Wow. Tim Worstall drops some serious knowledge on us this morning about the dynamics of market pricing for silicon chips and the reasons why Solyndra and many Chinese solar firms failed or are failing.
Not sure that I agree with his overall point that we don't care about producers when evaluating the effects of trade, but I learned a lot about boiled sand and the production of solar panels.
Here's an excerpt (but do read the whole thing):
At which point I should make the metal’s industry critique of the Solyndra business plan. They assumed a continuing high price for silicon and thus their technology concentrated on making that expensive material more productive. If silicon had remained high priced it might even have worked: but as they were ramping up production into a world where the raw silicon ingot had just fallen to 10% of its previous price they were doomed.
4 comments:
This guy is hyperbolic. It's not that we don't care about producers. It's more like 'we need not care about producers'. PPP and relative prices will adjust, with free trade, such that producers will continue to profit and survive - Overall. All producers are always at risk of failure. Producers fail on their inability to innovate.
"And when they was no meat we ate fowl. And when they was no fowl we ate crawdad. And when they was no crawdad to be found, we ate Sand..."
I do actually say in a footnote that I'm using hyperbolic rhetoric.....
There is a larger point here though. I think this happens to almost everyone who is actually expert in a particular field (sorry, no false modesty here. I know more about the weirder corners of the exotic metals trade than is probably healthy, let alone sane).
You read along about some story in your field of expertise, see all the journalists getting the names right, the grammar, the spelling, and yet missing the great big underlying point of what is going on.
You also see the political arguments, the public arguments carrying along without their noting the actual point either. Here it's that there's been a large change in the underlying production costs of silicon. That was always going to cause havoc whatever was being done with subsidies.
Others from my corner of the world...."we're going to run out of x metal in 30 years". Then you find out they've been looking at the reserves figures. They failing to realise that reserves are the stuff that we've proved is there to a certain stock market defined standard. And no one bothers to meet that stock market standard for any more than 30 or 40 years. Why bother, the net present value of doing the proving is too small.
Reserves is a technical word which does not have the same meaning as resources in this case.
All those arguments on either side: about running out or about how new technology will find us more. Both sides are entirely irrelevant simply because no one understands this technical meaning of the word "reserves".
Which leads to a further rant. "This generation will use up all the reserves of x". Well, yes, every generation does use up all the reserves of everything. Because reserves has a technical meaning and the costs of that technical meaning lead to us only ever defining about one generation's usage as a reserve at any one time.
I'll stop now but I'm sure that experts in any and every field find themselves puzzled about what the hell everyone else is talking about.
"We're going to run out of oil based fertilisers" for example. Who in hell has used oil to make fertilisers, ever?
In the forbes article Mr Worstall says that wafers are 80-200 nm thick. Please note that is ridiculous. A human hair is 70 micrometer thick, 500 times thicker.
You can't saw a slice of an ingot 80 nm thick. You would be a very rich man if you could.
I can't judge the rest of his arguments but this simple error tells me the guy is quoting stuff he seriously does not understand. Any phisics undergrad could have told you this.
What does this tell you about Mr Worstall?
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