorithm solving a similar routing problem below.

http://gfycat.com/ifr/DeadlyJampackedFishingcat

Road trip stopping at major U.S. landmarks

After less than a minute, the genetic algorithm reached a near-perfect solution that makes a complete trip around the U.S. in only 13,699 miles (22,046 km) of driving. I’ve mapped that route below.

Note: There’s an extra stop in Cleveland to force the route between Vermont and Michigan to stay in the U.S. rather than go through Canada. If you’re able to drive through Canada without issue, then take the direct route through Canada instead.

Randy Olson

Assuming no traffic, this road trip will take about 224 hours (9.33 days) of driving in total, so it’s truly an epic undertaking that will take at least 2-3 months to complete. The best part is that this road trip is designed so that you can start anywhere on the route as long as you follow it from then on. You’ll hit every major area in the U.S. on this trip, and as an added bonus, you won’t spend too long driving through the endless corn fields of Nebraska.

Here’s the full list of landmarks in order:

1. Grand Canyon, AZ
2. Bryce Canyon National Park, UT
3. Craters of the Moon National Monument, ID
4. Yellowstone National Park, WY
5. Pikes Peak, CO
6. Carlsbad Caverns National Park, NM
7. The Alamo, TX
8. The Platt Historic District, OK
9. Toltec Mounds, AR
10. Elvis Presley’s Graceland, TN
11. Vicksburg National Military Park, MS
12. French Quarter, New Orleans, LA
13. USS Alabama, AL
14. Cape Canaveral Air Force Station, FL
15. Okefenokee Swamp Park, GA
16. Fort Sumter National Monument, SC
17. Lost World Caverns, WV
18. Wright Brothers National Memorial Visitor Center, NC
19. Mount Vernon, VA
20. White House, Washington, DC
21. Colonial Annapolis Historic District, MD
22. New Castle Historic District, Delaware
23. Cape May Historic District, NJ
24. Liberty Bell, PA
25. Statue of Liberty, NY
26. The Mark Twain House & Museum, CT
27. The Breakers, RI
28. USS Constitution, MA
29. Acadia National Park, ME
30. Mount Washington Hotel, NH
31. Shelburne Farms, VT
32. Fox Theater, Detroit, MI
33. Spring Grove Cemetery, OH
34. Mammoth Cave National Park, KY
35. West Baden Springs Hotel, IN
36. Abraham Lincoln’s Home, IL
37. Gateway Arch, MO
38. C. W. Parker Carousel Museum, KS
39. Terrace Hill Governor’s Mansion, IA
40. Taliesin, WI
41. Fort Snelling, MN
42. Ashfall Fossil Bed, NE
43. Mount Rushmore, SD
44. Fort Union Trading Post, ND
45. Glacier National Park, MT
46. Hanford Site, WA
47. Columbia River Highway, OR
48. San Francisco Cable Cars, CA
49. San Andreas Fault, CA
50. Hoover Dam, NV

Bonus: Road trip stopping at popular U.S. cities

If you’re more of a city slicker, the road trip above may not look very appealing to you because it involves spending a lot of time outdoors. But worry not, for I created a second road trip just for you! The road trip below stops at the TripAdvisor-rated Best City to Visit in every contiguous U.S. state.

Note: Again, there’s an extra stop in Cleveland to force the route between New Hampshire and Michigan to stay in the U.S. rather than go through Canada. If you’re able to drive through Canada without issue, then take the direct route through Canada instead. But really, Cleveland is a nice city to stop in (ranked #53 on TripAdvisor).

Randy Olson

This road trip will more-or-less follow the same path as the major U.S. landmarks trip, covering a slightly shorter 12,290 mile (19,780 km) route around the U.S. Some larger states — like California and Texas — may have multiple cities you’d like to visit, so it’s probably worthwhile to stop at other larger cities along the route.

You may note that cities from North Dakota, Vermont, and West Virginia are missing. Out of the top 400 recommended cities to visit on TripAdvisor, none were from North Dakota, Vermont, nor West Virginia. This is especially interesting because TripAdvisor reviewers recommend cities like Flint, MI — the 7th most crime-ridden city in the U.S. — over any city in North Dakota, Vermont, and West Virginia. I’ll leave the interpretation of that fact to the reader.

