from Bharath Ramsundar via Brad DeLong

Decentralized Protocol and Deep Drug Discovery Researcher

The Ferocious Complexity Of The Cell

Fifty years ago, the first molecular dynamics papers allowed scientists to exhaustively simulate systems with a few dozen atoms for picoseconds. Today, due to tremendous gains in computational capability from Moore’s law, and due to significant gains in algorithmic sophisticiation from fifty years of research, modern scientists can simulate systems with hundreds of thousands of atoms for milliseconds at a time. Put another way, scientists today can study systems tens of thousands of times larger, for billion of times longer than they could fifty years go. The effective reach of physical simulation techniques has expanded handleable computational complexity ten-trillion fold. The scope of this achievement should not be underestimated; the advent of these techniques along with the maturation of deep-learning has permitted a host of start-ups (1, 2, 3, etc) to investigate diseases using tools that were hitherto unimaginable.

The dramatic progress of computational methods suggests that one day scientists should be able to exhaustively understand complete human cells. But, to understand how far contemporary science is from this milestone, we first require estimates of the complexity of human cells. One reference suggests that a human sperm cell has a volume of 30 cubic micrometers, while another reveals that most human cells have densities quite similar to that of water (a thousand kilograms per cubic meter). Using the final fact that the molar mass of water is 18 grams, a quick calculation suggests that human sperm cells contain roughly a trillion atoms. For another datapoint, assuming neuronal cell volume of 6000 cubic micrometers, the analogous number for neurons is roughly 175 trillion atoms per cell. In addition to this increased spatial complexity, cellular processes take much longer than molecular processes, with mitosis (cell division) occurring on the order of hours. Let’s assume that mitosis takes eight hours for a standard cell. Putting together the series of calculations that we’ve just done suggests that exhaustively understanding a single sperm cell would require molecular simulation techniques to support an increase in spatial complexity from hundreds of thousands of atoms to trillions of atoms, and from millisecond-scale simulations to multi-hour simulations. In sum, simulations of sperm cells will require 10 million fold increases in spatial complexity and about 10 million fold increase in simulation length, for a total increase in complexity on the order of a hundred-trillion fold. Following the historical example from the previous paragraph, and assuming that Moore’s law continues in some form, we are at least 50 years of hard research from achieving thorough understanding of the simplest of human cells.

Let’s extend the thought experiment a bit further. How far is human science from understanding a human brain? There are roughly a hundred-billion neurons in the brain, and human-learning occurs on the order of years. Assuming that each neuron contains 175 trillion atoms, the total brain contains roughly 2 * 10^25 atoms. To put this number in perspective, that’s roughly 29 moles of atoms! It follows that simulation techniques must support an increase in spatial complexity from today’s limits on the order of a billion-trillion fold (20 orders of magnitude improvement). As for time complexity, there are rougly 31 million seconds in a year, so simulations would need to run tens of billions of times longer than today’s millisecond computations to understand the dynamics of human learning. Combining both of these numbers, roughly 30 orders of magnitude increase in handleable total complexity is required to understand the human brain. To summarize, assuming Moore’s law continues, we are at least 100 years of hard research from achieving thorough understanding of the human brain.

An important point that I’ve finessed in the preceding paragraphs is that both estimates above are likely low. An important, but often ignored fact about biological systems is that all nontrivial biomolecules exhibit significant quantum entanglement. The wavefunctions of biological macromolecules are quite complex, and until recently have remained beyond the reach of even the most approximate solvers of Schrodinger’s equation. As a result, most simulations of biomolecular systems use crude approximation to handle fundamental biological phenomenon such as phosphorylation or ATP processing. More accurate simulations of cells will require extremely large quantum simulations on a scale far beyond today’s capabilities. We have to assume that a Moore’s law for quantum computing will emerge for our estimates to have any hope of remaining accurate. However, given the extreme difficulty of maintaining large entangled states, no such progress has yet emerged from the nascent quantum computing discipline.

To summarize our discussion, simple back-of-the-envelope calculations hint at the extraordinary complexity that undergirds biological systems. Singulatarians routinely posit that it will be possible to upload our brains into the cloud within the not-too-distant future. The calculations within this article serve as a reality check upon such musings. It may well be possible to one day upload human brains into computing systems, but the computational requirements to simulate a brain (a necessary component of high-fidelity upload) are so daunting that even optimistic estimates suggest that a hundred years of hard research are required. Given that the US National Science Foundation is only 66 years old, the difficulty of planning research programs on the century time scale becomes more apparent.

None of this is to suggest that computational investigation of biological systems is useless. On the contrary, I believe that increased use of computation is the best path forward for science to comprehend the dazzling array of biological phenomenon that support even the most pedestrian life forms. However, today’s scientific environment is polluted with AI-hype, which naively suggests that artificial intelligence can solve all hard problems in short time frames. The danger of such thinking is when learning systems run into their inevitable failures, disappointed backers will start questioning research plans and will start withdrawing funding. Cold breezes from AI-winter have already started drifting into research buildings following the tragic death of Joshua Brown in a self-driving Tesla. Scientists need to combat the spread of hype and the proliferation of naive forecasts of AI utopia in order to create the solid research plans and organizations required to bridge the gap between modern science and revolutionary advances in biology.

Written on June 3, 2016

Dean Baker: Why should government funded research result in a private patent monopoly?

 via Patreon

Dean Baker

Hey, If the Government Pays for the Research, It Doesn’t Have to Grant Patent Monopolies

I was glad to see Ezra Klein’s piece touting the Biden administration’s creation of ARPA-H. This is the Advanced Research Projects Agency-Health, a DARPA-type agency explicitly designed to promote the development of health-related innovations, like vaccines, drugs, and medical equipment.

Like Ezra, I’m a big fan of increased public funding for biomedical research. However, he goes a bit astray in his thinking near the end of the piece. He notes proposals, like those put forward by Bernie Sanders, for a cash prize to take the place of a patent monopoly. The government hands out $100 million, $500 million or $1 billion, and then allows the drug, vaccine, or whatever to be sold as a cheap generic. That likely means breakthrough cancer drugs selling for hundreds of dollars rather than hundreds of thousands of dollars.

