Me From the Past!

So I was just alerted to the online availability of a brief presentation I gave at FEE's Young Scholars Colloquium last year, and I figured it would be worth posting here. I should note that the presentation was basically a response to not having enough student presentations to fill the time and needing one of the interns to jump in to eat space, so I don't pretend that anything particularly groundbreaking was said.

But without further ado, here's the link. My talk starts at 12:30, and discusses pollution taxes. In it, I make the claim that there are pollution taxes, and I'm not actually sure that's true...can anyone think of an example? That aside, I think it's pretty decent presentation, and I hope you all enjoy it!

My climate change presentation from this year's seminar will hopefully be coming online relatively soon -- and with video! -- so look forward to that...

How Climate Change Policy May Cause Economic Disruption

A little while ago, I wrote a post discussing why I didn't think that a tax on emissions of greenhouse gases would result in an overall decrease in buying power spread across the economy. In that post, I focused on how a policy might work out if it were slowly phased in; my intention was to set aside the possibility of certain problems that a climate policy may expect to face in order to focus only on a particular set of concerns about overall buying power in the light of increasing the cost of emissions. In this post, I want to address some of the issues I set aside in that earlier post. Particularly, I wanted to focus on the possibility that by implementing a new climate change policy, we could disrupt the existing economic order in a very significant way, and that this might be expected to produce some very worrisome impacts. (Again, this post will talk about carbon taxes; if the translation to cap-and-trade schemes is confusing, I can explain.)

So here's the deal. As I explained in the previous post, a good carbon tax is built on the idea that we make carbon-emissions-intensive goods more expensive with a tax. The proceeds are used to finance a tax cut elsewhere which has the effect of making non-emissions-intensive goods relatively less expensive by increasing consumers' buying power (stated in terms of nominal dollars). This would tend to have the effect of increasing the demand for non-emissions-intensive goods at pre-tax prices, and lowering demand for emissions-intensive goods at prices reflecting the pre-tax price and the carbon tax.

In the previous post, I discussed an example involving two consumers (Cynthia and Xavier) who were part of an economy including rocks (which do not take carbon emissions to produce) and rubber balls (which do take carbon emissions to produce). Before the tax, both rocks and rubber balls cost $5. After the tax, rubber balls cost $6 and the price of rocks is unchanged. The proceeds of the tax on the rubber balls, I said, was used to finance a tax cut so that the consumers each ended up having more buying power than they would have had otherwise (in dollar terms).

If such a policy were enacted, we would imagine that people would shift their consumption choices in the direction of rocks and away from rubber balls. If we held market prices fixed for the moment, we would expect people to demand more rocks and less rubber balls. This could create an incentive for suppliers to decrease the prices of rubber balls in order to avoid building up excessive inventories, and to increase the prices of rocks in order to avoid creating a shortage. Alternatively, it could create an incentive to decrease the production of rocks and to increase the production of rubber balls. In practice, it would more than likely be a combination of both.

So here's the problem: In our modern economy, there is a lot of capital invested in the production of emissions-intensive goods. In our example economy, we might imagine that many rubber balls are produced using a sophisticated ball-making machine. And it may be that at the new lower demand, some of the companies that invested in these ball-making machines would need to sell them or might even go out of business. The people who made the ball-making machines would see demand for their products drop, and perhaps they would be put out of work. The ripples would move outward.

Of course, on the flip side, the rock producers would experience some seriously good times, at least at first. Once the drop in rubber ball demand put some people out of work and decreased the salaries of others, it's conceivable that the decrease in those individuals' consumption would balance out the increase in demand for rocks created by the carbon tax, or even outweigh it.

It should be clear that the more drastic a tax is imposed, and the more quickly it is implemented, the more significant the impacts on the structure of the economy. In our example, we might imagine that the tax was imposed only with a five year warning. In the scenario, it seems rather likely that the impacts would be substantially less severe. Producers would have time to plan for the tax, and they would be far less likely to make investments that would turn out to be really awful. Or alternatively, we could imagine that the tax was relatively small, and so the shift in demand might be rather small.