Here’s the full list of cities in order:

1. Oklahoma City, Oklahoma
2. Wichita, Kansas
3. Denver, Colorado
4. Albuquerque, New Mexico
5. Phoenix, Arizona
6. Las Vegas, Nevada
7. San Francisco, California
8. Portland, Oregon
9. Seattle, Washington
10. Boise, Idaho
11. Park City, Utah
12. Jackson, Wyoming
13. Billings, Montana
14. Sioux Falls, South Dakota
15. Omaha, Nebraska
16. Des Moines, Iowa
17. Minneapolis, Minnesota
18. Milwaukee, Wisconsin
19. Chicago, Illinois
20. Indianapolis, Indiana
21. Louisville, Kentucky
22. Columbus, Ohio
23. Detroit, Michigan
24. Cleveland, Ohio
25. Manchester, New Hampshire
26. Portland, Maine
27. Boston, Massachusetts
28. Providence, Rhode Island
29. New Haven, Connecticut
30. New York City, New York
31. Ocean City, New Jersey
32. Philadelphia, Pennsylvania
33. Wilmington, Delaware
34. Baltimore, Maryland
35. Washington, D.C.
36. Virginia Beach, Virginia
37. Charlotte, North Carolina
38. Charleston, South Carolina
39. Orlando, Florida
40. Atlanta, Georgia
41. Nashville, Tennessee
42. Birmingham, Alabama
43. Jackson, Mississippi
44. New Orleans, Louisiana
45. Houston, Texas
46. Little Rock, Arkansas
47. Branson, Missouri

Make your own road trip

If you’d like to customize your own road trip, I’ve released the Python code I used in this project with an open source license and instructions for how to optimize your custom road trip. You can find the code here.

What about other parts of the world?

I’ve made another version for Europe here. Check it out!

If you’d like to collaborate on making an optimal road trip for other parts of the world, feel free to email me.

Conclusions

The saying goes, “A journey of a thousand miles begins with a single step.” Really, that’s not true. Every major journey begins with a plan: where you’re going, where you’re stopping along the way, and how you’re getting there. I hope this article convinced you that machine learning can play a crucial role in that planning phase and save you a ton of time along the way.

Of course, it may not be practical for you to take a road trip of epic proportions like the ones described here. But really, this algorithm works just as well when you’re planning a smaller trip within your state or even a larger trip spanning the entire world. All the algorithm needs are the distances travelled between every stop so it can compute the optimal route. How you get between those stops is up to you.

Happy road tripping!

Read more: http://www.randalolson.com/2015/03/08/computing-the-optimal-road-trip-across-the-u-s/#ixzz3UZRn42Gf

Can Democracy Survive Aggressive Global Capitalism?

By Lynn Parramore, The Institute for New Economic Thinking | Interview

In the naughts, British-born novelist and author Rana Dasgupta was thrilled to call Delhi his home – a city still buzzing with possibility after India’s 1991 entry into the world of market-driven capitalism. Today, he raises concerns that India’s economic rise has come with massive inequality, environmental destruction, and potential social unrest. In Part 2 of an interview with the Institute for New Economic thinking, Dasgupta shares his view of the contradictions and tensions of India’s economic and political scenes. What does it mean that pro-business Hindu nationalist Narendra Modi was elected prime minister in 2014, while Arvind Kejriwal, a firebrand social activist who speaks for the poor, easily won a second term to lead the nation’s capital in Delhi? How does India’s warlike capitalism co-exist with its deeply democratic spirit? What are the biggest challenges for India going forward?

Lynn Parramore: As the American middle class grows increasingly insecure, how is India’s new middle class faring? How do you view its economic status and political presence?

Rana Dasgupta: India plugs into the global system at a later stage, so the wealth, security, and confidence the American middle class gained through the 1950s and 60s is probably never going to happen.

A few decades ago, for instance, many college graduates in America and elsewhere worked in or even owned bookshops —small businesses that usually didn’t rise to big corporate levels. Then big chains came in and bought many of them up, and then Amazon replaced this entire system with new one in which there was a very highly paid, business-owning minority and lots of minimum wage work.

Is globalizing India going to start with all those little bookshops and then go through the entire same process? No, it’s going to go straight to the end—with the book packing and delivery labor and the people at headquarters doing the marketing and financing. The form of capitalism that’s coming in India will never have the kind of promise that it had in 1950s America, even from the outset. America had to make various concessions to its working majorities for many reasons. The economy was growing so fast over the Second World War it was just better to settle disputes: give the workers what they want and get them carrying on producing.

With the spread of global capitalism elsewhere, the business owners are more careful about giving way concessions because they’re starting off in a much less profitable kind of enterprise. They get the call center work and so on from the U.S. because of low costs, and have to be very careful about offering bargaining power to workers. They can’t start bargaining over the length of the working week or wages because the business will go under very quickly. They actually expect that India will become too expensive at some point and they’ll have to move to Bangladesh or wherever, but the costs of moving are high, so they want to put it off as long as possible.

