Monday, July 25, 2011

Nice interview with Bill Gates on energy and the environment---He even uses the term Opportunity Costs...NICE!!!

In a discussion on energy, Mr Gates invokes the important economic term "Opportunity Cost". He uses it terms of using land to produce food for either human consumption or energy production.  Trying to solve one problem (clean energy) creates unintended consequences (well, dead people from starvation/malnutrition).  I encourage you to read the whole interview (rather short).  He has some good insights and touches on many behavorial economic concepts as well the state of alternative energy on a macro and micro level. 

Q&A: Bill Gates on the World Energy Crisis

Anderson: When you look at the big picture, where should we be focusing besides nuclear? On massive solar plants in the desert? On middle-size stuff for office roofs? Or is there a reinvention that could be done right in the home?

Gates: If you’re going for cuteness, the stuff in the home is the place to go. It’s really kind of cool to have solar panels on your roof. But if you’re really interested in the energy problem, it’s those big things in the desert.
Rich countries can afford to overpay for things. We can afford to overpay for medicine, we can overpay for energy, we can rig our food prices and overpay for cotton. But in the world where 80 percent of Earth’s population lives, energy is going to be bought where it’s economical. People are going to buy cheap fertilizer so they can grow enough crops to feed themselves, which will be increasingly difficult with climate change.
You have to help the rest of the world get energy at a reasonable price to get anywhere. It’s great to have the rich world, because we’re there to think about long-term problems and fund the R&D. But we get sloppy, because we’re rich. For example, despite often-heard claims to the contrary, ethanol has nothing to do with reducing CO2; it’s just a form of farm subsidy. If you’re using first-class land for biofuels, then you’re competing with the growing of food. And so you’re actually spiking food prices by moving energy production into agriculture. For rich people, this is OK. For poor people, this is a real problem, because their food budget is an extremely high percentage of their income. As we’re pushing these things, poor people are driven from having adequate food to not having adequate food.
The most interesting biofuel efforts avoid using land that’s expensive and has high opportunity costs. They do this by getting onto other types of land, or taking advantage of byproducts that aren’t used in the food chain today, or by intercropping....""
The whole article is HERE...
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