“The government could identify, say, 12 conditions that it wants to see a drug developed for. The first group to develop and prove out such a drug would get a princely sum — $100 million, or $500 million, or a billion dollars, depending on the condition and the efficacy. In return, that drug would be immediately off-patent, available for any generic drug producer to manufacture for a pittance (and available for other countries, particularly poor countries, to produce immediately).”

I think the Sanders’ proposal is a great improvement over the current system. But coming in the middle of a discussion of a plan for more direct government funding, it makes the famous Moderna mistake: paying companies twice.

For folks who may have forgotten, we paid Moderna $450 million to develop its coronavirus vaccine. We then paid it another $450 million to cover the cost of the phase 3 testing needed for FDA approval. We then allowed it to claim intellectual property in the vaccine, which meant tens of billions of dollars in revenue. It also led to the creation of at least five Moderna billionaires. Tell me again how technology creates inequality.

It really shouldn’t not sound too radical to say that companies only get paid once for their work. If the government pays for the research, it doesn’t also give you a patent monopoly. These are alternative funding mechanisms, not part of a smorgasbord that we throw at innovators to allow them to get incredibly rich at the expense of the rest of us.

Like Ezra, I applaud the Biden administration’s commitment to increase government support for developing new technologies, but we should not be doing this in a way that makes our inequality problem even worse. We can argue over the best mechanisms.

I personally prefer direct public funding to a Sanders-type prize system. The main reason is that we can require everything be fully open-sourced as quickly as possible under a direct funding system, allowing science to advance more quickly.

Also, I suspect that awarding the prizes will prove to be a huge legal and moral nightmare. It is not always clear who actually met the prize conditions and also who made the biggest contribution to getting there. For example, a researcher may make a huge breakthrough that allows pretty much anyone to come along and cross the finish line and claim the prize. Direct upfront funding removes this problem. (I discuss this issue in chapter 5 of the good book, Rigged [it’s free].)

In any case, we can debate the best mechanism through which public funding can take place, patent monopolies, prizes, or direct funding, but the idea that you only get paid once should not be controversial. It is unfortunate that Ezra doesn’t address this issue in his piece, since he does know better (he reads my stuff). There is a huge amount of money at stake in who gets the gains from innovation, likely more than $1 trillion a year, and it would be an incredible failing of the political process if the issue is not even discussed.

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Dean Baker: Do Workers Have to Take It on the Chin to Fight Inflation?

 

via Patreon

Do Workers Have to Take It on the Chin to Fight Inflation?

I have had many people ask me if there is not a better way to fight inflation than the current route of Federal Reserve Board rate hikes. Just to remind people, this route fights inflation by slowing the economy, throwing people out of work, and then forcing workers to take pay cuts.

The people who are most likely to lose jobs are the ones who already face the most discrimination in the labor market: Blacks, Hispanics, people with less education, and people with criminal records. Not only will millions of these workers lose jobs, tens of millions of workers at the bottom half of the wage distribution will be forced to take pay cuts. They are the ones whose bargaining power is most sensitive to the level of unemployment in the economy, not doctors and lawyers.

It seems more than a bit absurd, that when we have all these various public and private initiatives that are supposed to improve the lot of disadvantaged groups, we can have an arm of the government, the Federal Reserve Board, just swamp these efforts by creating a tidal wave of unemployment. I don’t want to disparage well-meaning efforts to help the disadvantaged, but they can’t come to close to offsetting the impact of a three or four percentage point rise in the unemployment rate for Blacks or Hispanics. And, the hit could be much larger.

So, it seems like a good idea to think of an alternative path to lowering the rate of inflation. When I want to reduce inflationary pressures I naturally think of the ways in which we have structured the market to redistribute income upward, as discussed in Rigged [it’s free].

We can look to reduce some of the waste in the financial sector that makes some Wall Street types very rich at the expense of the rest of us. My toolbox includes a financial transactions tax, universal accounts at the Fed (eliminates tens of billions in annual bank fees), getting pension funds to stop throwing money away making private equity partners rich, and getting universities to stop making hedge fund partners rich managing their endowments.

These are all great things to do, but not the sorts of policies that can be implemented overnight to stem current inflation. We can maybe get a foot in the door, but even in a best-case scenario the benefits will only be felt several years down the road.

Then there is the plan to end the protectionism that benefits highly paid professionals, like doctors and dentists. If our doctors got paid roughly the same as their counterparts in Germany or Canada, it would save us around $100 billion a year, or $900 per family. This would mean setting up international standards to ensure quality, and then many years of foreign doctors coming to the U.S., as well as increased competition from nurse practitioners and other health care professionals, to bring our physicians’ pay structure into balance. Again, great policy, but not the sort of thing that will have a big effect in the immediate future.

Next, we have reducing the corruption in the corporate governance structure. As it is, the corporate boards, who are supposed to keep a lid on CEO pay, don’t even see this as part of their job description. They see their jobs as helping the CEO and other top management.

We can look to change the incentive structure for directors, so they actually do take an interest in putting a check on CEO pay. As I point out, this matters not just for the CEO, but bloated CEO pay affects pay structures at the top more generally, taking huge amounts of money out of the pockets of ordinary workers.

My favorite tool is to put some teeth in the “say on pay” votes by shareholders on CEO pay. I would have the directors lose their pay when a CEO pay package is voted down. That seems like a great way to get their attention, but again, a change that will take years to have an impact, not something that could address the current inflation.

The last item in my market restructuring has more promise. This is the system of government granted patent and copyright monopolies, which has allowedBill Gates and many others to get ridiculously rich. I have argued for radically downsizing the importance of these monopolies, by increasing the role of public funding for research and creative work.

While the full agenda calls for largely replacing patents as a source of funding for innovation in the case of prescription drugs and medical equipment, and reducing their importance elsewhere, there are intermediate steps which can be taken to both reduce costs and get us further down this road. One is simply the sort of price controls on prescription drugs that were part of the Inflation Reduction Act.

These don’t begin to take effect until 2026 and only apply to a limited number of drugs, but we could in principle go much further. We will spend over $500 billion this year (almost $4,000 per family), for drugs that would likely sell for less than $100 billion in a free market. In other words, there is lots of room for inflation reduction here.

If we don’t like the government setting prices, even when government-granted monopolies made prices high in the first place, there is also the option of weakening the monopoly. We can require drug and medical equipment companies to issue compulsory licenses.

