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Comment by linuxftw | Hacker News Reader

> It seems like the entire solar industry is focused more on extracting government subsidies than on creating long term revenue streams.

Some might argue this is the exact nature of government subsidies.

People are always going to make choices in their economic self-interest. Either solar needs to be the most cost effective solution for their energy needs, or the government needs to artificially inflate the cost of other energy (or reduce any subsidies to other energy to make solar more competitive).

Every time a hurricane knocks out a town's electric grid and federal funds are used to repair it, that's a subsidy. When government authority to exercise eminent domain acquires easements or land to erect power distribution, that's a subsidy. Not to mention utilities being absolved from responsibility for the pollution they create.

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> People are always going to make choices in their economic self-interest.

I would add that they will make choices in their understanding of their economic self-interest. People are not rational actors.

Rationality, in the economic sense, doesn't mean making objectively correct decisions as perceived from the outside. It means to make decisions in the furtherance of a particular subjective goal. Making decisions that later turn out to be counter to those ends does not mean that person was behaving irrationality, just that they were wrong.

In other words, economically irrational actors are individuals who act consistently against their own self interest, even as they perceive it. Almost no one is irrational in that sense.

It's a loose definition, but it's all that is needed to make markets functional.

> It means to make decisions in the furtherance of a particular subjective goal.

The particular subjective goal is “experienced utility”, and economic rationality not only presumes that that can be meaningfully summed across time but also that the decision made will be made with perfect information as to resulting utilities and disutility and maximize the net lifetime experienced utility.

Why would economic rationality assume that the decision made will be made with perfect information as to resulting utilities and disutility and maximize the net lifetime experienced utility?

This seems like a non sequitur, and a really silly assumption. Wouldn't economic rationality assume that the decisions of actors are rational rather than based on perfect information about their consequences?

> Why would economic rationality assume that the decision made will be made with perfect information as to resulting utilities and disutility and maximize the net lifetime experienced utility

I didn't invent rational choice theory, so don't ask me to justify it.

Ok, well, I'll take a stab at it—the whole concept is exquisitely well crafted as a basis for the argument that liberal (in the classical sense) economic, and even political, systems are ideal in terms of experienced human outcome.

> Wouldn't economic rationality assume that the decisions of actors are rational rather than based on perfect information about their consequences?

Economic rationality is defined to include both perfect information and optimality given that information, so there is no “instead of”—your two alternatives are different phrasings of the same thing.

Where are you getting the idea that rational choice theory necessarily assumes perfect information?

That is the simplest model of rationality, but there are others. Wikipedia[1] lists three others in addition to perfect information:

> Perfect information: The simple rational choice model above assumes that the individual has full or perfect information about the alternatives, i.e., the ranking between two alternatives involves no uncertainty.

> Choice under uncertainty: In a richer model that involves uncertainty about the how choices (actions) lead to eventual outcomes, the individual effectively chooses between lotteries, where each lottery induces a different probability distribution over outcomes. The additional assumption of independence of irrelevant alternatives then leads to expected utility theory.

> Inter-temporal choice: when decisions affect choices (such as consumption) at different points in time, the standard method for evaluating alternatives across time involves discounting future payoffs.

> Limited cognitive ability: identifying and weighing each alternative against every other may take time, effort, and mental capacity. Recognising the cost that these impose or cognitive limitations of individuals gives rise to theories of bounded rationality.

[1] https://en.wikipedia.org/wiki/Rational_choice_theory

China threw massive subsidies at solar, and they readily admit there was a great deal of waste and graft, but now that the dust has settled China is the industry leader.

But there's no telling what the opportunity cost was. Likely far more massive than whatever short-term benefits from being an industry leader.

If there is no telling, then it's kind of pointless to speculate on its inefficiency.

> People are always going to make choices in their economic self-interest.

Why does 89 octane gasoline exist?

The magic of solar city is simple -- they figured out how to market easy monthly payments for a big capital investment. People decide to go solar for all sorts of reasons, and financial is usually not the driver. I live in the northeast, and it's marginal value, you save like $20/mo in electric bills and are stuck with a lease on your roof. Many of my neighbors with solar could save $50/month with a much a $4,000 investment windows, and a few hundred in chaulk and spray foam.

89 and 93 octane isn't the right argument.

You need to ask why does gasoline contaminated with ethanol still exist, when all it does is increase the cost of gasoline (per mile), decrease mileage (per gallon), and increase emissions (both per mile and gallon).

Drivers would save tons of money if they'd refuse to buy it, we would just need to get enough of us together to get such a thing done.

to subsidize corn producers in the mid-west.

