X-Message-Number: 5549
From: Peter Merel <>
Subject: Coal Prices and so on.
Date: Mon, 8 Jan 1996 12:58:46 +1100 (EST)

Perry Metzger writes,

[with regard to the logistic map]

>Nope. Never have. Why don't you be so kind as to explain what it is.

Originally it was a differential equation important in ecology, used to
predicting the growth of populations under Malthusian assumptions. Its
general form is

 x' = cx(1-x)

where x is the present population normalized to a value between 0 and 1,
with 0 representing extinction and 1 representing maximum resource utilization.
The constant c represents the rate of growth over the period of study, and x' 
is the population after that period.

The equation as gained a lot more popularity recently as the simplest equation
that can be made to exhibit chaotic behaviour. The point of mentioning it here
is that the population of many organisms does exhibit such behaviour when 
pushed away from equilibrium conditions; while population may trend smoothly
for long periods, nothing guarantees that it will continue to do so.

>I never said that the rate of increase and its continuity are
>related. All I said was that land degredation and increase in demand
>for food are smooth and steady functions. If you dispute that, well,
>thats your problem -- you would be going against all available data in
>addition to all common sense. Please re-read what I said.

Um, perhaps our wires are crossed. If, by "smooth and steady" you merely
mean "continuous", of course I agree, but I fail to see the significance
of that continuity in predicting growth rates and limits. If, on
the other hand, you mean "linear" by this, I think you're mistaken, at
least over the period of the last two hundred years or so when growth
appears to have been closer to exponential.

>If you can find a large worldwide market that can successfully be
>manipulated, please let me know -- but I suspect it will be a cold
>day in hell before you manage it.

I personally? My pocketbook is not so remarkable. However it's
unsurprising that those with great big pocketbooks, governments and
large corporations, are able to do so on occasion. On other occasions,
things blow up in their faces - if the world was easy to predict then
there'd be little fun in it :-)

>> (for a good example you might examine the way that the Japanese
>> manipulate the Australian coal-mining industry in order to benefit
>> Japanese steel),
>
>How, exactly, do they do this? I have trouble believing that anyone
>can manipulate the coal prices in any given country given the size of
>worldwide energy markets. Anyone trying to manipulate the energy
>markets would probably be squashed like a bug by arbitrageurs.

The subject has been actively debated over the last year in the Australian
senate, so I can probably dig out some references for this if you need them.
The basic mechanisms they use are very simple - they're just playing poker:

First, the Japanese pay more dollars for coal that has been taken from
new mines than they do from old ones. This has resulted in many more
mines being opened than are needed to satisfy demand, and a much larger
number of unionized coalworkers than would otherwise be employed.
Second, Japanese steel manufacturers have invested heavily in Australian
coal mining, and over the last couple of decades these Japanese
investments have suffered dramatically - but the investors have turned
huge net profits from their steel holdings because the price of raw
materials has been so low.  Third, the Japanese have built up a
considerable buffer stock of coal, enough to allow them to cease all
importation for a number of years - so if the Australians try to raise
prices, the Japanese just don't buy that year - which they can well
afford to do - they just restock their buffer when prices drop the next
year. Fourth, the Japanese have a coal-buying board, and that board sets
the coal price for the entire Japanese steel industry - so there is no
chance of trying to set Japanese steel manufacturers competing with one
another to raise the coal prices.

There are other tactics, but I think these are the main ones. The upshot is
that coal prices are manipulated to suit the Japanese, even though they
have no alternative coal supply but Australia.

>> and demand always ignores the economically disenfranchised.
>
>Huh? You mean that the poor don't eat?

How many millions starved in Africa over the last decade? Read 

http://www.info.usaid.gov/HORN/regional.html

to get some idea of capitalism at its low ebb.

>I'm really starting to get tired of this discussion. It appears that
>someone who knows little of economics has become frightened by
>processes they poorly understand.

Hell, yes! I strongly suspect that *no one* understands global economics
over the long scale. To get some idea of the questions for which people
seem to have no good answers, you might like to check out Joel E. Cohen's
article "How Many People Can the Earth Support?" in the latest issue of
"The Sciences" (Volume 35 Number 6, Nov/Dec 1995). Nothing but questions!
Frightening questions!

But if you're tired of corresponding, I'll understand - this conversation
is straying a long way from relevance to cryonet anyway.

>They don't have to. The point is that if the amount of food available
>per human on the planet was really dropping, or becoming harder to
>produce, we would expect the long term trend to be for an increase in
>food prices. 

Why would we expect that? Until resource limits are reached, why would there
be any effect at all? Markets work with supply and demand, not nebulous
anticipations. Of course there are futures markets, but they're about as
useful for predicting resource limits as horse races are for predicting
stud fees.

>I've stated, there is reason to believe that we
>don't have a real problem given that market signals very nicely result
>in resource reallocations.

Simon's argument in a nutshell. You might like to check out that URL I
gave for a refutation, or just re-read my own little critique.

>> >[snip] However, I have grave doubts that we will EVER see massive
>> >worldwide famine again so long as war and the like do not seriously
>> >disrupt global production and trade.
>> 
>> Without useful data to support it, what authority does your opinion convey?
>
>I'm afraid that the data *does* support my position.

Please direct me at some then - that's why I trolled in the first place!

Peter Merel.

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