This means that anyone could produce a patented drug or medical device, but they would have to pay a modest licensing fee (say 5 percent) to the holder of the patent. This can be put in place now under the Defense Production Act, but going forward we can require companies to agree to this condition as a requirement for anyone benefitting from the fruits of government funded research.

All of these routes to curbing inflation involve more time than just having the Fed raise interest rates, but it seems much fairer to make those who benefitted from the upward redistribution of the last four decades pay the price for reducing inflation than those who have been the victims. It is also worth keeping in mind that the pandemic inflation may not a one-time story.

We know that climate change is going to lead to more and larger weather disasters in the years ahead. If we see a major industry or agricultural crop knocked out by flooding, fires, or extreme heat or alternatively, if millions of people must be relocated due to such events, it will impose a serious strain on the economy. The supply-side impact could lead to another bout of inflation like we are seeing now.

It hardly seems fair that we again tell the Fed to throw the must vulnerable people out of work to get inflation under control. We can use other routes, if we plan ahead.

I know that this program has pretty much zero chance in Washington. It means challenging the Great Big Lie, that inequality just happened, but we can still talk about these sorts of alternatives. And progressives who actually want to see less inequality will push them.

Dean Baker on Republican Glee Over a Recession - via Patreon

 Republicans: Another Reason a Recession Would be Really Bad News

There is a large recession lobby in Washington these days, that seems to view a recession as a positive good for the economy and society. The basic story is that we have seen a big jump in inflation, associated with the pandemic and the war in Ukraine. They argue that a recession will be needed to bring inflation back down to acceptable levels.

The logic is that the higher unemployment associated with a recession will force workers to take pay cuts. This will reduce inflationary pressures in the economy.

I, and others, have pointed out the enormous human costs associated with a recession. Unemployment is traumatic for everyone, but we know that the people who are most likely to lose their jobs in a recession are those who are most disadvantaged in the labor market, such as Blacks, Hispanics, people with less education, and people with a criminal record.

And, contrary to what you often hear in the media, the unemployed are not a relatively small group. While 5.0 percent or 6.0 percent unemployment might seem like a relatively small share of the population, most unemployment spells are relatively short (thankfully), as people move in and out of unemployment. But this means that two to three times this number of people may experience unemployment over the course of the year.

Furthermore, the reduced bargaining power, which is the whole point of this exercise, is experienced by tens of millions of workers, stretching up past the median worker. In our book, Getting Back to Full Employment, Jared Bernstein and I showed that the only times when the median worker saw sustained real wage growth in the years since 1980, were when we had very low rates of unemployment.

It seems more than a bit bizarre that, we have all these private and public efforts intended to reduce inequality and overcome the effects of centuries of discrimination, and then we have a government agency, the Federal Reserve Board, acting to deliberately increase inequality. This doesn’t mean that we shouldn’t take the concerns with inflation seriously, just that we should be very reluctant to go the route of pushing unemployment up as the main tool to reduce it.

Many of us have argued that a big jump in unemployment will not be needed to restrain inflation. The pandemic and war-related factors that led to the jump in inflation are gradually being reversed, as seen most clearly with the plunge in gas prices the last three months.

With monthly inflation coming in at zero in July, and likely to do so again for August, the Fed has the luxury of adopting a wait and see approach before going ahead with more big rate hikes. Expectations of inflation are actually falling, so there is little immediate basis for fear about a self-fulfilling burst of higher wage and price increases leading to higher inflation.

But there is another factor that needs to be considered when assessing the urgency of rate hikes and unemployment compared to the benefits of the wait and see approach: the likely Republican takeover of at least one house of Congress this fall. This is not a partisan question about whether the Fed should be acting to favor Republicans or Democrats (its actions at this point will have little impact on the pre-election economy), rather it is a recognition of how Republicans behave when there is a Democrat in the White House.

While political science on the whole probably has a worse track record than economists in terms of explaining its object of study, one item on which there is a high degree of certainty is that a weak economy is bad news for the incumbent president. The worse the economy looks in 2024, the poorer will be Joe Biden’s chances of getting re-elected.

Congressional Republicans certainly know this. They did everything they could to sabotage the economy after they gained control of the Congress in 2010. They insisted on large budget cuts, which slowed growth and kept the unemployment rate high.

Their story was the old joke about the deficit. When a Democrat is in the White House, the Republicans are the biggest worriers about deficits and debt anywhere. We saw that under both Clinton in the 1990s and President Obama in the last decade. However, deficits don’t matter when they want big tax cuts with Republicans like Reagan, Bush II, or Trump in the White House.

This history means that if the Republicans take over the House this fall, we can be absolutely certain that they will block any efforts to stimulate the economy to boost it out of recession. In fact, they will most likely be demanding budget cuts to make the recession worse. And, given recent history, they will be threatening government shutdowns and debt defaults to get these cuts.

The Republicans are a party that does not give a damn about the well-being of the country, after all, their rich backers will be doing fine in a recession. They want political power. Mitch McConnell put this as clearly as possible after Obama was elected in 2008. He said that it was his job to make sure that Obama was a one-term president. (McConnell obviously failed on that one.)

This political picture has to be taken into account when considering the relative risks of the Federal Reserve Board’s interest rate policy. The inflation hawks do have a point, there is a risk (albeit a small one in my view) that we will see the sort of wage-price spiral we saw in the 1970s, with inflation rates getting ever higher, or at least remaining at levels that few of us would consider acceptable.

However, there is also the risk that Republican control of Congress will make, what would have been a relatively short and mild recession, into a long and severe recession. If there is one lesson we have learned well following the Great Recession, it is much easier for the Fed to use monetary policy to slow the economy than to boost it out of a recession.

The Fed certainly has the ability to put the economy into a recession. If a Republican Congress wants to keep us in recession, there will not be much that the Fed can do to counter its actions.

Bloomberg, with comments: Europe’s Winter Gas Shortages Set to Last at Least Until 2025

The economic blowback from the Ukraine war, and cold war with China - is HUGE.

The blowback from the global economic war against Russia and China grows much larger, especially for Europe, and so-called emerging market nations as well. A recession is now certain for them, and increasingly likely in the US too. All to stop Russia from blocking Ukraine's entrance into NATO.