But with a quickly implemented or severe tax (or both), it seems rather clear that the impacts would be very noticeable. A number of otherwise sound investments would be converted into misallocations of resources, and these would need to be liquidated. It seems important that we acknowledge this possibility when we think about our climate policy options. Of course, nothing said here shows that we should reject climate taxes; I just think this is a side of the picture that needs to be seen.

Lighting Authoritarianism Is Hilarious

It appears that the European Union is set to ban certain energy-inefficient light bulbs, "forcing consumers to buy more energy efficient alternatives." First to go will be conventional 100 and 60 watt pearl bulbs and frosted 25 and 40 watt bulbs; the rest of the inefficient bulbs will be "phased out" (i.e., prohibited by force of law) by 2012.

Do I care? No. But I did find one part of the article to be utterly brilliant. According to the owner of the British lighting chain Ryness, "We are seeing people coming in and bulk buying. People like frosted bulbs because they have a softer light." But according to a spokesman for The Lighting Association, a European Trade Association, "Consumers will realize in the end that the alternatives provide substantial savings and have equivalent light quality to incandescents." Sends chills down your spine, doesn't it?

For the uninitiated, the problem with the spokesman's statement is not that "They're regulating light bulbs! Communism is right around the corner!" The problem is that this guy has an opinion about the quality and value of these products that is very clearly not shared by a lot of people. And these people are apparently willing to spend a whole lot of extra money in order to have light bulbs that this guy finds to be equivalent to the cheaper ones. So could it be that the fluorescents have yet to prove their value to some people?

I personally use compact fluorescents in my home. They work just fine, and I'm very happy to save the money, energy, and space it would take to maintain a supply of incadescents that would match the life of the fluorescents. But the light bulbs are very much not the same. Fluorescents take time to heat up, they look funny, and they emit a decidedly different quality of light. Maybe I will "realize" that this wasn't true after I haven't seen an incandescent light bulb for a while, but while I still see the differences every day, it's pretty difficult to come to that "realization." Again, I don't mind the differences, but some people might. And if they're willing to actually pay money in order to not use fluorescents, then why on Earth would I want to forcibly stop them from doing so?

One possible answer might lie in the fact that the European Union is trying to limit CO2 emissions. Using energy inefficiently, then, is not just a waste of money -- it's a contribution to global climate change. I may be reading into this too far, but it seems to me that what's happening here is a proclamation that "The differences between fluorescent and incandescent bulbs are not important enough to justify allocating a portion of our CO2 budget to allowing consumers to use incandescents." But this is exactly the kind of mindset that market-based policies are designed to avoid! The whole point of a market-based policy is that you increase the price of the thing you want to avoid, and people cut back wherever it's the least uncomfortable for them to do so. The policy is specifically designed to make it so regulators don't have to decide where those cuts will take place; that's the problem with centrally coordinated programs!

According to the owner of Ryness, if you watch what people are doing, you will clearly see that switching from incandescent light bulbs to fluorescents is not the least uncomfortable thing to do. The fact that people are motivated to actually go to the store and buy massive quantities of light bulbs suggests that they are quite uncomfortable indeed with this switch, and are willing to significantly go out of their way to avoid it!

And so in conclusion, facepalm.

Some Thoughts on the Cost of a Carbon Tax

Lately I've been hearing a lot from some people on the Right about potential climate change legislation and why it's going to be horrible. The idea from some of these people seems to be that whether we have an auction-based cap and trade system (which would be relatively imbecilic but seems more or less inevitable) or a carbon tax system, the end result is going to be that we end up paying a whole bunch of money, and we're all going to go straight to the poor house as a result.

Since I think that auction-based cap and trade systems are excruciatingly dumb, I'll focus my comments on a carbon tax system. If this gives anyone an ulcer, I'll be happy to explain how these thoughts can apply to a cap and trade regime, but I'd rather not have to do those gymnastics if no one's ultimately going to care. The subject of this post, then, is whether or not a carbon tax should be expected to force us all into poverty. I will avoid here the question of whether or not such a policy would be advisable in an all-things-considered sense, since that's a question far too big for this post. Suffice it to say that I don't think the necessity of such a policy is as obvious as some people make it out to be. But that's a conversation for elsewhere.