In America, at the end of the 19^th century and the beginning of the 20^th century workers were campaigning for security, to be looked after when they were sick and in their old age and so on. In India, and I suspect in lots of other places in the world, all these kinds of securities were associated with socialism. In capitalism, it’s assumed that no one is going to take care of you — and even in the Singaporean version of capitalism, the Asian values take care of all that social stuff. So it’s pure business. You take care of your sick parents, not the state. People don’t expect these securities, and the system has been set up to make sure that that kind of thing doesn’t happen. Wages are very seductive — people say, look, I can earn like a thousand dollars a month when my father earned maybe 200 dollars. Amazing! But I don’t have health insurance or old age insurance. People can buy themselves a mobile phone and that helps win certain political battles because middle class people can function very well at the everyday level and travel and do lots of things their parents couldn’t do. But this masks the fact that they’re very insecure.

LP: In what ways has globalization impacted notions of democracy in India?

RD: One shouldn’t imply that there’s no argument about these things, even among elites. There’s a lot of debate, and to some extent the election of Modi as prime minister and the election of Kejriwal, who just won a second term as Chief Minister of Delhi, are signs of this.

What is democracy supposed to do for us? Is it just about making sure that big businesses continue making lots of money? The answer is not clear. Some people think that the best thing for India is lots of dynamic big business. It’s assumed that this creates lots of dynamism in the economy generally, and it also gives a sense of symbolic power to India, which is important to people who feel that the country has been historically marginalized and treated with contempt. We would like to have our Microsofts and so on.

Modi makes a lot of his masculine power, the width of his chest and things like that.  He’s an authoritarian figure who is clearly anti-democratic in a lot of his instincts, and also very charismatic. He presents himself as vegetarian, frugal, and uncorrupt. He’s got this contemporary slant on Hinduism that is all about being personally hygienic in his habits, working very hard, and being devoted to development in business. Modi is actually married, but he’s always claimed to be a single man, because sex is one of those appetites he wishes to disavow. It’s like he wishes to say I don’t eat meat, I don’t have sex, I’m not interested in pleasures, women, and so on. I’m just working for the people. I don’t take money, I’m not corrupt. I started as a tea boy. I’m Hindu and I’m going to make India great. That combination of things is very attractive to some people. It’s about big business and a masculine, pure figure leading it.

LP: What segments of the population are uneasy with his brand of politics?

RD: Modi has been conspicuously unsympathetic to lots of people who are very uneasy for various reasons. He is uninterested in the environment, and that makes people uneasy – in Delhi for instance no one can breathe. The water’s polluted and the ground is polluted. A lot of Muslims are very uneasy because there is a quiet subtext of a Hindu purification of the nation. There’s also this very fascist undercurrent that Modi is too intelligent to actually state, but there’s a widespread feeling that he gives assent to it to some extent. A lot of women are uneasy about this very masculinist talk of India, coming at a time when women’s security is conspicuously under threat. There’s also labor —he has withdrawn or declared his lack of interest in a lot of the safety nets that were extended by the Congress Party to the poor. He basically has a neoliberal, trickle-down idea of how the economy works.

With Modi’s huge election victory, a lot of people felt that India was supporting most the authoritarian capitalist way. But there’s another idea held in reserve which calls into question all of that — an idea of a much more radical democracy that comes closer to the people and makes the poor visible in its language. Kejriwal is part of that. The broom is the symbol of his party, the sweepers, the poorest people. He’s also interested in fighting corruption and reinventing democracy. For him, democracy is not about very remote people surrounded by enormous security and the kind of accoutrements of the most imperial British power.

Kejriwal famously operated out of his tiny apartment in an unglamorous section of East Delhi. But he’s a guy who has been brought in to run Delhi just a few months after Modi’s victory, so this signals that both political currents are alive and well, that the jury is out on how politics and capitalism fit together in India. Modi can’t be too confident when in his own backyard in the capital, a tiny rival party won massively. He should be aware of putting up too many posters of himself and becoming too much of a one-party state kind of leader, because in the background there is this other, very different possibility.

I think it’s to some extent Kejriwal’s victory is a backlash or a warning. India does have a deeply democratic spirit. That is the deepest thing about Indian culture.

LP: Sounds like people in India don’t really like political extremism, but how do they feel about economic extremism?