The Bloomberg article below this commentary details the degree of pain this conflict is inflicting. As far as I can see, no one working very hard to end it. Security considerations appear to have negated security in favor of NATO domination of Europe. The "domination" strategy -- which has long legs ever since the end of the second world war, has yielded what harvest, exactly?

The European Central Bank and Bank of England are now facing a serious double-digit energy/inflation crisis, and a virtually inescapable recession threat. A recession in Europe and the rest of the world will not spare the US. Indeed the strong dollar is rapidly raising borrowing costs for the rest of the world facing a crisis that will likely compel massive borrowing. 

The New PM in England, Elizabeth Truss, on her second day in office committed massive support to British households hit with energy costs that have increased nearly ten-fold. All with borrowed funds. The windfall tax on energy companies was rejected because it would disincentivize gas and oil resource investment at the same time there is no short term economic replacement for Russian natural gas.

All of these  are consequences of the proxy war with Russia over US and EU plans to recruit Ukraine into the NATO military alliance. I say "proxy, because the economic boycotts and sanctions, and gas shutoffs, have consequences far beyond and frankly even bigger than those on Ukrainian battlefields. 

Christine Lagarde's press conference

The official report of the ECB did not yet predict a recession. 

That omission brought laughter from several quarters, given the extremity of the energy crisis. However ECB chair Christine Lagarde responded to the laughter in her press conference today as if prepared for it. She confessed the published "base line" forecast as essentially optimistic, but noted that the ECB also had a "downside" forecast that was "grim", even "apocalyptic", and proceeded to enumerate dire risks if the war and boycotts and shutoffs extend -- or advance --beyond six months.

The energy corps and defense contractors are the big winners, so far. Everyone else should gird themselves for "demand destruction" -- a fancy term for layoffs and poverty, food and energy insecurity -- guaranteed to stop people from buying anything. However, the energy firms themselves are such concentrated and massive firms that windfall taxes on their skyrocketing wealth to pay for the costs apparently cannot be contemplated. 

A socialist would be inclined to say: "Let's nationalize the "too big to fail" energy firms and be done with the endless blackmail to Exxon  et al profits. It is tempting to suspect very cynical geopolitical plotting to some of these firms.

The invasion of Ukraine by Russia was not justified according to my understanding and support for Benjamin Franklin's outlook on foreign policy and war ["I never saw a good war, nor a bad peace" -- that from a veteran soldier, revolutionary, AND peacemaker] . 

But neither was it unprovoked. I am neither a Ukrainian, nor Russian. Further, I live in a country of routine mass and schoolhouse slaughters, staggering inequalities and miscarriages of justice, and am not inclined to pre-judge or lecture other countries on their alleged bad or criminal behavior. 

To my friends on the left who affirm an absolute right of a nation to self- determination, regardless of regional or global security considerations, and therefore have joined hands with imperialism to "liberate Ukraine", I see no road to peace in that stance and no road to "self-determination" of any kind. 

If one joins hands with imperialism to pursue what looks like virtue, he will end up losing his arms and legs too. Truth is the first casualty in war reporting, but where is an example of the US "liberating" anyone since WWII? It this is one, it would be the first. Without new, updated regional security, the US led liberation of Ukraine, and the hoped for overthrow of the Russian government, there will more likely result in a holocaust than self-determination for anyone.

Marxism and Self-determination

On the question of self-determination, many rose to cite V.I. Lenin's extensive remarks on this subject, which I just re-read. Putin has criticized these remarks for things they do not actually say. Some US Marxists have defended them, too, for things they do not actually say. An Odd correspondence. 

Lenin's intent was -- to refute Rosa Luxemburg's efforts to limit the right of nations to self determination, subject to whether the nationalistic  movements were socialist, or not. 

Since the Marxist conception of nations is entirely subordinate to their historic evolution as bourgeois organizations of society, Lenin argued it would be absurd to see them as having any other than a bourgeois state for their objectives, suited to bourgeois relations of production and politics. On the other hand, he says nothing on the "rights" to join military blocs and disrupt regional security. Indeed, the latter assertion seems irrelevant to the point the master Marxist was trying to make. 

I believe, however, it was George Washington. who said, near-about from memory, "in matters between nations, interests rule". Not, primarily, a moral "good" or "bad". quality to either friendships or conflicts between personalities. Whatever may be said of the invasion --- a horrendous, likely global economic bomb is now ignited by the US led boycotts and sanctions counter-attack. . The latter will create existential circumstances in numerous EU countries.

A massive failure of diplomacy needs to be corrected.

A massive failure of diplomacy permitted this war to start. Understanding interests, as well as ideal principles of a given nation or culture, is the key to giving diplomacy its best chance at deals that preserve and protect each party's existential interests. Even when diplomacy fails, the peacemakers' role and mission, especially in a nuclear armed world, must be redoubled in order to avoid 'apocalypses'.

The conflict in Europe is not unrelated to US attempts under both Trump and Biden to overthrow Chinese sovereignty in both Hong Kong and Taiwan. The sovereignty of China in both cases is affirmed in numerous treaties and signed documents. China has shutdown of US incited separatist agendas in Hong Kong and is plainly determined to do the same in Taiwan. What do the American people gain from subverting Chinese sovereignty? Who is threatened by who? And for what purpose -- other than "domination"? China has one foreign military base and 4 unarmed "offices", according to Google. The US has over 700, over 200 being well armed. 

The global economic and political war against Russia and China is the wrong strategy for these times. The pandemic, climate change, the proliferation of nuclear arms all call for aggressive "cooperation", not "domination" diplomacy. Russia and the world have mutual interests strong enough to achieve peace, to end the decades long expansion (to Putin--"aggressions") of NATO eastward, to devise new security frameworks that include, not exclude both Russian and Chinese participation, to end the global economic war which Biden falsely called "competition", to end militarization and occupation of Ukraine, and Russia's shut down of natural gas to Europe. All these goals demonstrate the urgent, imperative need for diplomacy and renunciation of domination policies on all sides.

Russia lit the match. But the global economic bomb has a recognizable "made in the US imperial" brand.

What is the price of this bomb? Inflation and recession. 