So here's how an effective carbon tax (in the sense of mitigating contributions to climate change) might be expected to work. The government slowly phases in a tax on things like coal, natural gas, and petroleum which are cited as sources of greenhouse gas emissions, as well as other influences on the climate system like agriculture, land clearing, etc. The revenues from the tax are used to finance a tax cut (ideally structured to cancel out some of the potentially worrisome distributive effects of the tax) or to finance some government expenditure that otherwise would have resulted in a tax increase (i.e., paying for the preposterous stimulus programs). The goal of the policy is to increase the price of energy-intensive goods with the tax, and to use the revenues to ensure that people do not lose overall purchasing power. Accordingly, people would have an incentive to shift their consumption away from energy intensive goods and towards non-energy-intensive goods. And while those who purchase disproportionately energy-intensive goods would be expected to suffer, those who purchase disproportionately non-energy-intensive goods would actually be expected to benefit.

Let me illustrate this in action. Let's say we have an economy with two goods: rocks and rubber balls. Producing and using rocks, in our example, does not involve any net impact on the climate system, whereas producing rubber balls involves the use of a substantial amount of fossil fuel. Rocks and rubber balls both cost $5 before the tax. Now let's imagine that every year, Xavier typically buys three rocks for $15, and three rubber balls for $15. And imagine that Cynthia usually purchases five rocks for $25 and only one rubber ball for $5.

Now we implement a carbon tax of $1 on rubber balls, so they now cost $6. The argument from some on the Right says, "Well look; now Xavier's consumption would cost $33 and Cynthia's consumption would cost $31, instead of both costing $30! This is a tragedy!"

But watch: let's say that Xavier and Cynthia don't change their consumption patterns in light of the tax. Xavier ends up paying $3 more in taxes to finance the purchase of the rubber balls, and Cynthia ends up paying $1 more. The government now uses its $4 to finance a $2 tax cut for both Xavier and Cynthia. So now Xavier ends up paying $1 for consuming a disproportionately high amount of rubber balls, and Cynthia actually gets paid $1 for consuming a disproportionately low amount of them.

In such a scenario, we might expect that the parties would see an opportunity to benefit from shifting their consumption away from the more expensive rubber balls. And the extent to which they were doing this before others or to a larger degree, they would benefit. Those who stubbornly insisted on consuming rubber balls, the argument goes, would simply be forced to pay the price for their anti-social behavior.

Things are a little more complicated with real governments who never actually do things like returning all the money, and where there are costs associated with implementing and enforcing the tax. But at least that's the idea. If the tax is revenue neutral, the only people who go to the poor house are the people who have a far greater impact on the climate than everyone else. And when those people go to the poor house, everyone else gets paid for being more responsible. So yes, some people would lose, but it seems like the advocates of this policy would want this sort of thing to be happening. Accordingly, the argument from some on the Right -- which focuses not on how we wouldn't want to trust the government with this policy, and not on how expensive it would be to implement, but only on the fact that it involves an increase in prices -- seems to me to be an utter failure in its current form.

Accordingly, it seems to me that this argument should be abandoned. There are other more plausible arguments that could satisfy the Right's thirst for some reason to oppose climate change legislation. They could question the ethical basis for such a policy, arguing that cost-benefit analysis (by which the policies are typically justified) are not ethically legitimate grounds for the kind of intervention that would be involved in the policy, and that the philosophical groundwork that would be necessary for an alternative analysis has not been satisfactorily settled. They could voice doubts about the government's ability to implement a policy like this in any way that wouldn't be a disaster more morally questionable than letting climate change happen. They could argue that given the amount of restructuring that will be necessary to substantially decrease our contributions to climate change, the resources we use to mitigate climate change could be better used fighting malaria around the world, bringing clean water to those who don't have it, researching cancer and AIDS, or any number of other things. But this overly simplistic argument about costs is misguided, and should be trashed.

