Friday's Radio Spot

Here is my interview with Pittsburgh Business Radio on Friday, by myself this time. I was there for about an hour and we talked about Zappos, the BP oil spill and the highest altitude by which someone survived a free fall to the ground.

If you look only at costs...things look pretty costly!

CNN reports on a new study put out by Economics of Climate Adaptation Working Group which states that climate related disasters have killed over 800,000 people and caused over $1 trillion in economic losses. You know where this is going-- humans are causing global warming, global warming kills people, so every day that you drive a car you're relegating your future self to that much more purgatory. We've talked about this before.

The main issue I have with this study-- and with global warming alarmism in general-- is that it's looking only at the cost side of the situation. Look at the case studies the report provides-- hurricanes in Florida, droughts in Africa, rising sea levels in Samoa. (Talk about bad timing on that last one.) I'm not denying that these events and costs could have occurred as a result of an increase in global temperature-- it's not exactly a ceteris paribus analysis, but for the sake of argument, let's say that's the case. The problem is that the analysis (from my perusing of the report) completely ignores the benefits of temperatures rising. What if the case studies were as follows: Crop proliferation in Canada, arable land impact in Ukraine, days of sun for youth baseball players in America. Wouldn't the end result look different? It may still be negative on net-- if that's the result you need, there is so much leeway in doing a global cost/benefit analysis of climate change that you can generate just about any result you like-- but in any case, it would have to be less than the stated result simply because you're adding benefits to the costs-only calculation.

The actual report itself is here and the executive summary is here.

Resource guzzling hybrid cars

TPS friend Pavel Yakovlev sends along this article about the emerging underbelly of the hybrid car market:

The Prius hybrid automobile is popular for its fuel efficiency, but its electric motor and battery guzzle rare earth metals, a little-known class of elements found in a wide range of gadgets and consumer goods.

I guess it's not all roses and clean cars. The consequence of needing to mine more rare earth metals to save oil pushes us further down the path towards the best-case scenario: Environmentalists arguing with other environmentalists over what to do, in this case the anti-oil consumption folk with the anti-mining folk. Here's to hoping that this debate can become everything it could be.

Policy is never so bad that it can't get worse

Want to know the sad part about this? I'm truly, honestly surprised that there isn't a provision in here that stipulates you get more money, or maybe only get money, if you buy an American car.

Though I love the following line:

The program lasts either one year or until the funding runs out.

If the federal government hasn't run out of funding yet, it's not going to happen for a good long while.

If this passes, or looks to pass through the Senate, we should expect to see a price spike in the used car markets for those varieties eligible for the rebate.

A Sunday Thank You

Here's a short piece on CNN this morning about a fellow who converts engines using diesel fuel to ones that can use vegetable oil. Not that I have a particular interest in this process, nor can I believe it involves only snipping and reattaching a few hoses here and there, but I loved the quote at the end:

"If you're emitting half the carbon dioxide that our neighbor is, that means one of two things: Either your neighbor can drive twice as much, or you're having a significant positive impact on the environment."

And it is for this reason that I thank the alternative fuel movement, since any modicum of guilt I could possibly feel for driving is mitigated knowing that others are taking the effort to compensate for my transportation pollution. Thanks, environmentalists!

I Want More Ethanol Statistics Like This

From Bloomberg:

Mike Vis hooks a pump to a grain silo in Minnesota and siphons out enough of his corn to feed 91 people for a year. This batch will fuel vehicles in Houston for 21 seconds.

Note that this behavior might make sense in some environments, but probably not the current one.

Self Regulation in Port Lincoln

Incentives matter:

One secret of Port Lincoln's success has been a remarkable system of self-regulation. Take the rock lobster industry, which exports shellfish the size of poodles to grateful consumers in China, Hong Kong and Taiwan. Since 1991, the lobster fishermen have voluntarily reduced the length of their season, the number of pots that they can lay and the minimum size of lobster ­ or crayfish, as they are called here ­ that they can catch.
...
Steaming out to sea to pull his pots on a cool, clear autumn morning, Mr Collinson reflects on a wise investment that he made as a 23-year-old deckhand in 1983. He bought a licence and 40 crayfish pots, which cost him $40,000 (about £16,000 at today's exchange rates). He now has the maximum 60 pots, and his licence is worth $2.2m (about £840,000).
...
The value of licences spiralled as cray fishermen not only found new markets in Asia, but also recognised that it was in their own interests to look after the stocks. For without a healthy fishery, their licences would be worthless. The fishermen have become conservationists; they work in close co-operation with government scientists and, if the scientists advise them they are overfishing, they take steps to catch less. Every aspect of their job is regulated, mainly at their own instigation; boat size, engine power, dimensions of pots.

Spillovers from deep sea drilling?

Oil drilling is bad, right? But what if we can observe new species while doing so? Do the environmentalists then fight themselves, a la Ed Norton in Fight Club? What's the elasticity between the dislike of drilling and the sanctity of videotaping the un-videotapable?

Will Politicians Keep Their Campaign Promises?

According to my colleague here at SPEA, Evan Ringquist, they will about 70% of the time on environmental issues. I hope it is lower on economic issues. Here's the abstract from his paper, published at Social Sciences Quarterly (sorry, gated only):

Objective. The extent to which candidates for elected office keep their campaign promises holds great interest for citizens and has important consequences for the quality of democracy. However, we know very little about whether candidates actually keep these promises. This article examines the relationship between campaign promises and the subsequent legislative behavior of members of Congress in the area of environmental protection. Methods. Responses to the 1996 National Political Awareness Test (NPAT) are matched with roll-call data on environmental issues from the 105th Congress. A series of bivariate probit models with selection are then used to assess the extent to which roll-call votes are consistent with candidate policy statements in the NPAT. Results. We find that members of Congress vote consistent with their campaign promises 73 percent of the time, and that NPAT responses help to predict roll-call votes even when controlling for party, race, gender, campaign contributions, and previous environmental voting record. We also find that the propensity to keep campaign promises varies systematically across types of legislators. Conclusions. Contrary to public perceptions, candidates for Congress routinely act to keep their campaign promises once elected, at least in the area of environmental protection policy.