IIRC, it reduces certain noxious components of air pollution like particulates at the cost of more CO2

It lowers actual octane rating, thus increasing air pollution ever so slightly.

An engine designed entirely for ethanol, not one that just merely takes a mix but is meant for gasoline, would be higher efficiency and be worth it.

Ethanol has a higher octane rating (113 RON) than petroleum, but is less energy dense (so lowers mpg.)

> You need to ask why does gasoline contaminated with ethanol still exist

The two mandates that together promote this are mandates for share of renewable fuel use and mandates for gasoline oxygenation to reduce carbon monoxide emissions; ethanol-containing gasoline helps meet both mandates (the latter is applicable to certain markets at certain times of year.)

> Drivers would save tons of money if they'd refuse to buy it,

Well, yes, refusing to buy the gas that is sold at the pump would save lots of money.

> Some might argue this is the exact nature of government subsidies.

I'm not sure why that's bad though. It's true it'd be nice if US science was unfettered by the constant funding-directed pressure to find novel ways to kill people (or support folks doing said killing), but it is true that it spurs research in a variety of areas.

> Either solar needs to be the most cost effective solution for their energy needs, or the government needs to artificially inflate the cost of other energy (or reduce any subsidies to other energy to make solar more competitive).

Solar's receiving less subsidy than most other forms of energy. The oil industry, in particular, receives massive subsidies (and military interventions abroad in some cases) and the current US government heavily favors the coal industry (which already receives a lot of monetary subsidy as well). SolarCity being somewhat unethical in defrauding sales is not unique to, you know, a subsidized business. It's a consequence of any insufficiently regulated industry where the penalty for fraud is less than the profit of fraud. It's a fundamental feature of capitalism when untethered from objective assessments of value.

> People are always going to make choices in their economic self-interest.

I hope people understand that this is actually a religious point, not a scientific one. The science says quite the opposite.

> It's a consequence of any insufficiently regulated industry where the penalty for fraud is less than the profit of fraud. It's a fundamental feature of capitalism when untethered from objective assessments of value.

That is not a feature or consequence of capitalism. Fraud exists in any economic system, and the punishments for fraud are independent of the economic system itself.

> I hope people understand that this is actually a religious point, not a scientific one. The science says quite the opposite.

Science can say whatever it wants, if you look at our world objectively, it's quite plain to see people are motivateed primarily by economic forces.

For instance, in the following article [1] (top relevant, second overall google search result for 'why buy an electric car'):

>Q: Why should someone should go out and buy an electric car right now?

> A: They can make a huge contribution to reducing carbon dioxide emissions—that's the most important reason. There are advantages in terms of going into the carpool lane. Electric vehicles are becoming (price) competitive with internal combustion engines. In our report we looked at the life-cycle cost of ... electric cars, hybrid electric cars, gas-powered cars and we found that, for example, the Nissan Leaf and the Smart car are competitive right now even without (government) incentives. What's driving down the cost of EVs is the reduction in the cost of the battery. Another important point is that the maintenance is minimal.

There are several reasons given. All but the first are clearly economic reasons meant to persuade people into buy an electric car. I believe this to be because, in the opinion of the answer, buying an electric vehicle has positive economic incentives that the reader might not recognize immediately, and they are providing a case for overall economic benefit to the purchaser.

The first point is not immediately about economics, but I argue that it is indirectly. The best way to decrease your carbon footprint is to not have a car and to sleep outdoors. Of course, that is not an economically viable or desirable option for most people. These people have made a self-interested economic decision to own a personal conveyance that operates on public highways at the expense of carbon emissions.

There will always be a cross section of personal motivations (tastes, preferences) and economic self interest. The wealthy can afford to pursue the former at the expense of the latter; the average person will be more adherent to economic self interest in for the future or marginal pursuance of the former.

[1] https://phys.org/news/2018-02-shouldand-shouldntbuy-electric...

> That is not a feature or consequence of capitalism. Fraud exists in any economic system, and the punishments for fraud are independent of the economic system itself.

This is a pretty lousy comeback to my argument. A better comeback might have been, "Why would economic penalties for fraud be effective if you're arguing that economic self-interest doesn't have a strong effect on the actions of humans?"

> For instance, in the following article [1] (top relevant, second overall google search result for 'why buy an electric car'):

The question is not, "Can humans rationalize decisions?" The question is, "On balance, is 'economic self-interest' a good model for predicting human behavior at any given scale?" No one here is arguing that humans can't rationalize.

> This is a pretty lousy comeback to my argument. A better comeback might have been, "Why would economic penalties for fraud be effective if you're arguing that economic self-interest doesn't have a strong effect on the actions of humans?"