The FED has likely little choice but to sharply raise interest rates in the face of inflation steadily exceeding wage raises. It has and very few tools, to curtail inflation. Against the back drop of the war, and cold war, and sluggish asynchronous recovery from the pandemic related supply chain disruptions, raising rates will indeed "destroy demand", but the geopolitical conflicts may negate most of their impact on inflation.

 Biden's entire foreign policy seems oriented toward giving rebirth to 70 year old cold war alliances and frameworks dedicated to containing, repressing and destroying socialism in every form. These  alliances besotted with too many wars and failed interventions to enumerate, or to be credible as "defenders of human rights, or democracy". He seems determined to defy the slightest change in the essential post war US imperial position -- but in a much more multipolar world --: that peace is only possible if one nation is "dominant".

Such a position is, and has been, a cover for aggression. It mimics a Cartoon General's idea of peace through permanent war. It is difficult not to link the decades long NATO expansion eastward to the resurgence of Russian nationalism, which rose pretty much in (counter) proportion. The destruction of Russian socialism under the title of "the Washington Consensus" was a primary objective of the Bush and Clinton administrations following the collapse of the USSR. Indeed, the so-called "Oligarchs" were a direct corrupt result of Clinton inspired policies designed to destroy state economic ministries in Russia, deny Russia NATO membership, and open it to the mercies of US neoliberal investment. Ditto, really, the plan for Ukraine. By "neoliberal" I mean the proposition that the US is the worlds greatest democracy and that systems of bourgeois dominated political "democracies", like the US, are the only worldly perfection path permissible..


Now President Zelensky is calling for limited nuclear war. The rights and wrongs of the Ukraine war can be debated for years, but a a diplomatic failure of massive proportions need not be followed by an even bigger one. Biden and Putin, aided by any and all third parties, must move toward diplomacy.

 The power of energy becomes the central question of global political power and hope for stability. I will include links to LeGarde, PM Truss, and a lengthy interview with Fed Chair Powell on both forecasts and ideology around these moves.

john

*********************************************

Christine Lagarde's press conference

Chair Powell Remarks

Liz Truss Remarks

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Next Winter’s Crisis May Be Even Tougher for EU: Energy Update

BLOOMBERG.COM

Next Winter’s Crisis May Be Even Tougher for EU: Energy Update

The European Union is set to intervene in energy markets to take the pressure off companies that are being squeezed by a liquidity crunch. It will also propose a clawback on excess profits by power and oil companies as it seeks to protect citizens from soaring costs.

Supply to remain tight until at least 2025 on LNG bottlenecks
Demand destruction is coming to Europe, energy executives say






While European politicians are focusing on the region’s survival this winter, next year could be worse.

The loss of Russian natural-gas supplies will cause reserves to be depleted faster when temperatures drop in the coming months and make the process of preparing for following heating seasons even more difficult. With no quick fix available, the strain is set to last until at least 2025, according to energy executives.

“Europe could have an even bigger problem next winter,” Niek Den Hollander, chief commercial officer at German energy giant Uniper SE, said in an interview at the Gastech conference in Milan this week. “It is possible that nations won’t be able to fill up storage sites next summer as much as we have managed to do this year.”


Europe is gripped by its worst energy crisis in 50 years as Russia slashes deliveries in retaliation for sanctions imposed over its invasion of Ukraine. With prices soaring, the squeeze has intensified a cost-of-living crisis and pushed economies to the brink of recession.




Europe’s leaders are dealing with the near-term pain and have earmarked more than 300 billion euros ($297 billion) to take the sting out of soaring energy costs this winter. But they face a reckoning when those measures expire and there’s still no relief.


“It’ll be somewhere between 2025 and 2027 that we’ll see the prices in Europe coming back to where they were at the beginning of 2021,” Ed Morse, global head of commodities research at Citigroup Inc., said in a Bloomberg TV interview. Capacity for exporting liquefied natural gas “doesn’t grow overnight.”

Read more: EU to Consider Emergency Power-Use Cuts, Price Caps, Profit Grab

After decades building up its reliance on Moscow, the region now faces a painful reset, with strapped consumers forced to rein in usage and businesses cutting output.

“This is going to culminate in demand destruction,” said Charif Souki, chairman and co-founder of LNG developer Tellurian Inc. “People will have to change the way they live. You will drive your car less often, you will turn on your heating less often, you will turn on your lights less often, and you will have to live with industrial production that is curtailed.”

Coping With Gas Cuts

European gas demand falls this year despite higher usage in power


Source: Wood Mackenzie

*Aggregated 7-day average for Belgium, France, Germany, Greece, Italy, Netherlands, Poland, Portugal, Romania, Spain, UK


The key problem is that Russian gas -- which last year covered about 40% of European Union demand -- can’t easily be replaced. After Gazprom PJSC cut flows through the Nord Stream pipeline indefinitely over the weekend, supplies via Ukraine could be next.

“If the Kremlin’s end game is to completely starve central Europe of Russian gas supplies, then certainly transit via Ukraine is at risk,” said Laura Page, a senior LNG analyst at energy-data company Kpler.

The EU aims to discuss a price cap on Russian gas imports, part of an unprecedented plan to step into energy markets. President Vladimir Putin has already warned that Moscow won’t supply anything if the cap is introduced.

The standoff puts pressure on Europe’s leaders to diversify sources. Norway is now the main provider of Europe’s gas, but it doesn’t have capacity to fully offset supplies from Russia. Other nearby suppliers such as Azerbaijan and Algeria face some similar bottlenecks.

Filling the Gap

LNG and Norway replaced Russia as Europe's top gas provider this year


Source: ICIS



LNG, which can be carried by ship from far-away producers such as the US and Qatar, is a promising option. Germany -- among the countries most exposed to the loss of Russian deliveries -- is pushing to open its first floating LNG terminals in the coming months.


But import capacity is only one side of the problem. Global LNG production is already tight and increasing capacity takes as least three years, according to Colin Parfitt, vice president at Chevron Corp. Meanwhile, Europe has to fight with Asia for the existing volumes for the next couple of years.

With Europe facing a smaller pool of gas available, markets will remain tight for the foreseeable future.

“We will get back to a more normal situation, but it will take time,” Helge Haugane, senior vice president at Norwegian energy company Equinor ASA. “Volatility in prices is here to stay for longer.”

ean Baker: Will Remote Work Lead to International Competition for Professionals?

 via Patreon

Will Remote Work Lead to International Competition for Professionals? 