Wait, Since When? (Update: Oh. Since Never.)

Update: I take it all back. See the bottom of this post.

In my current line of work (energy industry research), I come across quite a few government research reports, and generally I need to suspend my Austrian-ness and libertarian-ness as I read them in order to avoid getting frustrated. It's not that they're poorly written; in fact, they tend to be really well researched and thought out, and it's incredibly valuable to have access to them. But as one might gather from this post, there are sometimes little tidbits in them that make me want to pull my hair out. Moreover, they almost never make it a point to mention things like government failure, and are very often ignorantly perfectionist and guilty of the nirvana fallacy.

So I was very surprised to stumble across a report from the Congressional Budget Office, The Economics of Climate Change: A Primer, which described the problem facing policymakers like this:

The Earth’s atmosphere is a global, open-access resource that no one owns, that everyone depends on, and that absorbs emissions from an enormous variety of natural and human activities. As such, it is vulnerable to overuse, and the climate is vulnerable to degradation—a problem known as the tragedy of the commons. The atmosphere’s global nature makes it very difficult for communities and
nations to agree on and enforce individual rights to and responsibilities for its use.

With rights and responsibilities difficult to delineate and agreements a challenge to reach, markets may not develop to allocate atmospheric resources effectively. It may therefore fall to governments to develop alternative policies for addressing the risks from climate change. And because the causes and consequences of such change are global, effective policies will probably require extensive cooperation among countries with very different circumstances and interests.

However, governments may also fail to allocate resources effectively, and international cooperation will be extremely hard to achieve as well. Developed countries, which are responsible for the overwhelming bulk of emissions, will be reluctant to take on increasingly expensive unilateral commitments while there are inexpensive opportunities to constrain emissions in developing countries. But developing nations, which are expected to be the chief source of emissions growth in the future, will also be reluctant to adopt policies that constrain emissions and thereby limit their potential for economic growth -- particularly when they have contributed so little to the historical rise in atmospheric greenhouse gas concentrations and may suffer disproportionately more of the negative effects if nothing is done.

The bolding in the above is mine. I honestly don't think I can think of another example of a central government publication being so good about acknowledging the power of spontaneous order and the need to avoid the Nirvana fallacy. So kudos goes to Robert Shackleton of the CBO's Macroeconomic Analysis Division, who wrote the study, for not sounding like someone who's ignorant of economic theory! I'm just starting to read through this report, but I'm already looking forward to hearing what he will have to say.

Those who have followed my work will be aware that I am generally hesitant to endorse the approach to the issue of climate change which treats the problem as a question about the most efficient allocation of social resources. It seems to me that efficiency considerations can only justify coercive and centrally organized social engineering in rather extreme situations, and I am not fully convinced that the specter of climate change qualifies (or that if it did, the currently popular policy approaches would be the appropriate way to handle the problem). And looking through the table of contents in Shackleton's report, it doesn't appear that he considers these issues. But this is typical in the mainstream discourse, and I am not entirely surprised -- I can't hold it against him.

However, I can hold it in favor of former CBO Director Peter Orszag, who mentioned my point of view in a presentation at Wellesley College in October. On the 13th slide of his presentation, Orszag wrote:

Alternative view: Valuation of future benefits should be viewed primarily as a decision about equity rather than as a traditional investment decision.

But viewed as an equity issue, inconsistencies arise relative to how other intergenerational trade-offs are analyzed

Of course, I don't think Orszag is right to brush aside my approach in such a cavalier manner. And I certainly think that if "inconsistencies arise" when policies are considered from the standpoint of equity, then that seems like a problem for the views which are made inconsistent, and not the idea that policies should be based on equity. But the greater point is that at least Orszag is aware enough of what's going on to bring up this issue.

And this concludes my statist love-fest. You can all go back to your various degrees of distrust, dissent, and anarchist tendencies now.