The Externalities of Branson

The private push towards space has been enjoyable to follow-- not only for its embarrassment of the government's attempts to explore the frontier, but who doesn't like the possibility of being weightless?

When people argue that NASA is worthwhile, oftentimes it goes down the path of "they do a lot of research and come up with a lot of things we wouldn't otherwise have." Well, true, but think of all the things we don't have because of NASA. Anyway, the positive externalities of technology need not come only from government ventures-- it looks like the climate change people will benefit from Richard Branson's space push.

$200,000 is the price for a trip at the moment; will it be 1/100th of that price in 15 years?

What is today's worry?

A little while back, I heard an off-the-cuff comment about how people always need something to complain about, and that the media taps into this and gives them their ammunition. Complaining about financial markets and the state of the economy is the current favorite; gas prices and global warming have been recent favorites as well. And you never know which one is going to jump back into the top spot!

But it's also fun to see what happens to the old #1 complaints after they have been supplanted. Gas prices have retreated a fair amount; oil looks to take a decent jump this morning but is still down about 30% from July's high.

Y2K was a big worry. That didn't really pan out. Same with bird flu. And killer bees.

What got me to thinking about the topic this morning was this piece concerning ice levels in the Arctic. Remember when people were predicting that you'd be able to sail over the North Pole by the summer? Yeah, that didn't quite happen. Not even close. Turns out that ice loss was less in 2008 than it was in 2007; estimates for 2008 were off by 1.74 million square miles.

Sachs' Social Value Mishap

We're going through Sachs' Common Wealth in our reading group, it certainly makes for a lively discussion since there isn't a lot to agree with. Nonetheless, the man is a Harvard trained economist, which made the following gaffe all the more surprising. I'm paraphrasing, but it goes as follows:

Let's consider we have a lake that is privately owned. There are fish in the lake that exist only within those waters. Further, if the fish reproduce at a sufficiently low rate compared to the interest rate, it becomes profit maximizing not to manage the population, but to "cash out," if you will, and use the proceeds in capital markets to earn a better return. He notes that the social value of having this fish species can not be calculated into the price of the fish-- people would want it only for meat-- and, viola, market failure.

(Side note: Are there any animals-- fish or otherwise-- that even begin to approach this scenario? And no, his point was not that any animal exhibiting characteristics like this would end up extinct.)

He overlooks the market adjustment here-- the price of the fish will rise as extinction nears, but that could be swept under the rug as well considering his interest rate assumption. Depending on the demand for the fish, this may or may not be accurate, but that's not what bothered me. What bothered me was that he assumed the social value of fish needs to be factored into the sale of individual fish. It's in the sale of the lake that this calculation comes into play. When the lake is purchased, the owner has an idea of how he'll use the lake-- conservation, for food, perhaps some combination of the two. But to assume the lake is privately owned and to be used strictly for profit-maximizing fish harvesting is to forego completely the possibility for social value to play a role in the acquisition of the lake.

There will be collective action problems in mobilizing the social value into a lump of money to buy the lake with-- free rider problems mainly, there's reason to believe that you'll be below what the theoretical aggregated social value of the fish existing. (That's not to say that market solutions don't exist to the free-rider problem that would help get closer to the aggregated social value-- a hazy concept in and of itself.) But to miss completely the transaction of the lake itself and to attribute market failure to the sale of the fish since it doesn't account for the social value...that was surprising.

EPA By Any Other Name Would Be as Captured

From CNN:

And Sen. Barbara Boxer, a California Democrat who has long battled with the agency's administrator, Stephen Johnson, said the instructions showed that Johnson is "turning the EPA into a secretive, dangerous ally of polluters, instead of a leader in the effort to protect the health and safety of the American people."

Capture Theory anyone? This is the only way things can turn out with the EPA, we would all be a lot better off without it. A second best would be for it to be heavily restricted from the ability to levy actual regulations of processes and limit it to regulations of outcomes instead.

Better word to describe Al Gore: Green or Red?

The good folks at the Tennessee Center for Policy Research have been keeping an eye on uber-environmentalist Al Gore. Remember when it was reported last year that Gore's Tennessee home used far more energy than the average home? The TCPR dropped that story. Anyway, they've kept an eye on the "green" improvements to his house over the last year, and guess what? He uses even more energy than he did before!

The Tennessee Center for Policy Research gets the TPS Seal of Approval.

Heartland on Ethanol

I've linked to Heartland before-- I've somehow ended up on the mailing list for a good number of free market think tanks and Heartland's correspondence is consistently in the upper crust of what I get. Today's email concerns Ethanol and makes interesting point throughout. I can't find the text of the email on their site word for word, but here's the research and commentary section from which their emails usually draw. I particularly enjoyed these lines:

Policy experts have pointed to three major problems with this notion. One, ethanol fuel will not reduce global warming. Two, ethanol does not provide much fuel when compared with the amount of resources used to produce it. And three, the diversion of grain to ethanol production has resulted in higher food prices in the developed world and food shortages, food riots, and starvation in less-developed nations.

The first part will be debated well into the night; the second is the real crux of the issue; the third is correct in the first half, though I can't vouch for the riots and people have been starving in less-developed nations for decades.

I hesitate recommending more in your email inbox, but they get the TPS seal of approval.