Contrary to the Washington Post, the Optimists Say Yes

The Washington Post ran a piece last week that raised the possibility that workers who are now working  remotely may see their jobs outsourced to countries with lower-cost  labor. It raised the possibility that this might lead to the same sort  of hit to jobs and wages that the rise in imports from China and  elsewhere gave to manufacturing workers.

The piece then tells readers:

“Many economists are optimistic that American workers will land on  their feet amid a gradual transition from a world in which they compete  with a few dozen locals for each new job to one in which they compete  with a few million professionals worldwide. But economists were  optimistic about Y2K-era globalization as well, and it seems wise to  keep a wary eye on the possible downside.”

While the second part of this paragraph is certainly true, most economists were very willing to ignore economics in arguing that massive imports from developing countries would not  reduce the pay of manufacturing workers, and less educated workers more  generally, the first sentence is a bit bizarre.

Exposing manufacturing workers to competition with their much  lower-paid counterparts in the developing world is a big part of the  upward redistribution of the last four decades. This had the effect of  both lowering the pay of less-educated workers, and reducing the cost in  the United States of a wide range of goods, from shoes and clothes, to  cars and steel.

More educated workers were the beneficiaries of this reduction in  costs. While their wages were not hurt by foreign competition, since  they were largely protected, their money went further since they could  now buy goods at a lower cost.

In this context, it is hard to imagine why anyone would consider it  “optimistic” that the pay of more educated workers, who are now working  remotely, will not be lowered by international competition. Such a  reduction in pay should mean that a wide range of services, such as  accounting, legal services, and medical services, can be provided at  lower costs. This will benefit the whole country, but especially those  workers who are not seeing their pay cut as a result of this  competition.

The reduction in pay for more highly educated workers should also  help reduce inflationary pressure in the economy. The highest 10 percent  of the population takes in almost 50 percent of personal income. If we can reduce this by just 5  percent, this would be equal to 2.5 percent of total income.

To understand the economic importance of this sort of hit to the  income of high-end earners, remember that many economists were going  hysterical about the inflationary impact of President Biden’s student  loan forgiveness program. By most estimates, loan forgiveness will  reduce the amount that people are paying on student loans by roughly 0.1  percent of GDP.

This means that a 5 percent reduction in the pay of high-end earners  would have 25 times as much impact in lowering inflation as the student  loan forgiveness had in raising inflation. If people think student loan  forgiveness is a big deal in raising inflation, then they should think  that the prospect of international competition for remote workers will  be an enormous deal in lowering inflation. Now, isn’t that optimistic?

Let me just add that I know that not all the people who will be hurt  by increased competition for remote workers are rich. But, as the old  saying goes, if you think you have a policy that does something useful,  without harming some people you don’t want to see harmed, you don’t  understand the policy. There is no way to lower incomes at the top  without hitting some people who are not at the top.

Having said that, we can and should also pursue policies that are more directly focused  on the very top, such as lowering CEO pay and eliminating the bloat in  the financial sector. But if you show me a policy whose impact will be  primarily to lower the pay of the top 20 percent of the workforce, I’m  an optimist and I’m for it. I’d love to hear from those economists who  say this is bad.

Perry Bryant: Historic Climate Legislation Passed (text only)

 Historic Climate Legislation Passed

by Perry Bryant

        The US Senate has historically been the place where climate legislation has died: cap and trade legislation in 2009, the Kigali Agreement phasing out hydrofluorocarbons, etc. Not this time. The Senate passed and President Biden has signed into law the Inflation Reduction Act (IRA), providing almost $370 billion in funding over the next ten years to significantly reduce America’s greenhouse gas emissions.  

        Princeton University’s Zero Lab projects that the IRA will cut the United States’ emissions by 40% by 2030. Without the IRA, our emissions would only have been reduced by 27% by 2030. The 40% cut in emissions puts the US close to meeting our Paris climate goals of a 50 to 52% reduction in emissions by 2030. 

        As important as these reductions in US emissions are -- and they are vitally important -- the IRA also reasserts American world leadership on climate issues increasing the chances (although there’s certainly no guarantee) that China, India and other countries will up their commitment to fighting the climate crisis during the upcoming November UN Conference of Parties in Egypt. 

        There’s a lot to the IRA. This article will summarize the major energy and environmental provisions and then provide some details on the tax credits that are available to individuals for purchasing an electric vehicle (EV) and the rebates available for retrofitting homes for energy efficiency.  

Energy Production

        For homeowners who install a solar array or a wind turbine, there is a 30% tax credit for the cost of installing these system, and that tax credit is available for the next ten years (until 2032). Battery storage, which currently does not qualify for investment tax credits, becomes available for the 30% tax credit in January and is also available over the next ten years. 

        Utility-grade solar, wind, geothermal, and batteries will also qualify for the 30% investment tax credit if the developer pays prevailing wages and has an apprenticeship program. These solar and wind projects can qualify for additional tax credits if they are located in “energy communities” that include brownfield sites, communities with high unemployment, and census tracts were a coal mine closed after 1999 or a coal-fired power plant retired after 2009. Altogether it appears that a facility could qualify for a 40% tax credit if it met all these add-ons including using domestically produced material in construction of the facility. 

        By 2030, the amount of solar energy produced in the US is expected to increase fourfold; wind energy threefold; and battery storage fourteen-fold. The IRA could well make the 2020s the decade of renewables. That is not too soon for addressing the climate crisis.

Electric Vehicles (EVs)

        Transportation is the largest source of greenhouse gas emissions in the country. Moving to electric vehicles (EVs) is an essential step towards reducing these emissions. During the negotiations on the IRA, Senator Manchin expressed concerns about providing incentives that would encourage EV purchases with batteries made in China and reliance on critical minerals mined in countries outside North America. The final version has significant restrictions on the EV tax credits that reflect his concerns about importing batteries and minerals from China and other countries.

        If you are considering buying an EV, or want to understand the restrictions on EV tax credits, the details of these tax credits are outlined at the end of this article. Both the tax credits and the restrictions on the EV tax credits are significant and may well impact how successful the EV tax credits will be in promoting the sale of electric vehicles.