Update:

Ugh. I take back all my love for Shackleton. Way to break my heart, man! Enjoy:

The atmosphere and climate are part of the stock of natural resources available to people to satisfy their needs and wants over time. From an economic point of view, climate policy involves measuring and comparing the values that people place on resources, across alternative uses and at different points in time, and applying the results to choose a course of action. An effective policy would balance the benefits and costs of using the atmosphere and distribute those benefits and costs among people in an acceptable way.

And by "Enjoy," I mean, "Try not to break something. It'll be okay."

A Little Bit of Blasphemy: A Reply to Onorati

Over at the FreedomWorks blog, my good friend Joseph Onorati wrote a post in condemnation of protectionism and in favor of free trade. As you can guess, I am in general agreement with Joseph on this one. But because I am a wicked troll, I had no choice but to post a scathing counterargument on the blog. I figured it might be of interest to some of you, and I'd love to help draw attention to Joseph's work and the FreedomWorks site. So check it out!

I also wanted to offer a few counterarguments to the counterargument I presented on the FreedomWorks blog in case anyone suddenly feels uncomfortable about free trade in light of something I said there (I wouldn't want to actually make someone advocate protectionism, of course; I was just poking fun at Joseph!). So here are, as I see them, the three points which together make liberalizing trade a coherent position to advocate for in national policy debates:

1) The particular values which we might seek to promote through protectionist policies are not universally shared across the country. In fact, it's not even close. A respectful society would not impose coercive policies which are inescapably designed in a way that impoverishes the general populous in order to promote goals which are not necessarily supported by those who will be affected.

2) As Joe correctly noted, the free market -- with its power to spontaneously coordinate the pursuit of constantly changing and often competing ends without the direction of a conscious designer -- is the most powerful mechanism we know of for creating wealth and prosperity. Nothing else even comes close. So by allowing the market to function, we can be relatively confident that people will be generally better off than they will be under more consciously coordinated regimes which aim to mold society to a particular static vision.

3) Centralized decision-makers are ill-suited to making effective protectionist policies. They are subject to lobbying pressure and a set of incentives which often lead them to make decisions for reasons other than their beliefs about what would be in the best interests of the people, and even when they are acting on good intentions, they often lack the knowledge and understanding that would be necessary to carry out their plans with any degree of precision and effectiveness.

For those three reasons (and not only one of them by itself), I think it's reasonable to support free markets in national-level policy discussions. To be clear, I don't always think that's the right call for more localized and tightly unified policy-making groups. But where policies are going to be imposed in broad strokes on a country of over 300 million people, I can't bring myself to support putting any power of that sort in the hands of any bureaucrat or politician, no matter how much they want the best for the country.

Some Hayekian Bathroom Reading: A Reply to Farrell

Yesterday over at the Crooked Timber blog, Henry Farrell wrote a post about an idea introduced by an airline executive which would have forced passengers to pay for their use of airplane toilets. He uses this example as a dig against we zany libertarians:

I’ve always thought that the social expectations associated with Ryanair flights are a microcosm for a certain kind of gung-ho libertarian ideal of market society, in which every possible social interaction is conducted through the cash nexus (if Michael O’Leary thought he could get away with charging you for the attendants’ smiles, he would). There are some quite clear efficiency benefits to this – externalities are internalized, and if you are determined just to travel (and to carefully work around their ways of squeezing you for extra cash) their flights are very cheap indeed. But you can also expect that they will charge you for everything that they possibly can, and take full advantage of every bargaining asymmetry going.

I agree that this sort of thing is unattractive, which is why I wouldn't expect that many airlines would get away with it for very long (though in the mean time it would be a source of irritation, and I would think it reasonable if they were required to disclose their policy very explicitly to potential customers in order to avoid legal ambiguity). Charge toilets might be a more efficient policy if allocating toilet use were at issue, but when your business depends on customer satisfaction, it seems dubious to me that the few dollars you would make per flight by charging for bathroom access would justify alienating and frustrating an enormous majority of your customers.