RD: I think that one of the things that happens in these kinds of countries is that people are a bit naïve about economic extremism. They take a long time to recognize it for what it is. Economic extremism could lead to political extremism because in the worst kinds of scenarios in India we could have enormous class warfare. We might have just so many people whose lives become unsustainable in the countryside arriving in the cities and realizing that they have nothing to do there and that they don’t have water to drink, and stuff like that. We might have big turbulence in the cities and then there would have to be some kind of political solution.

LP: What do you hope for India’s future? Can the democratic spirit survive the continuation of the kind of war-like capitalism you’ve described?

RD: I think and hope for more moderate solutions.  After all, this is a democracy. Poor people have more votes than rich people. The poor in India have an immense resilience, so things can get very bad before it has any political effects. They are incredibly networked. When people in the cities don’t have anything, the people in the countryside take care of them. So there’s a lot of slack in the system even when people are in very dire situations. But ultimately if, say, 500 million people can’t feed themselves or survive, or they just don’t have anywhere to go because the countryside is just full of factories and real estate, then they convert. Hopefully there will be political ideas that have enough quality that these situations can be resolved.

There is the potential for immense wealth creation in India in the next 40 or 50 years, so there will be money and resources to redistribute and resources and as long as the tides of poverty and violence are not too catastrophic, then I think probably the system can readjust itself. Right now, within India, without anything else happening outside, there’s enough prospects for growth. In 40 to 50 years, economies of the West are going to be in dramatic decline, and in the longer term, I think the global system as a whole will face some sort of crisis and that will affect India, too. But in the medium term, India has pretty good growth prospects and hopefully there’s the quality of leadership and ideas that can redistribute some of that wealth and find livable solutions to some of these problems.

But inequality and the environment are going to be massive in Indian politics. Really, no one is talking about water, but giving 1.3 billion people clean water to drink is becoming very difficult. And you can’t survive for very long without it, so if a city of 25 million people — and there are at least two Indian cities that have that kind of number — has no water, the effects are immediate. When there’s no housing the effects could be years away, but when there’s no water, there are water riots immediately. People who don’t have it will steal it because they have to.

So water could be one of the triggering events in Indian cities for how a sort of mini-political revolution might happen and realization on the part of the middle classes that there is actually a wider world that is up against its limits.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

LYNN PARRAMORE

Lynn Parramore is an AlterNet senior editor. She is cofounder of Recessionwire, founding editor of New Deal 2.0, and author of Reading the Sphinx: Ancient Egypt in Nineteenth-Century Literary Culture. She received her Ph.D. in English and cultural theory from NYU. She is the director of AlterNet’s New Economic Dialogue Project. Follow her on Twitter @LynnParramore.

Scott Walker Ends Freedom of Contract in Wisconsin

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  By Dean Baker, Truthout | Op-Ed

  There is nothing about workers’ “right to work” in this story. Scott Walker and his backers could not give a damn about workers’ rights. This is a bill about taking away workers’ freedom of contract in a way that will weaken their bargaining. It is a lie to gloss over this fact and pretend there is some issue of individual rights at stake. There isn’t.

  Read more…

Under Obamacare, America’s uninsured rate has fallen 35 percent

 

1. 14.1 million Americans have gained health plans since Obamacare’s coverage expansion began in 2014.
2. An additional 2.3 million young adults gained coverage between 2010 and 2013 — after Obamacare began requiring employer plans to offer dependent coverage through age 26.
3. Federal officials say this is the largest drop in the uninsured rate since 1965, when Medicare and Medicaid began.

America’s uninsured rate just fell by one-third

A new report from Health and Human Services finds that the uninsured rate has fallen from 20.3 percent prior to the health-care law down to 13.2 percent at the start of 2015. This is a 7.1 percentage-point decrease in the uninsured rate — or, to put it another way, a 35-percent decline in the number of Americans who lack insurance coverage.

“Nothing since the implementation of Medicare and Medicaid has come close to this kind of change,” says Richard Frank, assistant secretary for evaluation and planning at Health and Human Services.

The decline in coverage has coincided with two big Obamacare programs. First, there was the part of the law that required employers to offer dependent coverage up through age 26. Since that program began in 2010, the uninsured rate among young adults (Americans between the ages of 19 and 26) has dropped from 34.1 percent to 26.7 percent.

Second, and much larger, was the start of the health law’s insurance expansion in 2014. Federal officials estimate that since the expansion started, 14.1 million Americans have gained coverage, largely through Medicaid and the health law’s marketplaces for private insurance.

