Police Radars, Spare Donuts, V-8s, V-6s, and KIAs

You like cars?  This is a great show.

Woods announced that 93% of his audience is male audience.  That’s quite a percentage. Cool.

Give a listen to his interview with Eric Peters.  End run and dodge all the tax farming.

Today’s show has Eric Peters, who runs Eric Peters Autos, EPautos.com.

RADAR DETECTOR
First topic: Radar detector.  Do they work?  No one likes being pulled over.

Get one.  These will save you money.  He’s out on the road driving a lot.  And wouldn’t feel safe without his Valentine One Radar Detector.  These are not cheap, $450!  Said it has saved him thousands of dollars.  Consistently found to have the greatest sensitivity to police radar.  Prevents non-cop radar from bothering you.  It can track several radars coming at you.  And works with different apps.  Apps don’t tell you in real time with radar who just turned it on.  The app is more like flash a light, pipe a warning of a speed trap.

Valentine One Police Radar

New car features that ought to be optional.

Radar emanates from sources other than police cars.  It will emanate from garaage doors, automatic doors.  Many new cars come with new technologies that come with radar and laser, and an Audi will emanate a radar.  The V1 has new software.  Mike developed the escort software.  Valentine gives you an actual threat.

What about the interest in Tesla.  Cars catching on fire.  Disparate reaction to the problem of auto-igniting of Tesla cars.  Ride and Drives for journalists, like Peters.  Strong evidence there is a design problem.  Lithium Ion battery packs.

Government is funding Tesla and the state of Michigan is investing and buying stock in its company.  Subsisding 911 Porsche for high-paid government workers.

Self-driving cars?  Are they still testing it out?  Or is it a stupid idea?  Question of infallibility.  Anything build by people there will be problems.  Self-driving cars are encouraging to not pay attention and not be responsible.  Sensors fail.  Out on the road these cars will accrue mileage.  Parts wear, moving parts wear and wear out. Computer that operates in a car works in a much harsher environment.  The computer in your car has to be tough: 100 to -12 temps degrade mechanical parts.  Self-driving car has an aura of inevitability.

What’s the context of self-driving car campaign?  Manhattan residents who drive a few miles.  Different mind set for those who drive 100 miles on the weekends or commute that to work.  Not infallible; plus, the campaign is forcing these cars on people.

SPARE TIRE
The donut spare?  Roll along on it for 50 miles and you’re okay. Origins of the donut spare.  Why from a perfect spare tire.  It’s a temporary use only to gimp you down to the gas station.  It’s much smaller.  Not designed for high-speed use.  Typically 18/19 inch wheels.

Has to do with pressure that all the car companies are dealing with to meet corporate average fleet fuel economy requirements.  Those are the mandatory minimum fleet averages that every car compnay has to meet or they get his with the gas guzzler fines.  By eliminating full-sized spare tire, you drop about 30 lbs. from the car’s curb weight.  If that gives them a fractional increase per car, that’s factored in a 100,000 vehicles it adds up.  That’s the chief reason for getting rid of the full sized spare in most vehicles and replacing it with this idiot temporary use spare.  And the crappy and unsafe jack you use at your peril.  Heavy duty jacks are gone because they’re heavy.

In the market for a pick-up truck and wondered why they’re so expensive?

V-8 ENGINES
Gets back to the corporate average fuel economy requierments, (1975). Applies to trucks too.  Of course, trucks are heacvy and so they need powerful engines.  To meet the conflicting demands of government and the market place, the government has passed regulation that forces car companies to get rid of V-8 engines by replacing them with smaller, heavily turbo-charged engines.  Ford’s 1500 Series, F-150: V-6 with turbo charges.  These cost more than a traditional V-8 engine.  Eco-boost engines with turbo chargers to replace the V-8s.  Aluminum bodies to lighten up the truck to get better gas mileage.  Costs go through the roof.

LCD touch screen.  Governmt mandated the back up cameras with view screens.  A couple of people backed over a kid, now everyone has to have a backup camera.

Air conditioning.  Lawyer caveat?  Click “Agree.”  Then you put the car in reverse and try to back out and the system mutes the radio while you’re backing up the car.

New, low-end, inexpensive car that he can get cheap.  What car does he get?  Where does he go to get such a car?  An affiliate contest in November.  Top 10 people win prizes.  2nd to 10th.  #1 seller will win a brand new car.  So he needs an entry level car. Automatic transmission.  He doesn’t want people to be cursing them for a free car.