In any case, though, what we gung ho libertarians favor is letting people have the choice to try new things. As Farrell rightly points out, maybe there are some people out there who want to travel at the lowest possible expense, and are willing to put themselves in situations where they may be forced to pay out the nose for any amenities they wish to consume. We certainly wouldn't want to ban anyone from serving these odd folks. The issue gets complicated when access to the airline industry and to flight routes are restricted by another set of government policies, thereby reducing the opportunity for competition and making it so airlines have a privileged position in negotiating with their customers. But it still seems like no one is forcing you to fly with Ryanair, and what people should do is to choose the airline with policies they support (or are willing to accommodate for some other convenience or benefit).

The upshot of organizing society that way is that you never know what may come from toll toilets. Maybe people learn to accept paying for toilets, and that makes it possible for some entrepreneurial airlines to offer separate premium bathroom services (much like how when airlines started charging extra for food, the food got way better). The current incentive structure encourages airlines to go for the bare minimum. Maybe the best policy would be to charge for the nice bathrooms and have free ones that are poorly maintained. Maybe the best policy would be to only have nice bathrooms, charge for them, and brag about how your charge toilets are better than the other guy's charge toilets. I don't know.

And obviously, this isn't just about airplane toilets. The (good) libertarian argument was never that whatever happens in the market is desirable, or that we should never lament the elimination of services that we all enjoy. I would personally rather have free airline toilets, and I would gravitate flying on an airline that didn't fleece me at every available opportunity (perhaps even if I ended up paying more in the end!). But by legally prohibiting people from trying alternative policies, we entrench current tastes and prejudices and prohibit people from trying new things which may open up possibilities we haven't thought of before.

So while I join Farrell in finding the Ryanair suggestion to be unattractive and ridiculous, I don't think I would support the prohibition of such a policy which he seems to favor. If anything, that's because I would want to see competitors advertising with "Fly British Air. We don't make you pay to use the bathroom like those tits at Ryanair. Seriously, who makes their customers pay to use the bathroom on the airplane? What is this, France?"

Mankiw's Decentralized Approach to Stimulus

Yesterday, Greg Mankiw pointed out that perhaps the federal government is not the right entity to be charged with repairing the diverse and complex system of interrelationships that is the national economy:

When designing a fiscal stimulus, there is no compelling reason for one size fits all. Let each governor make a choice and answer to his or her state voters. It is called federalism.

After spending the last week or so despondently sifting through the House and Senate Stimulus Bills in search of energy industry-related cash, I almost stood up and cheered. But then I remembered that nobody listens to ethics-free Republican hacks.

*Sigh*

The Department of Energy Is Clearly Trying to Piss Me Off

Sometimes I wonder if the government anticipates that I will read their reports, and puts little things in them specifically to get to me. Today's episode occurred while reading a (mostly well-done) new report from the Department of Energy's Electricity Advisory Committee, "Keeping the Lights On in a New World."

On page 66 of the report, the Committee's authors note that investments in new generation capacity predictably follow a cyclical pattern. To illustrate why this is the case, please consider the following fictional example. Fake City is served by a large, centralized coal plant which produces baseload power, and several natural gas plants which satisfy peak load. Over time, the demand for electricity in Fake City rises, but the centralized coal plant is unable to increase its generation sufficiently to satisfy it. Electricity prices rise, and investors notice that profit opportunities exist for anyone who can help to meet the shortfall. The existing natural gas plant operators ramp up their generation, and several new natural gas and wind facilities (which can be built relatively quickly and inexpensively) are brought online to take advantage of the high prices.

Eventually Fake City's utility operators come to believe that future electricity demand will be sufficiently high to justify investment in a large new coal plant (these are very expensive and take a long time to build, but are less costly to operate). They begin construction on the plant, and in the mean time, the new natural gas and wind projects rake in the earnings which justified their construction in the first place. Eventually, the new coal plant is brought online, which decimates the market price for electricity, flooding the market with new, inexpensive supply and effectively pricing out the natural gas plants (the wind projects are less costly to operate, so they'll likely stick around, but new ones will not likely be built).