Energy Efficiency

        The IRA revives a tax credit program for homeowners installing energy efficiency measures and establishes two new rebates to help pay homeowners to retrofit their homes to make them more energy efficient. The tax credit program, now called the Energy Efficiency Home Improvement Credit had lapse. The benefits are now made retroactive to 2022 although it will only pay 10% of the improvements. Beginning in 2023, the benefits increase to 30% and annual and lifetime caps are improved. 

The new rebate program promoting electrification (tax credits for electric heat pumps, e.g.) is income based. While one almost always wants higher income levels so more people qualify for these rebates, the income levels are not unreasonable, in my opinion. 

The second program – Home Owners Managing Energy Savings (HOMES) – provides enhanced benefits to low-income households, but is available to all households regardless of income. This program provides larger rebates depending on how much energy is projected to be saved from the retrofit. The details on all three of these energy efficiency programs, including eligibility guidelines and what will pay for (they are extensive) are at the end of this article. 

Both of these new rebate programs will be run by the state. The state will need to submit a draft program to the US Department of Energy for approval before benefits will be available. It is unclear how soon that will happen. By contrast the tax credit program, the Energy Efficiency Home Improvement Credit, is in effect now with enhanced benefits in 2023.

Just Transition

        As the country transitions away from coal and towards renewables for electric generation, there undoubtedly will be additional loss of coal mining jobs. One the best alternatives to mining jobs is to provide a true or just transition by creating good-paying manufacturing jobs. The IRA provides $10 billion in tax credits for manufacturing clean energy components such as solar panels, wind turbines, parts for EVs, etc. This funding through section 48C of the IRS tax code provides a 30% tax credit for manufacturing clean energy components, and $4 billion has to be spent in “coal communities.” This includes communities where a coal mine has closed since 1999 or a coal-fired power plant retired after 2009. Funding for a specific 48C project isn’t assured; funding is awarded on a competitive basis. This is a golden opportunity to diversify the state’s economy, particularly in southern West Virginia. One can only hope that state government and manufacturers take advantage of this once-in-a-lifetime opportunity. 

Methane Fee

        Methane is a very powerful greenhouse gas. Over a 100-year period, methane is 25 times more potent at trapping heat in the atmosphere than carbon dioxide (CO2). However, unlike CO2 which impacts the atmosphere for hundreds of years, methane dissipates in 10 to 12 years. So, reducing methane emissions can have some of the most immediate (in climate time) impact on global warming. 

The oil and natural gas industry is a top source of U.S. emissions of methane. They emit methane at every step in the production of oil and natural gas: drilling, processing, and distribution. 

        The IRA imposes a fee on methane emissions of $900 per metric ton beginning in 2024. The fee increases to $1,500 per ton by 2026. The fee only applies to large methane emitters, exempting small operators who emit as much as 60% of all methane emissions according to the Congressional Research Service. The IRA provides the oil and natural gas companies with $1.5 billion in grants and other incentives to help them reduce their methane emissions. And if companies can comply with an anticipated EPA regulation on methane emissions, they will be exempt from the methane fee. 

Environmental Justice

        The IRA contains numerous provisions supporting low-income communities and communities of color. Listed below are just two examples of the environmental justice provisions in the IRA. The Greenhouse Gas Reduction Fund sometimes referred to as the “Green Bank,” provides $27 billion in funding to EPA. These funds are intended to leverage private funding to develop low- and zero-emission projects. $20 billion will be available to nonprofit financing institutions, and 40% of these funds ($8 billion) must be invested in low-income and disadvantaged communities. 

        The Environmental and Climate Justice Block Grants provide EPA with $3 billion for environmental justice projects for disadvantaged communities. Eligible activities include pollution monitoring, transportation emissions reduction, and pollution prevention. 

Black Lung

        The tax on the mining of coal that historically funded the black lung program expired last year. The IRA permanently restores the tax on coal mining to fund the black lung program. 

 

Fossil Fuels

The IRA reflects Senator Manchin’s “all of the above” strategy for energy development. For example, the bill prohibits the Interior Department from approving renewable energy development on federal property over a ten-year period unless it also opens lands to oil and gas development. 

Specifically, in order for the Interior Department to issue rights-of-ways on federal property for solar and wind development, they are required to lease as much as 2 million acres onshore each year and at least 60 million acres offshore each year for oil and gas development. (Inside Climate News, July 28, 2022.) There is leasing reform along with this leasing. These reform measures include, “raising royalty rates and rental rates to hold a lease, eliminating non-competitive bidding, (and) raising bonding requirements.” (West Virginia Rivers Coalition, August 9, 2022.)

The IRA also provides enhanced benefits for carbon capture and storage (CCS). CCS is a technology that removes CO2 from emissions from the flue gases at coal- or gas-fired power plants or industrial facilities (e.g., cement or steel plants). CCS technology is not currently economically viable and demonstration projects have struggled or failed. The IRA increases the amount of tax credits that a company can claim from the current $50 per ton of CO2 to $85 per ton of CO2. 

Senator Manchin secured agreement from legislative leaders to also pass permitting reforms as part of his support for passing the IRA. At least two proposals for permitting reform have been suggested. One would move judicial review of the Mountain View pipeline from the 4th Circuit Court of Appeals to the DC Court of Appeals. The other would limit agency reviews under the National Environmental Policy Act to two years, and restrict judicial review once an agency has made a NEPA decision. 

Agriculture and Forestry 

        The IRA provides $20 billion to help farmers reduce and store greenhouse gases. There is an additional $14 billion to help rural electric co-ops to transition to renewable forms of energy production.

        The US Forrest Service will receive $1.8 billion to reduce fuel in the wildland-urban interface, as well as $50 million to complete an inventory of old-growth forest and to protect old-growth forest. 

Conclusion

        Whew. There is a lot in the IRA, and this review only touches on some of the more important provisions. One weakness of the IRA is that it does not require action by individuals or most industries. There are plenty of carrots in the IRA but few sticks. Developing the sticks will fall on President Biden’s shoulders. One can only hope that the combination of the IRA carrots and President Biden’s regulatory action will be enough to make the monumental transition away from fossil fuels to renewables; a transition that the International Energy Agency, the world’s energy experts, has called the most difficult in human history. 

