Paul Krugman: Progress in solar panels has been so dramatic and sustained that … prices adjusted for inflation [have been] falling around 7 percent a year. … If the downward trend continues — and if anything it seems to be accelerating — we’re just a few years from the point at which electricity from solar panels becomes cheaper than electricity generated by burning coal. And if we priced coal-fired power right, taking into account the huge health and other costs it imposes, it’s likely that we would already have passed that tipping point.
The "market" doesn't price in health and environmental costs; health costs are clearly an externality - the coal plant electricity in OHIO doesn't pay for athsma in NY. Also, we don't properly account for military costs to keep the straights of hormuz open (to put it another way, if Iraq and Libya didn't have oil, do you think we would be spending hundreds of millions of dollars there ?)I admit that there are load mismatch issues (sun in AZ doesn't shine during midnite in NY in Dec).What is most curious is that "red" states have the most wind and solar - if the GOP could spend 10% on solar/wind etc that they spend on tax breaks for goldman sachs, AZ and MT and other red states would be the new persian gulf.Gotta admire the GOP's adherence to values(nuclear of course is the worst; without the explicit insurance guarantee of the US Gov't, every nuclear plant would shut down tomorrow)
PS: anyone who uses the word "exponential" is usually not to be trusted, unless they are a physicist or physical chemist
My guess is that predictions made for 20 years out on anything that isn't obviously going to happen will have a success rate not much different than a coin flip would generate.
Can anyone point to someone who made a statistically significant series of predictions 20 years ago that have come true today, for events which were non-obvious or controversial at the time?
As to capacity and scalability, I do know that most houses in California can make the meter "turn backwards" just using part of their roofs for solar. So the area to be covered with PV is not necessarily any more than the area already covered by humans.
I don't know about disposal per se, but I do know design life is 25 years, with plenty of reason to think they will work with degraded efficiency somewhat longer than that. So at least in volume per year of "emissions" PV is gigantically below combustion based energy sources.
I have two questions about solar: what are the capacity and the real cost when production is scaled up to terawatts?
First, capacity: to replace other energy sources we'd have to blanket staggeringly huge swaths of the planet with solar collectors, the implication being that even if it the panels were free, the impact would be severe. And at least some of the technologies require rare earths which have a limited supply. Even if we wanted to build 50000 square miles of collectors, could we?
As to real cost: if 50% of our energy generation depends on photovoltaics (an arbitrary number), what impact does that have in terms of pollution from building and then discarding them? Would measures to control pollution drive up costs to a degree that could make their use impractical?
I would expect long term prediction markets to behave close to identically to the stock market when predicting some 20-year-out business trend.
First reason: why should the discount rate in a betting market be any lower (biased towards longer term payoffs) then in the stock market?
Second reason: it would see if there was a material difference in prediction between the betting and stock markets there would be an arbitrage opportunity. And arbitrage is WAY easier to make money at than predicting the future correctly 20 years out.
You pay an exchange, they using the money to buy an asset like a stock index fund, then the winner gets that fund, or its final cash value, at the end.
Generally, futures exchange value your collateral regularly (just think what they would do if someone had pledged PIIGS bonds before the crisis) and issue margin calls if it lost too much of its value. Just like they do if you need to add margin because the market moved against you.
The problem is that there is already an economic bubble built around fossil fuels.
Fossil fuels have a value in the ground that reflects their extraction cost and the expected value of those fossil fuels if they are burned as fuel. However the atmosphere cannot withstand combustion of all of those fossil fuels without global warming causing catastrophic damage.
Some of those fossil fuel reserves are not worth what they are valued at by the stock market because they can't be burned, yet economically they are valued as if they can be burned.
This is a bubble, but with trillions in inflated bubble asset valuation, that asset can be used to borrow a lot of money and it is someone else that will end up with nothing when the bubble pops.
I'm not sure I understand your point. Are you saying that there are prediction markets that accept pledges of stock or other assets in order to buy contracts? If that's true, then why won't they just loan me the money (at 0 interest) to make my bets? If they won't do it at 0 interest, then we're back to my problem. What happens to my bet if the stock loses all its value in the 20 years we're waiting?
Or did you mean something else?
Maybe you should make it clear: How can I make a long-term bet about a future event and have some hope that the money I bet will be working for me while the bet is pending?
Even as prices fall, solar is still very expensive compared to fossil fuels and also only works when the sun is shining, which introduces serious power utilization and energy storage issues. Personally, I look forward to those issues being overcome at least in part by advances in ultra-capacitors. But meanwhile... Drill baby drill!
The problem with long term prediction markets is that they don't pay dividends or otherwise appreciate in a regular way. Betting money on an event 20 years down the road makes no sense if that money will be tied up doing essentially nothing in the mean time. Investors demand returns. Easy bets (e.g., the US will exist in 20 years) will start and stay near their true odds giving investors no incentive to bet. Long shots will stay long, and bets that could either be a push or at most double your money really suck when your money could be consistently earning 3% or 4% in traditional investments over 20 years you're waiting for your long term bet to pay off.
You want people who have knowledge to come and bet on propositions about the future, but you're not willing to pay them for the use of their money in the meantime. Given that prices are usually supposed to represent the probability of the event directly and are therefore bounded above, the room for appreciation is small. Investors are likely to shy away from investments that don't have large potential upsides. It seems to me that only in the case where insiders possess significant hidden contrary information do they have any incentive to try to make some money on a bet. Otherwise, you're just operating on uniformed sentiment, which isn't what you want for the market to be predictive.