This cycle is immediately predictable to anyone thinking about how electricity generation works. It ensures that market demand is met in times when large new plants cannot be economically justified, and helps to communicate the need for new investments (whether in large plants or small ones) through the price mechanism. In short, the cycle is an illustration of comparative advantage at work.

Hopefully, anyone reading the above will be thinking, "Wow; it's really neat that the price mechanism is able to coordinate different technologies to satisfy the different needs of electricity consumers as they change over time! The big plants are built when they're needed, and there's a way to address consumer demand when those plants aren't economical -- that's great!"

But not the Electricity Advisory Committee! They write:

...large baseload capacity projects are limited to those times when demand and prices are significantly higher, thus reinforcing the cyclic investment process. Making new projects economically viable during lower demand growth periods will require policies and actons designed to stabilize investment returns, capacity, and energy prices.

There's only one coherent response to this statement: AAAAUUUUUUGGGGGHHHHHH!!!!!!!!!

On the FCCC's (and by extension, the IPCC's) Focus on State Decision Making

So I almost feel bad about this, but it's not really my fault. The IPCC put out a report in 1995 called Climate Change 1995: Economic and Social Dimensions of Climate Change; it was the contribution of the third working group to the Second Assessment Report. Normally, a used hard bound copy of the book will run you over $50; more if you want it in good condition. But because apparently some people don't understand what their goods are worth, I was able to utterly swindle some poor online merchant for a nearly immaculate copy for $20. INCLUDING SHIPPING! I've said it before and I'll say it again: I love imperfect information!

I've just started reading it, and let me tell you: these guys are good. They basically have everything they say so qualified that it's nearly impossible to disagree with it, no matter where you're coming from. But one thing has made me a little uncomfortable in these early goings (and it may just be because I'm overly sensitive to this kind of thing).

In its chapter on "Decision-Making Frameworks for Addressing Climate Change," the IPCC authors basically frame the issue of climate change as entirely something that is to be addressed through international political decision-making, embodied by the Framework Convention on Climate Change. The IPCC authors note that "First and foremost, the FCCC is a framework for collective decision making by sovereign states." They then acknowledge that for different states, different kinds of impacts will be politically important:

For example, European countries may focus most on the possible costs of abatement, whereas developing countries in Africa and South America may be most concerned with the burden of adaptation and vulnerability. Island states may be most threatened by a major loss of coastal land mass. Oil exporters may be most concerned about their potential loss of revenue from abatement strategies that reduce international fossil fuel consumption. An understanding of such differences in national perceptions, capabilities, and objectives must inform the decision process, particularly where those decisions must be reached collectively.

It seems to me that this focus on intergovernmental politics leaves out an important consideration, which is that large-scale collective action is only one tool with which societies can solve social problems. The IPCC neglects to discuss the importance of other tools, like community action and private activism. It seems to me that this way of looking at things sets up a dichotomy between "Fixing it!" and "Doing nothing" which cannot help but result in vast government intervention. I would expect a more balanced approach to the issue of climate change to be built on the foundation of recognizing that giant world governments can't always effectively solve problems, and that a part of the solution will need to come through other avenues.

I also worry that by framing the problem as a matter of political negotiation, the IPCC might be encouraging a paradigm which gives State decision-makers the power to treat their citizens as bargaining chips, rather than focusing on protecting them from mistreatment by the citizens of other countries and by other individuals within their own countries. As Paul Baer writes in his essay, "Adaptation: Who Pays Whom?":

...ethics and justice address the rights and responsibilities of individuals; obligations between countries are derivative, based on the aggregate characteristics of their populations, and pragmatic, given the existing state system.

Since climate change ultimately will be addressed within a social order which depends in large part on States to affect social change and to coordinate policy, I acknowledge that political bargaining will play a central role in any response to climate change. But to therefore think of the issue at hand as one of mere bargaining seems cynically realist and completely out of line with any coherent normative position. We all know what happens when issues are reduced to matters of mere bargaining: concentrated benefits and dispersed costs.