The statement which I responded to, that capitalism begets fraud as a feature of capitalism, is wholly untrue. Fraud exists in any economic system, and the punishments for any crime, whether economic or otherwise, have nothing to do with an economic system. There isn't any other rational response to your claim.

> The question is not, "Can humans rationalize decisions?" The question is, "On balance, is 'economic self-interest' a good model for predicting human behavior at any given scale?" No one here is arguing that humans can't rationalize.

My stance is that economic self-interest is broadly irrefutable, it doesn't require perfect rationality or all (perfect) information.

To a consumer uninterested in something other than price (ie, all motivations in which they care about being equal), power company A (nuclear) selling power for $0.01/kwh vs company B (coal) selling power for $0.005/kwh, the consumer is likely going to choose power company B, due to cheaper price, unless they have some pathological reason for choosing A (it could be that a higher price in itself is perceived as being higher quality, which is the case for many products).

> The statement which I responded to, that capitalism begets fraud as a feature of capitalism, is wholly untrue. Fraud exists in any economic system, and the punishments for any crime, whether economic or otherwise, have nothing to do with an economic system. There isn't any other rational response to your claim.

You're projecting an argument onto me that I didn't make nor claim to have. I didn't suggest or imply that all forms of capitalism uniquely generate fraud. They do exist in every system. You're angry with my phrasing not sufficiently hedging your concerns. You're also strictly wrong about how legal and regulatory systems impact economic systems. It's neither true nor true of how the literature evaluates said systems.

> My stance is that economic self-interest is broadly irrefutable, it doesn't require perfect rationality or all (perfect) information.

I think you're wrong, and overreaching with econ-101. This is like saying "Supply and demand is never violated." It's violated all the time.

If we're in the league where "I cite a magazine article" is considered to be a useful citation proving your point, then I cite all of Dan Ariely's work meant for consumption by lay-folk.

> You're projecting an argument onto me that I didn't make nor claim to have. I didn't suggest or imply that all forms of capitalism uniquely generate fraud. They do exist in every system. You're angry with my phrasing not sufficiently hedging your concerns. You're also strictly wrong about how legal and regulatory systems impact economic systems. It's neither true nor true of how the literature evaluates said systems.

I'm not projecting anything, your statement reads as

> [companies will commit fraud when the] penalty for fraud is less than the profit of fraud. It's a fundamental feature of capitalism when untethered from objective assessments of value.

To me, you're saying that "fraud is a fundamental feature of capitalism, unless regulated", which implies that fraud is an unavoidable consequence of capitalism unless the authorities step in to prevent it. The tone of your phrasing suggestions specifically that capitalism is directly correlated with fraud. If you didn't intend to make this suggestion, I can understand your consternation to my rebuttal.

Capitalism has nothing to do with fraud. Capitalism has nothing to do with law enforcement and crime punishment.

> If we're in the league where "I cite a magazine article" is considered to be a useful citation proving your point, then I cite all of Dan Ariely's work meant for consumption by lay-folk.

To my point in that article, the 'evidence is everywhere' as illustrated by the broad availability of information to support my claim. Just look at the marketing around electric vehicles and solar in general; you'll see a strong unifying factor of 'economic motivation' in those mediums.

Here's the top result for 'why buy solar' [1]. Top factors are all entirely economic. Clearly, the marketing around these products would prioritize most people's primary motivation for acquiring those products.

[1] https://www.energysage.com/solar/why-go-solar/

> The tone of your phrasing suggestions specifically that capitalism is directly correlated with fraud. If you didn't intend to make this suggestion, I can understand your consternation to my rebuttal.

But not enough to not be defensive about your reading, it seems.

> To my point in that article, the 'evidence is everywhere' as illustrated by the broad availability of information to support my claim.

Oh. That's not a metric I find compelling.

I don't think you've sufficiently proven the argument which the rest of your statements hinge on: "People are always going to make choices in their economic self-interest". It's an attractive (if somewhat cynical) point, but it's no more reasonable than any other generalisation. Not very.

If anything, voting patterns in the US prove this wrong.

Tax reform means my organically growing startup gets to keep 33% more of our profit to reinvest back into the company, which has meaningfully impacted our annual budget and growth trajectory.

VC funded startups get the advantage of growing ahead of profit, and booking tax losses which they can carry forward.

Bootstrapping means growth driven by profit, which necessitates paying income taxes on the ever growing cash balance which flows from growing revenues & expenses (e.g. always having 3 months operating expenses in the bank)

Ok. But the "working class" people who voted Trump in don't get to see any of those gains. They at best got a one time bonus, which is still taxed at higher rates, and in exchange, they get cuts to many of the services they rely on.