MIT Economics and Academic Prejudice

The MIT economics department’s dominance was fading just as I entered grad school there. David Warsh, himself a long-time chronicler of the department, reviews a book edited by E. Roy Weintraub on the golden age of economics at the Institute.

A sixth factor, advanced by Weintraub in the Transformation volume, argues that the rise of MIT stemmed from its willingness to appoint Jewish economists to senior positions, starting with Samuelson himself. Anti-Semitism was common in American universities on the eve of World War II, and while most of the best universities had one Jew or even two on their faculties of arts and sciences, to demonstrate that they were free of prejudice, none showed any willingness to appoint significant numbers until the flood of European émigrés after World War I began to open their doors. MIT was able to recruit its charter faculty – Maurice Adelmam, Max Millikan, Walt Rostow, Paul Rosenstein-Rodin, Solow, Evsey Domar and Franco Modigliani were Jews – “not only because of Samuelson’s growing renown,” writes Weintraub, “…but because the department and university were remarkably open to the hiring of Jewish faculty at a time when such hiring was just beginning to be possible at Ivy League Universities,”

Pointer from Mark Thoma. My Swarthmore College professor Bernie Saffran emphasized the anti-Semitism factor also. Bernie’s version was that Harvard’s anti-semitism made Samuelson feel that he would be better off at MIT, and once he went to MIT he went about using Jews to build a superior department to pointedly punish Harvard. It took almost three decades (roughly from the end of World War II to the late 1970s) for Harvard to come back.

Economists generally view prejudice by a firm as unsustainable, because that firm will lose out to competitors. The lesson I take from the Harvard-MIT story is that in academia prejudice can persist for a while, with long-term detrimental effects. Consider that as you read stories about prejudice against conservatives.

Read Warsh’s entire article, which covers much more ground.

Debunking America’s Energy Fantasy: Shale Gas and Tight Oil Peak in Next Decade

by Yves Smith

We’ve written from time to time on how reports of America’s coming energy independence and continuing access to lots of affordable domestic shale gas and oil are based on studies that more careful geological work have demonstrated to be optimistic, and by a large margin. We’ve repeatedly pointed out, for instance, that shale gas production will peak in 2020 and decline gradually for a few years after that, then tail off more rapidly.

Oil and gas expert Arthur Berman gave a detailed talk last month about hype versus reality as far as the outlook for US shale gas and oil production is concerned (hat tip Pwelder). The presentation is followed by Q&A with geologists, so the level of discourse is higher than what you typically see.

Since the presentation is long, I’ve also embedded the slides. A quick and dirty way to get much of the content is to read the slides, and then zero in on the sections that interest you, or just listen to the Q&A, which starts is at 1:08.

Some key points from Berman’s remarks:

The US is a much smaller player, in global terms, than the cheerleading would have you believe

The EIA (which if anything has a bullish bias) projects that US oil production will peak in 2016

Shale gas production is falling for all US plays except Marcellus, and that is estimated to peak in 2020

LNG export is a bad idea; the US can’t compete with Russian prices

He also has a long and intriguing discussion of how ZIRP and financialization have played into what he calls “the beautiful story”. And he’s not terribly optimistic about the prospects for US shale gas operators: “a lot of these companies are toast….There’s not a nice, easy solution to this.”

http://www.nakedcapitalism.com/wp-content/uploads/2015/03/HGS-NA-Presentation-23-Feb-2015.pdf

HGS-NA-Presentation-23-Feb-2015

Mandating Food Insecurity The Global Impacts of Rising Biofuel Mandates and Targets

Timothy A. Wise

In collaboration with ActionAid USA, I just co-authored a new study on the high social and environmental costs of government mandates and targets for biofuel consumption. As the summary below suggests, when oil prices are low such mandates, such as the Renewable Fuel Standard (RFS) in the United States, prop up biofuels markets. As the study shows, the United States is the worst biofuels offender. On our present course, we will remain by far the largest global consumer in 2025, contribute the most new demand to global consumption, and do so using the feedstock – corn – that provides the fewest environmental benefits and most directly competes with food and feed markets. Reform is desperately needed, and current proposals in Congress to scale back RFS mandates should be enacted.

Expanding demand for biofuels, fed significantly by government policies mandating rising levels of consumption in transportation fuel, has been strongly implicated in food price increases and food price volatility most recently seen in 2008 and 2011-2012. First-generation biofuels, made from agricultural crops, divert food directly to fuel markets and divert land, water and other food-producing resources from their current or potential uses for production of feed for animals and food for human consumption.

