There's a fellow who frequently comes to David's Coffee Place who looks and very much sounds like Paul Adolph Volcker. Paul Volcker was the Federal Reserve Chairman who bit the bullet and broke the back of the inflationary spiral that threatened to destroy the American economy (and thence the world economy) in the late '70s and early '80s. (His immediate successor was Alan Greenspan.)

Anyway, I have discovered that this fellow at David's Place spends much of his on-line time playing on Neopets.com. At first, I though this an amusing juxtaposition. But then I asked myself

What if he doesn't merely look and sound like Paul Volcker? What if he is Paul Volcker?

The economy is acting all scary, and maybe Paul Volcker is responding by focussing on Neopets! Or maybe the reason that the economy is going wack in the first place is that Volcker started messing around with Neopets!

Should economists be rushing to Neopets? Should we drag Paul away? I don't know!

To-day's mail brings a catalogue from MAT Electronics. I always enjoy going through their catalogues (though I fear that one day they will break my heart by offering the very Motorola chip that went-out in my Mitsubishi television set years ago, which I was unable to replace through Motorola, through on-line parts dealers, or through Mission Hills Radio & Television).

Catalogue #117 presents one of the Mysteries of Capitalism. On page 101, they are selling two Fluke multimeters, the Model 10 and the Model 12. The description for the Model 12 declares

The Fluke Model 12 is everything the fluke model 10 is and much more!

What makes this claim interesting is that the Model 10 is priced at US$149.50, and the Model 12 at US$149.95. So apparently the marginal cost of much more! is 45¢.

In fact, the explicitly described additional functionality of the Model 12 is that one can hook it to the circuit and walk away, and the device will thereäfter record maxima and minima, noting the time of each. That could indeed be a very valuable feature. In any event, it's a feature worth considerably more than 45¢ to a technician of almost any sort who would have been willing to pop for a Fluke meter in the first place.

I forgot to mention that last night I actually saw a stretch Hummer stage (turning east onto Washington Street from the alley between Third Avenue and Fourth Avenue).

Perhaps some such vehicles have a better use, but I'm inclined to regard them as an example of conspicuous consumption, and therefore as repugnant.

The Woman of Interest alerted me to the fact that the USPS will be increasing its rates again in May. A one-ounce, first-class stamp will cost another US$0.01.

The problem here is that the Postal Service long-ago passed the point where each increase in price caused a drop in total revenues, as people began switching first to facsimile machines and, more recently, to e.mail. And officials report their expenses as continuing to climb, which shows that they're not paring dis·economies of scale. Basically, officials increase the price per letter in an attempt to off-set the cost per letter which increases as the number of letters decreases because of past price increases. It's a death-spiral.

Post officials have long been told, and surely recognize, where things are headed. They probably feel that there would be little for them but grief in attempting at this point to promote the reforms that could get the the Postal Service off its present path.

My expectation is that we will eventually be told that privatization failed, that the Postal Service will stop pretending to be a firm, and that its prices and services will be determined by political and bureaucratic notions of necessity and of justice, with overt subsidies off-setting ever-increasing deficits.

One of the means by which some propose to reduce petroleum consumption is increased technological efficiency. The idea is that if it takes less oil to accomplish our tasks, then we will want and need less oil. However, let's turn that around. If it takes fewer liters of oil to accomplish a given task, then we can accomplish more with a given liter. So what's actually going to happen?

Consider how we normally decide how much of a good or service to buy at any given price, or how much we would be willing to pay for any given quantity of that good or service. Whenever we buy a unit, we are spending money that could be spend on other things. If we are rational, then we decide whether to forgo those other things based upon what they'd do for us, compared to what the unit in question would do for us. All else being equal, the more use (of some sort) that we can get out of that unit, the more that we are willing to forgo of other things. And if something causes the usefulness of a sort of good or service to increase, then we're willing to pay more for it than earlier, and we want to buy more of it at any given price than we would earlier.

It really doesn't matter whether the new usefulness is from an intrinsic change or from an extrinsic change. In other words, if a good or service just itself changes to become more useful (in which case, it's really no longer the same good or service), then we want it more; or if the context changes to allow more to be done with the good or service, then we want it more.

If all of our engines that use petroleum products were magically transformed to do more work-per-gallon — so that petroleum became more useful — then we'd want and use more petroleum.

Here we have the essence of what is called Jevons' Paradox. William Stanley Jevons (one of the preceptors of the Marginal Revolution), in his book The Coal Question (1865), noted that Watts' improvements on the design of the steam engine (so that it could do more work per ton) had been followed by a great increase in the consumption of coal in such engines. The generalization is that, as technological change diminishes the amount of a resources necessary to perform a given task, consumption of that resource may increase.

Note that the point is not merely that the resources left-over by efficiency found use elsewhere, but that efficiency increased over-all use. (I make this point because I've seen Jevons' Paradox misrepresented as if claiming that supply were constant at all prices.)

There's actually not much paradoxical about the alleged paradox; like most economics, it is explained by common sense applied with uncommon care.

So why, then, do petroleum producers join in the protests against legislation mandating greater efficiency? Well, for much the same reason as do the automobile manufacturers. You surely noticed my phrases above, all else being equal and magically transformed. If the technological change mandated by legislation were costless, then industry would rush to adopt it, with or without legislation. But, for industry to want to adopt a technology that has a cost, it has to increase the usefulness of the good or service with a value at least equal to that cost. Otherwise, the increased costs will cut manufacturer profits, in part through reduced sales of automobiles. And it's the latter — fewer cars — that worries the petroleum producers.

Now, one might then say Well, then increased technological efficiency can reduce petroleum consumption, if only in this round-about way! But it really isn't the efficiency that's reducing consumption; it's just the cost. If the same cost were imposed by simply slapping an additional tax on automobiles, petroleum consumption would go down more, because the increased cost wouldn't even be partially offset by greater usefulness from technological efficiency.