Over at Vox on Monday, Brad Plumer wrote a really interesting and oddly exciting article, Solar Power Is Growing so Fast That Older Energy Companies Are Trying to Stop it. It is about how the electric utilities are very concerned about people putting solar panels on their houses, even though less than a half percent of electricity is coming from solar right now. This isn’t just, or even primarily, about the rapidly falling prices of solar technology. Let me explain.

Forty-three states have “net metering” laws that require excess energy collected by homeowners to be bough by the electric utility. This causes a feedback loop. The electric utility still has very high set costs of bringing electricity to everyone’s home. Thus, as less people buy electricity from them, they will be forced to raise the per unit price of electricity. As the price of electricity goes up, so will the pressure for people to install solar panels. According to Plumer, “If rooftop solar were to grab 10 percent of the market over the next decade, utility earnings could decline as much as 41 percent.”

In one way this is great: renewable energy is just around the corner! But we still need the electrical grid. We don’t want to end up with a system where we aren’t guaranteed electricity — you know, like the days when that great free market innovator ENRON was providing (or rather very often not providing) electricity. Even if this weren’t the case, and we could all just switch to solar and say goodbye to (in California) natural gas based electricity, there would be big fights as the utilities tried to keep their lucrative monopolies.

But given that there is a very real need to maintain the electricity grid, this is all turning into a real mess. Plumer mentions how this issue is splitting the conservative movement, where some are actually saying that solar is giving people more choices — which is true. Of course, I don’t especially think this attitude is going to last. Yes, there are Tea Party groups who are very pro-solar. But I’m sure that the ones that stay that way will find their Koch brothers’ oil money dry up and even if the groups don’t disappear, they will have little impact on the debate.

There are, however, many things that can be done to save the electricity utilities. One that is not being talked about is the most obvious: nationalization. But that’s always the way. That is the conservative way and therefore the American Way™. We can’t just solve problems in the obvious way. Like with healthcare, we couldn’t just have a single payer system, with all of its advantages. We had to work out a hugely complicated “free market” system that would appeal to the conservatives, even though none of them voted for it and now they all whine, “Why did Obamacare have to be so complex?!”

As electricity generation becomes more and more individualized and egalitarian, it just makes sense to make the distribution of it nationalized. I wish we could do the same thing with the internet. (Note: nationalize flow not content.) Instead, we are generally stuck with a cable company that totally sucks and a phone company that totally sucks. At least a utility is better than that. But as profits get squeezed, the utilities might start acting very badly — enabled by a corrupt political process, of course.

But it is good news that solar power is going down in price. Let’s just hope that the entire federal government doesn’t become a wholly owned subsidiary of Koch Industries. Then solar panels might be made illegal. And don’t pretend that that couldn’t happen.

Martin Wolf has written an important warning over at The Financial Times, Why Inequality Is Such a Drag on Economies. It is based on studies by Standard & Poor’s and Morgan Stanley that show that rising inequality is actually hurting the economy in the United States. This isn’t news. I’ve written about it before, Individual vs Collective Interests. But it is good to see it getting more coverage.

Let’s be clear: it is obvious that high levels of inequality would be bad for the economy. The idea of Say’s Law is that supply creates its own demand. The problem is that Say has been dead for almost 200 years and the “law” is wrong. If Say’s Law were true, we wouldn’t have recessions. Keynes argued that one of the reasons it isn’t true is that prices don’t automatically adjust to economic changes; if a worker is going to starve with a given wage, he just won’t accept that wage.

But look at what we’ve had in the world for the last six years. There are huge amounts of money cycling all through the economy looking for some place to invest it. And there is no place to invest it. So effectively, the rich (including corporations) are sitting on huge amounts of money. If anyone really believed Say’s Law, companies would just start producing stuff because “supply creates its own demand”! But they don’t, because they aren’t idiots.

It’s interesting that so much conservative economics is found to be completely useless when it comes to practical matters. In general, those who have to predict economic conditions and who have money on the line use New Keynesian kinds of models. I think this tells you all you have to know. There is no doubt that the new classical economists have important lessons for people interested in economics as an academic subject. But in terms of practical matters, why do they stick their noses in? Well, it’s pretty clear: because they have ideological axes to grind.

So no one should be surprised that our ridiculous level of economic inequality should be bad for the economy. The more money accumulated by a smaller and smaller group, the less money there is to buy stuff. Of course, it is so much worse than this because it isn’t just economics. The more money the small group has, the more they can manipulate the political process in their favor.