In making this transition, the IRA is foundational. It is the most significant and comprehensive climate legislation ever passed by Congress. It creates the opportunity for the US to lead the world on climate reform and conceivably hold global warming to an increase of 1.5 degrees Celsius -- a very daunting challenge. But at least we have an opportunity to meet this challenge thanks to the IRA. 

Details on the EV Tax Credits

Currently, the tax credit for EVs is limited to the first 200,000 customers for each car manufacturer. Tesla and General Motors have already reached that limit and Toyota will shortly. The IRA eliminates this cap, but requires all EVs be assembled in the North America in order to qualify for the tax credit. Any tax credit that is available can be applied at the point of the sale, rather than waiting to file a tax return the following April.

        The EV tax credit in the IRA is up to $7,500 per vehicle, and is split equally into two buckets. The first bucket provides up to half of the tax credit ($3,750) and requires that batteries be manufactured or assembled in North America. In 2023, when the new EV tax credit becomes effective, 50% of the batteries have to be manufactured or assembled in North America. That increases over time until 2029 when 100% of the batteries must be manufactured or assembled in North America in order to qualify for the tax credit.

        The second bucket of up to $3,750 is contingent on where minerals used in the batteries are mined or processed. Beginning in 2023, 40% of these minerals (e.g., lithium, cobalt, and nickel) must be mined, processed or recycled in North America. This increases each year until 2027 when 80% of the battery’s minerals must be mined, processed, or recycled in North America. 

        It is unclear how quickly EV manufacturers can develop supply chains to meet these requirements. The US is heavily dependent on China for lithium-ion battery cells (80%) as well as graphite used for battery electrodes. EV manufacturers that can break this reliance on China will have a competitive advantage over EV manufacturers that are unable to do so. 

        There are also limits on the cost of the EVs and income limits on taxpayers who can qualify for EV tax credits. EV cars cannot cost more than $55,000 and SUVs and light trucks cannot cost more than $80,000 and still qualify for the tax credit. Additionally, individuals earning more than $150,000 and couples earning more than $300,00 do not qualify for the EV tax credits. 

        Used EVs sold by a car dealer also qualify for tax credits of up to $4,000 or 30% of the sales price, whichever is less. The sales price cannot exceed $25,000 and the EV must be at least two years old. Individuals who purchase a used EV cannot earn more than $75,000 (joint filers $150,00) a year. These tax credits take effect January 1, 2023.

Details on the Energy Efficiency Rebates

        There is one revived tax credit program for energy efficiency and two new rebate energy efficiency programs in the IRA. 

        The tax credit program, now called the Energy Efficiency Home Improvement Credit, had lapsed. It has been revived and made retroactive to 2022, although with only limited benefits: 10% tax credit on qualified efficiency measures with a $500 lifetime cap. Beginning in 2023, the tax credit increases to 30% and the lifetime cap on benefits is replaced with a cap of $600 per measure, and a $1,200 annual cap. Exceptions to these caps are included in the chart below.

        Eligible services and home improvements must be highly rated by Energy Star or other rating system, and include:

Heat pumps and heat pump water heaters ($2,000 credit)

Insulation and air sealing

Energy audits ($150 tax credit)

Energy-efficient HVAC systems (including furnaces, boilers, and central AC)

Electrical panel upgrades; must be at least 200 amps capacity

Energy-efficient windows and doors ($500 tax credit for doors)

The High-Efficiency Electric Home Rebate Program is one of the two new energy efficiency rebate programs. This one focuses on electrification. It provides rebates (not tax credits) to low-income homeowners for 100% of the amount listed below for installing electrical upgrades:

Heat pump water heater

$1,750

Heat pump for HVAC

$8,000

Electric stove or heat pump clothes dryer

   $840

Electric service upgrade 

$4,000

Insulation and air sealing

$1,600

Electrical wiring

$2,500

        Low-income homeowners are defined as households that earn less than 80% of the area median income as determined by the US Department of Housing and Urban Development (HUD) (see the chart below). Multi-family properties qualify if 50% of the residents meet this income requirement.

        Moderate-income households qualify for 50% of the maximum benefit listed above. For example, a moderate-income family could receive a rebate up to $4,000 for installing a heat pump. Moderate-income households are defined as earning between 80% and 150% of the area median income as defined by HUD (see the chart below). Households earning more than 150% of the median income do not qualify for rebates under this electrification program. Multi-family properties qualify if 50% of the residents meet these income requirements.

        According to the HUD website,[1] estimates for what 80% and 150% of the median income for West Virginia in 2021 for various household sizes are shown below. Please note that these are 2021 figures and will change. And they represent the best data available and should be considered estimates. 

Household Size

80% of the median income in West Virginia

150% of the median income in West Virginia

1

$33,750

$63,300

2

$38,600

$72,300

3

$43,400

$81,450

4

$48,250

$90,450

        The second energy efficiency program in the IRA is the HOMES program, and is a more traditional energy efficiency program. It provides rebates for the cost of a project depending on how much energy is saved through the project.

For retrofits that are projected to save 35% or more of the household’s energy, the rebates are $4,000 or 50% of the project costs, whichever is less. The benefits increase to $8,000 or 80% of the cost of the project whichever is less for households earning less than 80% of the area median income. 

For retrofits that are projected to save between 20% and 35% of the household’s energy, the rebates are $2,000 or 50% of the project costs, whichever is less. The benefits increase to $4,000 or 80% of the cost of the project whichever is less for households earning less than 80% of the area median income. 

For retrofits that achieve energy savings of at least 15%, they will receive “a payment rate per kilowatt hour saved…equal to $2,000 for a 20% reduction of energy use for the average home in the state.”[2] Benefits increase for households earning less than 80% of the area median income. 

Benefits from these two energy efficiency programs cannot be combined. Both programs will be run by the state. The state will need to submit a draft program to the US Department of Energy for approval before benefits will be available. It is unclear how soon that will happen.         

________________

[1] See https://www.huduser.gov/portal/datasets/il/il2021/2021summary.odn?inputname=STTLT*5499999999%2BWest+Virginia&selection_type=county&stname=West+Virginia&statefp=54.0&year=2021 

[2] I have no idea what this language means. But it is verbatim from the IRA statute.