A key policy driver of biofuel consumption is government mandates to increase or maintain rates or levels of biofuel blends in transportation fuel, the U.S. Renewable Fuel Standard and the E.U. Renewable Energy Directive being the most prominent cases. Mandates prop up demand for biofuels, particularly at times when oil prices are relatively low. In a new GDAE Working Paper, Timothy A. Wise and Emily Cole assess the spread of such mandates and targets, finding that at least 64 countries now have such policies. A related policy report from Action Aid USA calls for immediate policy reform.

The authors estimate the consumption increases implied by full implementation of such mandates in the seven countries/regions with the highest biofuel consumption, suggesting a 43% increase in first-generation biofuel consumption in 2025 over current levels. A 43% increase over current levels would likely require 13-17 million hectares more land than we are currently already devoting to biofuel production and approximately 145 billion more liters of water. Some international agencies anticipate even higher levels of biofuel consumption.

The authors assess the likelihood of implementation in key countries and regions, which suggests that with reform, particularly in OECD countries, consumption growth could be slowed. The European Union is considering reforms that would reduce further growth in demand for first-generation biofuels by 50%. The United States would do well to consider similar reforms that recognize the food-versus-fuel conflict.

The United States is expected to remain by far the largest global consumer of first-generation biofuels in 2025, contribute the most to global consumption, and do so using the feedstock – corn – that provides the fewest environmental benefits and most directly competes with food and feed markets. Even a modest reform, such as that proposed by the Environmental Protection Agency in 2013 to scale back the Renewable Fuel Standard, would reduce projected consumption growth in 2022 by one-third. More ambitious proposals in Congress to eliminate consumption mandates for first-generation biofuels go even further.

Mandates must be scaled back, and strict sustainability criteria must be applied to mandates for both first and second-generation biofuels. Otherwise, governments are mandating not just biofuel consumption but hunger and unsustainable resource use.

Income growth may be more important to the development of housing bubbles than cheap credit

The development of a housing bubble in the United States is generally regarded as one of the root causes of the financial crisis that began in 2007, but what causes housing bubbles to occur? Alison Johnston and Aidan Regan write that while the bubble leading to the financial crisis has tended to be blamed on the spread of cheap credit, the fact that house price rises were far larger in some countries than others suggests there were other factors at play. They argue that although credit plays a role in housing bubbles, an increase in income appears to be far more closely linked to the price rises that occurred across the OECD prior to 2007.

Housing bubbles have significant implications for economic stability and wealth inequality, as the US subprime crisis so emphatically demonstrated. Economists largely cite global financial trends (financial liberalisation, the removal of capital controls, interest rate convergence in the developed world, securitisation and permissive lending) as the culprits of bubble formation.

There is one major problem with this explanation, however. All countries in the OECD were subject to common global credit shocks. This made (mortgage) credit more widely available to households, and cheaper. But despite this common “supply-side” shock, not every country experienced a house price boom, as shown in Figure 1 below.

Figure 1: Changes in Real Housing Prices in the OECD (1990-2007)

Source: OECD and the Bank of International Settlements

If the rise of global capital fails to fully account for the variation in housing prices across developed economies, then what can? In a recent LEQS working paper, we propose a comparative political economy perspective, focusing on (wage-setting) institutional factors that shape mortgage “demand” in the wider OECD.

Recent credit-as-welfare literature, which focuses largely on (mortgage) credit expansion in the United States, treats income and credit as substitutes: repressed income growth requires households to take on more debt to maintain a given level of consumption. According to this narrative, income growth and housing prices should share a negative correlation – low incomes are associated with housing inflation as the former is supplemented with an expansion in household credit demand.

However, the US and UK, whose credit regulatory policies are heavily lax, are an empirical outlier. They do not adequately represent housing demand dynamics across other developed economies. Looking beyond the United States, housing price increases may be more reflective of the complimentaryrelationship between income and credit. Higher income growth enables households to take on more (mortgage) debt, which in turn places upward pressures on housing prices.

Institutions governing wage setting in national labour markets play an important role in income expansion. Countries with institutions that favour the export sector (Austria, Germany, and Japan) are more likely to produce more systemic wage moderation, and in turn low inflation, than countries with wage-setting institutions that favour sheltered sectors (Spain and Ireland) or those which favour the market (the US and UK).

Building upon the complementary nature of income and credit, we argue that economies with export-favouring institutions that moderate income growth may be less exposed to housing bubbles for two reasons. First, repressed income growth reduces domestic demand for all goods, including home mortgages. Second, since wage-setting institutions, and the sectoral politics that underpin them, are “sticky”, they may influence households’ future expectations of income growth, and adjust their demand for mortgages accordingly.

