## Saturday, February 14, 2015

### The US Exports water and land mass in the form of Ethanol. Madness.

I follow several agricultural organizations on Twitter because they provide lots of good info and graphics on things that interest me.

The US Grains Council is one of them.  They posted this graphic on my favorite thing to hate on---Ethanol.

They give a nice breakdown in the first orange bullet point below.  800 million gallons of ethanol exported they represents the use of 286 million bushels of corn (a bushel is about 56 pounds of corn which is between 45 and 60 ears of corn).

Couple of facts I calculated.

1.  How much water does it take to make one gallon of ethanol:  2.5 gallons (split estimate from HERE).

Just for the production of exported ethanol (not including water to grow the corn) we used at least 2 Billion gallons of domestic water.

Two Billion gallons of water would cover the whole State of Maryland in water one foot deep (one acre foot of water covers 3.07 acres of land). That is what we exported in water to make ethanol.

2.  In the US in 2014 the average number of bushels harvested per acre was 170. So, we utilized 1,682,352 acres of land to grow corn just for export. This is a little less than the size of Delaware and Rhode Island combined.

No one except lobbyists and politicians from farm states like ethanol. It is not supported by environmentalists or advocates for the poor (in the US or around the world).

### Why do the Ukranians and the Rebels continue to fight even when a cease fire is only hours away? Game Theory might tell us.

Ukraine crisis: Fighting rages as ceasefire nears
I read this headline and the accompanying story and wondered why the fighting remains at the same level when ALL the soldiers/rebels know a cease fire is just hours away.  Where is the "Invisible Hand" to direct the soldiers to do "what is in their best interest!" :)

Seems like simple Game Theory would come into play.  Both sides have full information that fighting will cease at a near pre-determined time.

If both sides continue to fight, they both will suffer high fatalities.  If the Ukrainians stop firing but the Rebels don't the Ukrainians will suffer deaths but the Rebels won't. The inverse is true it the Rebels stop firing.

Seems like the BEST outcome, since both sides know what the other could choose to do, would be for both of them to stop fighting and suffer no casualty's.

I made a simple Game Theory matrix to illustrate this.  You can see, with cooperation, the best outcome for each side is to cease hostilities (Lower Right Quadrant)....However...

...what if each side is a little "fuzzy" about the other sides intentions and does not know for sure they will stop firing?  If one side takes the initiative to stop firing they will suffer larger casualties relative to if they continued to fight. So, given the lack of information as to what the other side will choose, BOTH will continue to fight even though is seems the less rational thing to do. (Upper Left Quadrant below)

Or it could be they just hate each other so much that the "rational" human being in them is quashed.

War is hell and human rationality is temporal...

## Thursday, February 12, 2015

### Chocolate and Simultaneous Shifts in Demand and Supply----Happy Valentines Day!

Can you feel the love of supply and demand yet?

A very nice article in the New York Times that can be used for a basic supply and demand example showing the possible outcome with a simultaneous change in a determinant of Demand AND Supply. This is a common problem encountered in a basic economics class.
Valentine’s Day Chocolate Will Cost More This Year, as Cocoa Prices Rise

The article suggest that the price of chocolate will increase because of an increase in Demand from emerging Asian countries, primarily China,  and a decrease in Supply though a combination of bad weather and a fungi that has attacked the cocoa bean plants.

I put together some slides to illustrate these affects.  For the purposes of this lesson I am going to assume the magnitude of change in Demand and Supply are equal. In other words, the curves will shift accordingly by the exact same amount/percentage.

Any comments or corrections are appreciated.

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