The gains to the working class is seen in the lowest unemployment numbers ever, a rising workforce participation rate, and starting to see the first wage growth for the working class in decades.

That’s because that extra 33% in our bank balance means more marketing spending, more inventory, more open reqs for hiring sale, marketing, support, and engineering, etc. etc.

E.g. This WSJ post which is also on the front page: “U.S. Workers Get Biggest Pay Increase in Nearly a Decade”

https://www.wsj.com/articles/u-s-employment-costs-rose-in-th...

"The gains to the working class is seen in the lowest unemployment numbers ever"

Which isn't being accompanied by wage gains, and were going up long before the tax cuts happened.

"That’s because that extra 33% in our bank balance means more marketing spending, more inventory, more open reqs for hiring sale, marketing, support, and engineering, etc. etc."

Which is great, except the vast majority of companies are using that 33% for stock buybacks.

> Which is great, except the vast majority of companies are using that 33% for stock buybacks.

That’s certainly a popular talking point, but I think frankly it’s impossible;

“Publicly traded companies constitute less than 1 percent of all U.S. firms and about one-third of U.S. employment in the non-farm business sector.”

"That’s certainly a popular talking point, but I think frankly it’s impossible;"

Think what you want, but you're not entitled to your own facts. And the facts show that, most publicly traded companies used the money for buybacks, and that wages did not grow very much in the last quarter, which one would expect if these tax cuts were going to go to wages. Which they didn't.

> E.g. This post which is also on the front page: “U.S. Workers Get Biggest Pay Increase in Nearly a Decade”

You mean this one [0] that was flagged off the front page afte the discussion thread pointed out it was using figures not adjusted for inflation, where the inflation-adjusted figured show a decline of 0.1% percent in wages?

[0] https://news.ycombinator.com/item?id=17655634

> Tax reform means my organically growing startup gets to keep 33% more of our profit to reinvest back into the company, which has meaningfully impacted our annual budget and growth trajectory.

There's no doubt that we get better tax solutions in the short term. Long term, it makes government services we rely upon to sustain our business untenable. This is the problem with an "economic self-interest" argument: scale matters.

There's also the point that in the grand scheme of things, our companies don't matter and their short term windfalls shouldn't come at the cost of funding for education and social services that make it possible to sustain a healthy economy in the future. I certainly don't think my nascent company is more important than funding public education for the next generation in my country.

Its patently obvious. No sane individual will systematically go against their economy self interest.

You may wish to look into behavioral economics [1], a system of psychology + decision making that looks deeply at how individuals often do go against their economic (and other) self-interests.

[1] https://en.wikipedia.org/wiki/Behavioral_economics

I mean, mental health in this country has long been neglected, but I'm not sure that explains it all.

What? His argument doesn't require that statement to hold true. His statement only requires a very small percentage of people who're in the solar industry to make choices in their own economic self-interest.

> Every time a hurricane knocks out a town's electric grid and federal funds are used to repair it, that's a subsidy. When government authority to exercise eminent domain acquires easements or land to erect power distribution, that's a subsidy.

This is anti-government fervor carried to absurdity. No man is an island. What is the point of government if not to provide care in disastrous situations? And yes this is the peoples self-interest in carrying on a stable society. I support this kind of "subsidy" 100%.

I don't think linuxftw was necessarily saying that government intervention is inappropriate.

They were saying that the nature of government intervention is to distort the underlying economics.

It is therefore unsurprising when businesses grow up around these temporary distortions rather than long term business models.

It's the "price" we pay for whatever upsides there are to the subsidy.

Then I support this intervention. This idea that there is some "pure" form of undisturbed economics that is practiced outside the framework of achieving some larger social objective is also an absurd myth.

It is OK to support the intervention, but it's helpful to be honest about what it is (subsidy) so we can have an honest discussion the tradeoffs.

Oh then, is the subsidy for fossil fuels and roads driving increased intensity of hurricane storms? If you think so then what should we do with the increased destruction of property who at perhaps only peripherally participated in that subsidy?

> Oh then, is the subsidy for fossil fuels and roads driving increased intensity of hurricane storms?

I am unable to reply to this directly due to comment depth.

Public highways provide certain economic incentives. Land that would be of marginal utility due to transportation costs without public highways now has greater economic utility. This utility provides economic incentives to private automobiles to capitalize on that land. These public highways create traffic and pollution via suburban sprawl that would otherwise be much less. Public utilities also help subsidize suburban sprawl.