Nissan Versa?  Not a good word.  Very basic car.  You can get a radio delete.  $12,000.  They delete radio and air conditioning for a new car.  Roomy back seat.  Drive train equals a Sentra.  A to B transportation appliance.  Better would be something $1000 to $1500 nice . . . for example:  one, utilitarian side: VW Jetta Sedan. Superb Diesel engine.  1.8 liter gas engine gets about 40mpg.  VW are unique in that they are direct kin to the Audi.  VWs are less ostenatious Audis. Jettas are less expensive.  A4 and A6 sedan. Jetta less expensive.

Sexier side: Mazda 6.  $18 to $19,000.  Known for being fun to drive.  Good looking car.  Not the fastest.  Well equipped car. Exceptional gas mileage as well.

Tom is looking at the KIA Soul and KIA Rio.

LOW-END, INEXPENSIVE, GOOD CARS

KIA Rio

The above is the latest model Rio, 2011 to present.

KIA Soul  The 2014 model doesn’t look too bad.  Generally, I do not like the sport cruiser look.  It’s a crossover that in my opinion does a disservice to both the SUV and sedan.

But Tom Woods like these for the contest.  Not bad.  I would be happy with one of these as a free car.  Lots of models and sub models.

The soul is a box car.  They’re selling them hand over fist.  Roomy, versatile.  Small footprint on the outside.  High end features for the money.  Good family car.  Decent back seat.

Rio is a subcompact, commuter car.

Down a notch to . . . what?

Vastly inferior cars were in terms of how long they would last. Really?

Most people still stuck in the mindset of 4/5 years or 60000 miles better get a new one.  50,000 miles today and your car is still a baby.  Short of abuse, expect the car to go 100,000 to 150,000 miles.

Property taxes (what?) Saved 30% on insurance, much higher on a new car than a slightly used car.  Peters is very utilitarian when it comes to his cars.  He can fix them and maintain cars.  Cars depreciate massively.  Had a BMW VII, top line model $130000.  5 years from now that car will be maybe $50,000, losing $16,000 a year.  $8 or $9,000 and expect to be driving it for the next 10 years. Average car on the road today is about 10 years old.

You’d see cars that were 4 or 5 years old with paint chipping, smoking belching.  Today’s cars just don’t look old.

Peters has a wonderful community of people.  Eric Peters Autos.  EP Autos.  Service doing this for nothing.  He’s like Scott Horton in foreign policy.

“Since WWII, one-third to two-thirds of all technical researchers have been working for the military”

Video, article references, and books via Robert Wenzel at EconomicPolicyJournal

I found this presentation really interesting.  I like to know what things costs and see those costs compared to other costs to get a true assessment on how productive a company or industry is.  It is worth your time, and the subject is worthy of study.  

What follows are my notes on the presentation.

Productive growth and spending versus parasitic growth. We need to think about parasitic growth when we think of the military production. Military production does not contribute to our welfare in the present or the future. Melman introduces the concept of overkill. He argues that you cannot destroy a city more than once. In the immediate term, once it’s destroyed, it’s destroyed.  Bombing a city over and over is excess, and that excess is parasitic.

By the 1960s, the US gov’t, just looking at its strategic air craft and missiles, . . . for every person 6 tons of TNT worth of explosive power. “Am I safer now with 6 tons of TNT or safer with 4 or 1 TNT?” This is clearly wasteful. Parasitic, a very Rothbardian term.

Great point about GDP.  GDP doesn’t distinguish between what’s productive and what’s parasitic. Looking at opportunity costs, every tank that is unnecessary comes at the expense of something else. Cost is at the root of Austrian analysis. Costs are really quite stunning. Here’s an example: a single combat pilot costs $5-7 million. The fuel for the jet and his training costs are also astronomical.  The fuel that one American driver consumes over a two-year period is equal to the amount of fuel a training jet consumes in under one hour.   Mileage cost for an Abrams Tank is not calculated by miles per gallon–but more like gallons to the mile.  The tank consumes 3.8 gallons of fuel for every mile.

Between 2% and 11% of the world’s use of 14 important minerals are consumed by the military.

6% of petroleum is consumed by the military. The Pentagon’s energy use in one year could power all US mass transit systems for nearly 14 years.

More outreach to your left wing friends. Building bridges.

Opportunity costs 1947-1987: Department of Defense used $7.62 trillion in capital resources. In 1985 alone, the U.S. Dept. of Commerce, valued the nation’s capital stock at $7.29 trillion. That expenditure of resources you could have either completely replaced the capital stock. Staggering. If anything, that’s an understatement. Any portion to civilian use would have gone to the purcahse of capital goods would have increased the country’s production capacity. These costs are not trivial.