Our empirical results largely support the primacy of income growth in shaping housing inflation. But they also emphasise the unique relationship between income stagnation, credit expansion and housing bubbles in the US. In an instrumental variable panel analysis of 17 OECD economies from 1980 to 2007, we find that only real income growth and changes in real interest rates have significant effects on housing bubbles, while other credit variables (private credit supply and capital controls) and political variables (government partisanship and central bank independence) display minimal impact.

However, income matters more than real interest rate changes. While a one standard deviation decrease in real interest rates is associated with a 0.5-0.7 per cent increase in real housing prices, a one standard deviation increase in real income growth is associated with a 1.7-2.4 per cent real housing price increase. This relationship does not hold forthe US, which is the only country in our panel where the income/housing price relationship does not exist.

To tease out the impact of how wage bargaining regimes impact on housing inflation we supplement our panel analysis with a qualitative case study of Ireland and the Netherlands. During the 1990s, both countries had the highest increases in housing prices in the OECD. But during the 2000s, Dutch housing prices flat-lined while Ireland’s house price boom turned into a bubble. Credit supply factors cannot explain this divergence. The Netherlands had generous policies governing households’ mortgage credit accumulation. They had the highest maximum loan-to-value ratio and the most generous tax subsidies for home mortgages within the OECD. Real interest rate declines in the Netherlands during the 1990s were also roughly on par with those in Ireland.

It was not credit supply that explains the divergence in house prices between Ireland and the Netherlands, but wage restraint. From 2002-2005 the Dutch government, in coalition with export-led employers and reluctant unions, negotiated centralised wage agreements which, at first, imposed a 2.5 per cent nominal wage ceiling, followed by two years of nominal wage freezes. These wage pacts slowed income growth considerably. This slowdown in income growth conspicuously overlaps with the lull in Dutch housing price growth from 2001 (see Figure 2). Though Dutch banks continued to expand the availability of credit, their housing prices were moderated in line with the national wage agreements.

Figure 2: House prices, credit supply and income growth in the Netherlands (1990-2007)

Source: OECD, Bank of International Settlements and the World Bank

The opposite occurred in Ireland. In order to buy industrial peace and build electoral support, the government granted a series of wage rises (in addition to the country’s national headline wage pacts) to the public sector in the 2000s, which led to an average increase in public sector nominal wages of 50 per cent between 2000 and 2004. These payments, along with cuts in income taxes, fuelled wage spirals that conspicuously overlapped with the rapid expansion of credit that funded Ireland’s housing bubble from 2005 onwards (see Figure 3).

Figure 3: House prices, credit supply and income growth in Ireland (1990-2007)

Source: OECD, Bank of International Settlements and the World Bank

Our results suggest that income growth, and the wage-setting institutions that govern it, may be more important in explaining housing price growth than broader financial variables. While income growth’s impact on housing prices is minimal in the US, it is strongly correlated with housing price increases in other OECD countries.

This is not to suggest credit expansion does not matter, but that housing price increases are amplified, and turn into a bubble, in the presence of a complementary income shock. In the midst of international financial trends, which have made mortgage debt instruments more plentiful and cheaper, countries with wage setting institutions led by the export sector or the state, continued to remain insulated from the external risks of globalised capital.

 

‘Growth’ as flawed concept, and inherent to case for globalisation

 

In the latest PRIME publication by Dr. Geoff Tily “On Prosperity, Growth and Finance” the author elaborates on an earlier theme: the development of the economic concept of ‘growth’ in the 1960s by orthodox economists.  Tily points out that growth is not just a relatively recent and post-World War II preoccupation, it must also be understood as “inherent to the case for a globalized system.”

Tily notes that Keynes was concerned with the level of economic activity – output and employment. Before the Second World War “there was no sense of a systematic, and to some extent uniform, rate of change of the level at which an economy operated.” As orthodox economists struggled to build a rival system to Keynes’s, they set the world “a systematic and improbable target: to chase growth.  Nobody seems to have paused to consider whether growth derived as the rate of change of a continuous function was a meaningful or valid way to interpret changes in the size of economies over time” writes Tily.

Is The Government Bailing Out The Oil Industry?