Increased economic destruction by hurricanes (whether worsened by fossil fuels or not) is due to government providing economic incentives to construct in coastal areas subject to hurricane damage. The federal government subsidizes flood insurance for properties in these areas, make the actual cost of ownership lower for the developers and higher for others (tax payers). Perhaps it's cheaper to not erect suburban neighborhoods in areas prone to flooding in the first place.

It's all interconnected. Government subsidies in their various forms impact economic decisions for better or for worse.

> If you think so then what should we do with the increased destruction of property who at perhaps only peripherally participated in that subsidy?

Don't subsidize the reconstruction of properties damaged by hurricanes and flooding. The market will equalize the situation by 1) Insurance will be more expensive 2) Property value will decrease due to increased insurance cost (total cost of ownership) 3) Builders will be highly incentivized to build more hurricane resistant buildings in order to obtain lower insurance rates 4) Hurricanes will have less economic impact due to the aforementioned facts

> Increased economic destruction by hurricanes (whether worsened by fossil fuels or not) is due to government providing economic incentives to construct in coastal areas subject to hurricane damage.

No, infrastructure built to hurricane standards 50 years ago might be perfectly strong to stand against current storms of the time. If increased storm strength is cause by fossil fuels (and that likelyhood is strongly supported by scientific studies), then the fossil fuels (with or with subsidies) will have incurred costs to a lot of other externalized actors. Shouldn't that industry have to pay?

> Don't subsidize the reconstruction of properties damaged by hurricanes and flooding.

By leaving "the market" to contend with increased hurricane resistance alone you have just caused increased expenses for everyone building homes for ignoring fossil fuel externalities (some of which was encouraged by gov't subsisdy). And it's not just homes, it's maybe reworking entire metropolitan areas sewer or housing zones.

All of this underlines that the practice of "economics" has no such neutral starting point. Any action, even the action of letting "the market" decide is a social and political decision of helping some parties over others (or, better, helping many parties together). And these decisions often can't be disaggregated into neat isolated and individualized transactions or responsibilities.

> Shouldn't that industry have to pay?

The US government says they shouldn't have to pay. I doubt there is enough data to state empirically that storm 'intensity' has increased substantially over the last 50 years relative to the last 1000.

We don't have a system in place to account for every environmental impact made by people. Is everyone that has ever dug a hole in the ground responsible in some small way for soil erosion to contaminate waterways?

Similarly, what about crop irrigation and water rights? Farmers use public waterways to the detriment of estuaries and deltas. This might cause economic and ecological problems down stream. This may cause destruction of property such as an oyster farm.

It's clear at this point that coastal environments are subject to change, and sometimes dramatic change, irrespective of human influence. This should factor into the cost of the property and its insurance.

> By leaving "the market" to contend with increased hurricane resistance alone you have just caused increased expenses for everyone building homes for ignoring fossil fuel externalities (some of which was encouraged by gov't subsisdy). And it's not just homes, it's maybe reworking entire metropolitan areas sewer or housing zones.

The cost of homes is not necessarily rising but being more fairly distributed to those who choose to live in high-insurance areas. The marginal value of the land will decrease, more money can be allocated towards home construction quality versus merely owning the land, and the cost of housing will normalize.

Higher cost to insure will place deflationary pressure on housing prices to normalize total cost of ownership.

So which is it? Do we have to carefully consider "subsidy" of some activities, or are we throwing up our hands and saying "we don't have a system in place to account for environmental impacts"? I would say economic impacts (instead of environmental) made by political decisions?

> The cost of homes is not necessarily rising but being more fairly distributed to those who choose to live in high-insurance areas.

I would dispute that claim. If a 200 year old plantation house in the south now has to be rebuilt to handle more extreme weather due to expanded areas of storm incursions are we to blame the "choice" of the current owners? This is to some degree a pretend level of market "choice" by people living in regions of the nation. What if a family has handed down that house for generations. Did they make a choice of any sort? But they'll have to bear the cost of the upgraded durability of the building beyond that of regular maintenance. Public city infrastructure is the same way - incurring completely unneccessary upgrade costs due to non-choice climate change.

The future always holds some level of uncertainty. At this point, most people believe climate change is a certainty, so they have to operate based on those assumptions.

I don't think anyone had this information 50 years ago, so who are we going to hold accountable?

The fossil fuel industry which knew it all 20+ years ago...

Precisely. Government manipulation of the energy marketplace strongly impacts the economic viability of some energy sources over others.

Current market conditions mean people will choose traditional grid-backed energy (most of the time) for economic self-interest reasons.

Whether these subsidies are good or bad is up to the reader to decide. There are plenty of people on the internet that are willing to tell others 'what to think.' I just like to highlight what I believe to be the causation so we can achieve an optimal outcome instead of endlessly parroting dogmatic beliefs of any political party.

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