Then there’s the case of technical geniuses.

Finite number of geniuses. Not a case of 10% of the geniuses is a zero sum game.

Geniuses doing project A cannot do Project B. Since WWII, between 33% and 66% of all technical researchers have been working for the military at any given time. Think in terms of the opportunity costs involved there. Civilian research isn’t being done. Researchers have all been sucked into the military industrial complex.

Melman, “When research and development is not properly on behalf of civilian industry results like poor product design or poor production methods can have disastrous effects on the economic position of the industry. When as little as 1.5% of us national product is diverted to military research, it seems little enough but that accounts for more than 50% of the national research and development effort and has left many us civilian product industries at a competitive disadvantage due to faltering product designs and insufficient improvement in industrial production efficiency.

Interesting insight to overlook. Yet another cost that we have to bear.

Government can siphon off brilliant minds and talented people because it offer them tax-funded salaries that private sectors could not keep up with.

WSJ, people in Industry, “Frantic bidding by space and military contractors for scientists and engineers is creating a big shortage for industry. This scarcity along with the skyrocketing salaries it is provoking is bringing almost to a halt the hitherto rapid growth of company supported research. This development hampers efforts to develop new products and processes for the civilian economy.” WSJ.

The American Economic Review does not defend the private sector, “The growth of military and space research and development “has significantly retarded the growth of civilian research and development,” so these are R&D that was never done, and that opportunity is gone forever.

The growth of Defense R&D by bidding up salaries and taking up the cream of new science and engineering graduates has tended to reduce significantly the quantity and quality of R&D undertaken in civilian created laboratory.”

Some argument to the effect that I ought not “You wouldn’t have GPS technology if the gov’t blowing all this money on the military.” It’s called crossover spending. It invents Tang with civilian uses, so it’s not all a waste. A variety of estimates. Pentagon spending over the years has redounded to American society.

Norway has a 70% tax. You would think that the gov’t would deliver on something. Free university education. Okay. Tax rate is 70%. If I were paying 70% in taxes I would expect something, something free. With all the military spending, if a few inventions come out of it, well, that’s the least I would expect.

Melman believe that the lower-end estimate, maybe 5-33%, of these technologies due to defense resear4ch was very low and inefficient were going to be invented anyway. They would have been developed according to society’s timetable.

Easy to dream up all sorts of products, but it’s the development of them that matters. On what timetable do we develop these technologies that benefit society?

To what extent do we deprives ourselves of other goods while we’re siphoning resources into R&D, we ration things. That’s what the market is for. It rations these projects in a way that is consistent with consumer preferences. that’s their desperate attempt that these million dollars haven’t gone to waste.

Another effect of Pentagon dominance over some firms is that and as the Pentagon becomes the chief buyer as a firm gets more involved with the Pentagon, the firm’s business sense begins to dissipate. Pentagon does not make cost consciousness its top priority.  Don’t have to worry about controlling costs as with other clients. Pentagon will come up with the money one way or another.  Contracting with the Pentagon, all a company has to be concerned with is “Can you deliver on time?” “Can you deal with the deannds and changes of a project?” “Can you pivot, can you roll with the punches, can you speak the language of the military community?” What firms become are not profit-maximizing and cost-minimizing firms, but rather cost-maximizing and subsidy-maximizing firms. One way or another the money will be produced.

Historical costing by Pentagon.

Look at an older war plane to build a new plane. Seems sensible way to estimate costs. It bakes into that particular cake it bakes in a bias to an ever higher baseline. No sucritinizing of the costs.

ARTICLES REFERENCED IN THE PRESENTATION:
1.  The Neglected Costs of the Warfare State: An Austrian Tribute to Seymour Melman, Journal of Libertarian Studies, 2010.
2. Wartime Prosperity?  A Reassessment of the U.S. Economy in the 1940s, Robert Higgs, Independent Institute, 1992.

BOOKS REFERENCED IN THE PRESENTATION
1.  Military Spending and Industrial Decline: A Study of the American Machine Tool Industry, Anthony Difilippo, 1986.
2.  Pentagon Capitalism: The Political Economy of War, Seymour Melman, 1970.
3.  Depression, War, and Cold War: Challenging the Myths of Conflict and Prosperity, Robert Higgs, 2009.
4.  We Who Dared to Say No to War: American Anti-War Writing from 1812 to Now, Murray Polner and Thomas E. Woods, 2008.
5.