Martin Wolf discusses all this, but he puts far too big an emphasis on education. This I find mystifying. The young people today with college degrees can’t find jobs to use those degrees. If we had twice as many people with college degrees, we would have even more people who are over-qualified for the poor paying jobs that are available. Our focus should be on creating an economy where one could have a good life with just a high school diploma. Then there might be a market for people with advanced degrees. As it is, talking about college just avoids the issue.

And Wolf understand the issue. He wrote:

So you see the problem right there: we don’t provide decent jobs because the rich are taking all the profit in the economy for itself. And then, we don’t even take care of the poor — more and more of government transfer payments go to the top rather than the bottom. There is a feedback loop here where bad economic policy leads to high inequality which leads to more bad economic policy.

The question is: will this change? The truth is that I’m not hopeful. I discussed the basic problem earlier this year, Impulse Control and Global Warming. All the problems that conservatives claim plague the poor — things like poor impulse control — actually affect the rich to a much greater degree. They may see that for the economy as a whole, it is bad for all the rich to stick it to the poor. But it is still in their best interest to stick it to their own employees. And this can easily go on to the point where the whole society breaks down.

As Wolf noted, “Enormous divergences in wealth and power have hollowed out republics before now. They could well do so in our age.” Yes they could.

H/T: Mark Thoma

For some time, I’ve known that there was a little argument going on between election modelers Sam Wang and Nate Silver. I first noted it months back when I saw Wang poking at Silver about the fact that Wang that perfectly predicted the 2012 election and Silver had not. It always seemed playful to me, but with a serious undercurrent. After all, Silver was the man everyone talked about in 2012, but Wang was just this guy that more serious nerds knew about.

But then on 17 September, Nate Silver wrote, How The FiveThirtyEight Senate Forecast Model Works. Don’t let the title fool you; it was mostly just an exercise in calling Sam Wang an amateur. I discussed the situation at that time, The Senate Model Arguments. It’s gotten rather worse since them.

Silver has sent out a number of tweets that are, well, rude. I should be clear about my position. For quite a long time, I’ve considered Nate Silver a jerk. It isn’t surprising to me at all that he would be good at poker — it is a game that does tend to go with that temperament. And Sam Wang’s model has more told me what I want to hear this election cycle. But in general, I believe Silver’s model more. It is the one that I focus on now. But I’ll admit, a lot of it is style. I like how the model has inertia built in; it doesn’t bounce around like The Monkey Cage model, for example.

But recently, the whole thing seems to have turned ugly. For example, on Monday, Silver tweeted this:

My response to this was like Michael Salerno, “You’re looking petty, Nate. Just do you, my man. Your methods and results speak for themselves.” I was frustrated while the Princeton model was down. But to imply that something was amiss? Also, this tweet goes along with others where Nate Silver’s entire argument is, “The Princeton model is an outlier.” Everyone knows that. It’s what makes it interesting.

If all the Senate election models provided the same results, we would have to wonder what the point was. The truth is, at times, The Monkey Cage model has been a big outlier. But I’ve always been interested in that model because of its basis in (at one time: only) political science fundamentals. What’s interesting about Wang’s model is that it is the simplest. My understanding is that it doesn’t take into account “house effects” — estimates of how good particular polling organizations are. The assumption is that it will all work itself out. This is the wisdom of the crowd approach. Because of this, the Daily Kos model, which is also “polls only,” gives the Republicans a distinctly better chance than the Princeton model.

For whatever reason, Wang has gotten under Silver’s skin. I suspect it is because Silver is very competitive. Wang is a scientist. So regardless of his desire to win (which I don’t doubt), in the end, he can take the high road and say, “Now that the election is over, what have we found out about different approaches to models?” If Silver’s predictions prevail, he will just say he already knew, but Wang will be able to save face. If Wang’s prediction happens to prevail, then everyone else will look very foolish, even though it won’t actually mean that they were wrong or that Wang’s model is better. Silver’s prediction currently gives a 60% chance of the Republicans taking the Senate. That still means the Democrats have quite a reasonable chance of holding the Senate. If I were Silver, it would bug me that I would take a reputational hit if the slightly less likely thing happens.

I wish this would all stop. I think Wang and Silver and everyone else are doing very good and interesting work. I’m glad that we have different approaches to modeling the election. But at this point, I think there is real bad blood between these two men. And “The Ballad of Sam and Nate” may go on long past the election.