The "market" doesn't price in health and environmental costs; health costs are clearly an externality - the coal plant electricity in OHIO doesn't pay for athsma in NY. Also, we don't properly account for military costs to keep the straights of hormuz open (to put it another way, if Iraq and Libya didn't have oil, do you think we would be spending hundreds of millions of dollars there ?)I admit that there are load mismatch issues (sun in AZ doesn't shine during midnite in NY in Dec).What is most curious is that "red" states have the most wind and solar - if the GOP could spend 10% on solar/wind etc that they spend on tax breaks for goldman sachs, AZ and MT and other red states would be the new persian gulf.Gotta admire the GOP's adherence to values(nuclear of course is the worst; without the explicit insurance guarantee of the US Gov't, every nuclear plant would shut down tomorrow)
PS: anyone who uses the word "exponential" is usually not to be trusted, unless they are a physicist or physical chemist
My guess is that predictions made for 20 years out on anything that isn't obviously going to happen will have a success rate not much different than a coin flip would generate.
Can anyone point to someone who made a statistically significant series of predictions 20 years ago that have come true today, for events which were non-obvious or controversial at the time?
They aren't, and they won't be for all events.
Even for some very popular events, they won't be good prediction markets unless there are a sizable number of participants.
Not only can it be burned, Robert Laughlin assures us that from a geological perspective, it WILL be burned.
As to capacity and scalability, I do know that most houses in California can make the meter "turn backwards" just using part of their roofs for solar. So the area to be covered with PV is not necessarily any more than the area already covered by humans.
I don't know about disposal per se, but I do know design life is 25 years, with plenty of reason to think they will work with degraded efficiency somewhat longer than that. So at least in volume per year of "emissions" PV is gigantically below combustion based energy sources.
I have two questions about solar: what are the capacity and the real cost when production is scaled up to terawatts?
First, capacity: to replace other energy sources we'd have to blanket staggeringly huge swaths of the planet with solar collectors, the implication being that even if it the panels were free, the impact would be severe. And at least some of the technologies require rare earths which have a limited supply. Even if we wanted to build 50000 square miles of collectors, could we?
As to real cost: if 50% of our energy generation depends on photovoltaics (an arbitrary number), what impact does that have in terms of pollution from building and then discarding them? Would measures to control pollution drive up costs to a degree that could make their use impractical?
I would expect long term prediction markets to behave close to identically to the stock market when predicting some 20-year-out business trend.
First reason: why should the discount rate in a betting market be any lower (biased towards longer term payoffs) then in the stock market?
Second reason: it would see if there was a material difference in prediction between the betting and stock markets there would be an arbitrage opportunity. And arbitrage is WAY easier to make money at than predicting the future correctly 20 years out.
You pay an exchange, they using the money to buy an asset like a stock index fund, then the winner gets that fund, or its final cash value, at the end.
Generally, futures exchange value your collateral regularly (just think what they would do if someone had pledged PIIGS bonds before the crisis) and issue margin calls if it lost too much of its value. Just like they do if you need to add margin because the market moved against you.
@daedalus2u,
1. How could we, in the future, verify that a fossil fuel bubble has been burst?
2. In what year is this most likely to occur?
3. What probability do you assign to it happening in that year?
The problem is that there is already an economic bubble built around fossil fuels.
Fossil fuels have a value in the ground that reflects their extraction cost and the expected value of those fossil fuels if they are burned as fuel. However the atmosphere cannot withstand combustion of all of those fossil fuels without global warming causing catastrophic damage.
Some of those fossil fuel reserves are not worth what they are valued at by the stock market because they can't be burned, yet economically they are valued as if they can be burned.
This is a bubble, but with trillions in inflated bubble asset valuation, that asset can be used to borrow a lot of money and it is someone else that will end up with nothing when the bubble pops.
Why should we think markets are an accurate predictor of all events?
I'm not sure I understand your point. Are you saying that there are prediction markets that accept pledges of stock or other assets in order to buy contracts? If that's true, then why won't they just loan me the money (at 0 interest) to make my bets? If they won't do it at 0 interest, then we're back to my problem. What happens to my bet if the stock loses all its value in the 20 years we're waiting?
Or did you mean something else?
Maybe you should make it clear: How can I make a long-term bet about a future event and have some hope that the money I bet will be working for me while the bet is pending?
Even as prices fall, solar is still very expensive compared to fossil fuels and also only works when the sun is shining, which introduces serious power utilization and energy storage issues. Personally, I look forward to those issues being overcome at least in part by advances in ultra-capacitors. But meanwhile... Drill baby drill!
You can bet stocks or any other assets that appreciate. You money can be doing work, in addition to supporting your bet.
The problem with long term prediction markets is that they don't pay dividends or otherwise appreciate in a regular way. Betting money on an event 20 years down the road makes no sense if that money will be tied up doing essentially nothing in the mean time. Investors demand returns. Easy bets (e.g., the US will exist in 20 years) will start and stay near their true odds giving investors no incentive to bet. Long shots will stay long, and bets that could either be a push or at most double your money really suck when your money could be consistently earning 3% or 4% in traditional investments over 20 years you're waiting for your long term bet to pay off.
You want people who have knowledge to come and bet on propositions about the future, but you're not willing to pay them for the use of their money in the meantime. Given that prices are usually supposed to represent the probability of the event directly and are therefore bounded above, the room for appreciation is small. Investors are likely to shy away from investments that don't have large potential upsides. It seems to me that only in the case where insiders possess significant hidden contrary information do they have any incentive to try to make some money on a bet. Otherwise, you're just operating on uniformed sentiment, which isn't what you want for the market to be predictive.