Among the issues most commonly discussed are individuality, the rights of the individual, the limits of legitimate government, morality, history, economics, government policy, science, business, education, health care, energy, and man-made global warming evaluations. My posts are aimed at thinking, intelligent individuals, whose comments are very welcome.

"No matter how vast your knowledge or how modest, it is your own mind that has to acquire it." Ayn Rand

24 April 2010

Pelosi's Money-Saving Calculation for House Cafeteria Lighting

Nancy Pelosi called a press conference on 21 April 2010 to announce that the government had just spent $140,000 to put a new LED (light-emitting diode) lighting system into the House cafeteria in the Rayburn Building.  This new lighting system is supposed to pay for itself in a bit less than 10 years with energy use savings.  Great fanfare with all the politically correct words of energy-saving, sustainability, environment-friendly, Mother Earth, and green were used at the press conference.  It is hardly surprising to see the government spend $140,000 on something that gives it such a fine opportunity to look so green and earth-loving. 

Now, other things being equal, saving money on energy is a good thing.  However, we have to remember that the federal government is running huge deficits, which clearly are not sustainable.  We can look a little closer at this as well.  If the $140,000 lighting system pays for itself in 10 years, then the LED lights are saving about $14,000 per year.  It was noted that about 1 year ago, the light fixtures installed cost about $800 each and they cost just over $300 when the upgrade of the House cafeteria lighting system was performed.  So, in one year, the cost dropped to about 3/8 ths of what it was.  If in the next year it dropped as much, the cost per fixture would fall to about $112.50.  Perhaps the rate of the drop in price will not be as much, but it is reasonable to think it might fall to, say, $200/fixture.  If it did, the payback time would then be only about 6.67 years, or about 3.33 years less.  Since they said the payback was a bit less than 10 years, let us say the difference in payback is 3 years.

Thus, delaying the installation of the LED lighting system for one year would mean the government would pay out $14,000 more in electric bills.  Installing the $200 fixture LED system 1 year later, would save three times $14,000 in installation cost, however.  Subtracting the $14,000 not saved for 1 year in energy, means that delaying the installation for a year would have saved the taxpayer $28,000 more than installing the system will when it was installed!  Now, admittedly, I have assumed the cost of installation of each fixture is either minimal or included in the cost per fixture as given.  Perhaps this assumption is not justified and some other cost calculations need to be performed to determine the rational time at which the installation should be performed.  But, I have no confidence whatsoever that Congress performed any such rational calculations before they decided to spend $140,000 of taxpayer easy-come, easy-go money on this project.

Such rational calculations are much more likely to be performed in the private sector than they are in the public sector.  The lame media, many of the academics, and most politicians and bureaucrats are forever pointing at some failure in the private sector with harm coming to some relatively small numbers of people usually in some voluntary association with the persons or company causing the harm and claiming that if only the judgment of the government were brought into these associations and trades, events would turn out better.  This argument keeps foundering on one very important observation:  the assumption that the government will act rationally, more often than the private sector does, is demonstrably wrong.  It is very clear that the government acts less rationally and when it does, that the consequences fall upon many who have not made any voluntary choices based upon their own evaluations at all.  Government increases the number of irrational decisions and lays the sad consequences on many more people, many of them innocent of any irrational decision themselves.

The government has too little invested in other people's lives and fortunes and the money it spends comes too easily to it, for it to bother to make rational decisions even when it has adequate information at hand as we have seen from the House cafeteria lighting system decision.  In most cases in which the government wants a hand, it lacks the necessary and adequate information, which is either not available to it or takes more effort to find than it is willing and able to do.  After all, its SEC employees are too busy at Internet sex sites to have the time to gather the knowledge they need to do their job!  Frankly, even much more conscientious government employees will commonly fall short here as well.  Finally, what really matters is the press conference at which all the politically correct words can be spewed and the politicians can pretend to be paragons of virtue.  The reality is that they are commonly buffoons and wastrels.

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