Sunday, July 28, 2013

On the USS Gerald R Ford, the Most Expensive Ship Ever

Over at Business Insider:

USS GERALD R. FORD: Check Out The Construction Of The Most Expensive Ship Ever Nice pictures.

To quote: “The numbers behind the USS Gerald R. Ford are impressive; about $14 billion in total cost, 224 million pounds, about 25 stories high, 1,106 feet long and 250 feet wide. But the sheer enormity of the ship and construction operation is hard to grasp until you're nearly face-to-metal with the massive military beast.”

Whew!  That $14 Billion is up from $4.5 to $6.2 billion for  the Nimitz class aircraft carrier it is replacing.  And a nice write up over at wikipedia:

Meanwhile,  the planes it flies (from Reuters):
“The new baseline forecasts the average cost of the F-35 fighter, including research and development (R&D) and inflation, at $135 million per plane, plus an additional $26 million for the F135 engine built by Pratt & Whitney, a unit of United Technologies Corp

Again:”The new FORD-class aircraft carrier will be the largest, most lethal ship ever when it joins the US fleet in 2016.”

Well, counting its planes.  It will also be the largest, most delectable target, ever, when it joins the US fleet.  Carrying say 90 F35s, costing $160 Million apiece, it will be an investment costing over $28 Billion.  Say $30 Billion.  That’s about 300,000 man-years, or 7000 man-lives, of production.  That is a sunk cost, which is paid whether or not the ship itself actually sinks.  Never mind the annual expense of operating the thing.  If comparable to the Nimitz class, we can expect annual costs of upwards  $350 Million, counting the midlife overhaul, averaged over the years.  Say $1 Million per day.

Anyway, the life’s labor of 7000 men.  Gone.

What else is gone? After all, cost is lost opportunity, what wasn’t built, or was left undone; what those 7000 men maybe should have been doing with their lives.  Well, 1500 high schools, at $20 Million apiece to build. (One F35 figures in at 8 high schools.)  Or 300,000 houses at $100,000 apiece, although some might argue we don’t need any more of those.  

Or power plants enough to provide 6 to 10 thousand megawatts of electricity, enough to supply 3 to 5 million homes with power.

And Mayor Bloomberg’s plan to save (most of) New York City from rising sea levels (for a while) was only $20 Billion, but hey, isn’t global warming some sort of delusion?

Thursday, July 11, 2013

Free Trade and Salaries in Academia

Somewhere, perhaps not in this blog, we pointed out that the equalization of factor prices was eventually going to affect the salaries paid to economists in academia.  In labor terms, equalization of factor prices means the wages of workers in different countries with free trade between them are driven to the same level. (Wages are a factor of production, as are the other inputs of production, such as materials and capital.) So when a country with high wages trades with a country with low wages, its wages are driven down. (While in the low wage country, wages are driven up.  However, with the high wage country running a massive trade deficit, it seems that wages in that country are driven down more than the wages in the low wage country are pushed up.)

Now you might think that industries insulated from free trade, such as home-building and medicine and- economics, would not be affected, but this is not the case, although the insulation does delay the effects. However, no part of an economy is truly isolated from any other, and  depression of wages in one sector will eventually affect wages in all sectors.  

This delay has been part of the cause for the relative increase in educational costs and tuition, as in the rest of the country income has stagnated and more recently even declined. In particular, the taxes paid to the states have remained stagnant, and more recently declined, with median income.  The fact that this is also affecting the quality of education, and universities in general, rather than just depressing salaries, is also interesting.  It hasn't affected private universities as much yet, since they are further insulated from the effects of trade, not being as dependent on income from taxation, but it is just a matter of time before they too suffer from degradation.   

This would seem to be part of a general degradation of capital inputs. This may also be because of the chronic trade deficit, rather than merely the effect of the equalization of factor prices.  Net imports of Goods and Services was $560 Billion for 2012. (BEA Table 1.1.5)  That is a trade deficit of 3.5% GDP, which, since it has been persistent for the past 12 years or so, adds up.  See: 
The nation’s management at all levels seems to be adversely impacted, as we should expect.  One observation is that, with the Sequester, for example, the Federal Government is going after the wrong deficit.