Wikimedia Commons A technician inspects gauge on meter station at the Reserve’s Bryan Mound site near Freeport, TX.
WOLF RICHTER, WOLF STREET
Oil industry lobbyists must have been working the government over for months.The price of oil has plunged nearly 60% since June. Smaller oil companies are going bankrupt. Larger ones are bleeding.  Energy junk-bondholders are getting massacred. Wall Street investment banks are fretting about losing the fees. Lenders are worried about their energy loans.

PE firms that have funded the fracking boom are taking big losses. Venezuela is falling apart and is going to default. Russia is careening in the wrong direction. Kern County, the oil capital of California, declared a “fiscal emergency.”

They all need the price of oil to jump, and they need it to jump NOW.

And besides, American consumers, who’ve benefited from the lower price of gasoline, don’t seem to appreciate it, at least not in the true American way, as the last retail-sales reports have shown. They aren’t spending the money they’ve saved on gas. They’re supposed to spend all of it, and more than all of it in the true American spirit of living beyond your means. But instead, they’re squirreling it away to pay for surgery or college or whatever. Retail spending has been dropping. And that can’t be allowed to happen.

So on Friday evening, when consumers were busy with other things and weren’t supposed to pay attention, the government proposed to yank that little monthly bonus away from them and hand it to the fracking and off-shore drilling industry, the big oil companies, the little oil companies, their suppliers, to the PE firms that invested so heavily in fracking, to the Saudis, Russia, to the despised government of Venezuela….

Conspiracy theory?

Not quite. The Energy Department announced it Friday evening when no one was supposed to pay attention. It proposed to buy 5 million barrels of sweet crude for the Strategic Petroleum Reserve, Reuters reported. It could accommodate some oil in May but most of it would be for delivery in June and July.

How much is 5 million barrels? On first sight, not much, given the size of the oil markets. It represents over half a day of US production. But US crude oil inventories in the latest reporting week rose by 4.5 million barrels. Only about 70 million barrels in working storage capacity remain available. When storage is full, all sorts of heck is going to break lose. And storage is filling up quickly. The markets have been fretting about that.

These 5 million barrels would make a dent into such fears. It’s not huge, but it’s at the margins were prices are set.

The excuse this time is that the government is required by law to replace the 5 million barrels it took out of the SPR in March 2014. Back then, the excuse for taking out the oil was that it would be a “test.” Everyone figured at the time that the government wanted to bring down the price of oil to punish Russia and send a stern message about its actions in the Ukraine.

REUTERS/Daniel Dal Zennaro/PoolRussia’s President Vladimir Putin (L) stands with German Chancellor Angela Merkel (C) and Ukraine’s President Petro Poroshenko (R) as Italy’s Prime Minister Matteo Renzi stands on the back during a meeting on the sidelines of a Europe-Asia summit (ASEM) in Milan October 17, 2014.

Could the government be motivated by “Buy low, sell high?” No. The US government doesn’t know what profit is. It has no profit motive. The number one unwritten rule that employees of the government learn as they move up the ladder: “No one has ever been promoted for saving the government money.” The opposite is the case.

The current proposal contradicts recent discussions about reducing the SPR. Given the booming oil production in the US, and the imports from reliable neighbors Canada and Mexico, relatively little oil is being imported from other countries. The SPR simply isn’t that necessary anymore. The Obama administration is already working on a plan to reduce the size of the SPR and is expected to include details in its next energy review.

But no. Apparently, the oil industry will have none of it. Instead, the government is going to do what we’d been suspecting it might eventually do: bail out the oil industry.

The government plowed part of the proceeds from the sale of those 5 million barrels in March 2014 into a gasoline reserve in the Northeast “to address some of the resiliency needs in the region made evident by Superstorm Sandy in 2012,” a DOE spokeswoman said, according to Reuters. The remaining money is going to be used to buy back that oil.

And in the air hangs the threat that the government can always buy more if the 5 million barrels fail to pump up the price of oil, and along with it the price of gasoline.

We assume that President Obama will soon explain in one of his noble speeches why the oil industry, speculators in the energy sector, energy junk-bondholders, Wall Street investment banks, regional banks, the Saudis, Russia, Venezuela, and all the others – why the heck they need to be bailed out by strung-out, underpaid, overtaxed, maxed-out American consumers.

The industry is desperate. The price of oil did today what it has been doing for a while: it waits for a trigger and plunges: West Texas Intermediate dropped 4.4%, going into the weekend at $45 a barrel, less than a measly buck away from this oil bust’s January low. It’s down over 20% from the peak of the most recent sucker rally. US oil drillers have been responding by slashing capital expenditures, including drilling, in a deceptively brutal manner. Read… The US Oil Bust Just Got Worse