The thing is, though: much of the rest of the report does focus on the ethical considerations which should go into the decision-making process. So the realist "national interest"-based discussion in the early goings here seem like they might simply be at odds with what will be discussed later. I'll try to remember to post a followup to this post if the report starts to move away from this way of talking about things. But I figured it was worth pointing out while it's on my mind.

Roger Koppl Is Right About Gay Marriage

So a few months ago, I rather vocally proclaimed that when it came to the controversial issue of gay marriage, the answer was obviously that the government should eliminate its involvement in the issue altogether, since marriage is apparently a sacred institution which should have nothing to do with the government. I argued that homosexual couples should neither be legally recognized as married nor denied such recognition, but rather that the government should recognize all couples we currently think of as "married" by a different name. That way, marriage could be protected from redefinition like the religious conservatives want it to be, and no institutionalized discrimination would be perpetuated.

In spite of how clearly right I took that position to be at the time, and until just now, I have become convinced that I was wrong. I wanted to publicly acknowledge my change in opinion, in order to offer what I take to be a compelling argument in favor of the legalization of gay marriage.

That argument was offered by Dr. Roger Koppl in a discussion in the comments section of one of his posts on the ThinkMarkets blog. He point out that:

...they [religious conservatives] never objected to secular unions or calling such secular unions marriages. They are not defending marriage. They are expressing their (supposed!) moral objections to homosexuality. Why should we cow to that? Again, to protect their delicate sensibilities? No way! Certainly not given their failure to object to secular unions or the legal recognition of secular unions [as marriages].

I think that Dr. Koppl is right about this. I reproduce from my response to the post:

You do make a good point...in noting that the characterization of secular unions as “marriages” was never a matter of public outcry. I think you might be right, then, in suggesting that if there was going to be an objection to the liberalization of marriage, and its decoupling from the religious institution of the same name, then that objection should have been raised long ago. In other words, that a sort of statute of limitations applies here, and given the longstanding tradition of secular unions in this country, it might be fair to say that the window for objections has passed.

What was wrong with my previous position, then, is that I had granted to the conservatives the sacred status of marriage as currently defined, when in fact that status cannot be sustained in light of the well-established acceptance of secular unions as marriages in our country. If secular unions are unobjectionably "marriages," then it seems to follow that there is nothing necessarily sacred about marriage. And if secular unions fall within the established meaning of "marriage," I think it's pretty reasonable to think that the extension of the meaning to include gay marriages would be evolutionary, rather than revolutionary. After all, a secular union really is just a certain kind of contract, and forbidding homosexual couples from obtaining such a contractual relationship seems clearly unfair.

So hopefully that makes sense; thanks to Dr. Koppl for taking the time to discuss it with me!

On Coercion for Spammers: A Reply to Jacob

Over at the Crash Landing blog, Gene Callahan wrote:

...I often think that libertarians may tend to get confused (of course not all libertarians, and of course not all the time) between defending the general concept of property rights and defending such rights as they are currently defined. Now, I think it's fine to have a default position of "Don't tamper with current rights on a lark," but there are times I think it would be a very good idea to tamper with them. For instance, I would have no problem criminalizing what these "Wow Gold" folks have been doing to this blog. I've got to be spending a half an hour per week deleting their comments and the e-mails they generate. I consider what they are doing no different them coming over to my house with megaphones and shouting about "Wow gold" at a cocktail party I'm throwing.

Basically, the setup is this: Some spammers have somehow found a way to get past his blog's authentification defenses, and he's irate. But in the comments section of the post, a controversy arose. It appears that a fellow named Jacob is uncomfortable with the idea that we would feel justified in using coercive force against these miscreants, and thinks that Gene is dead wrong for thinking that it would be okay. In response to Jacob, I wrote the following, which I'm reposting here in case anyone finds it interesting:

Libertarian conceptions of rights are founded on the idea that others ought to be respected. When individuals don't want to be pestered, and they make that clear, then continuing to pester them is disrespectful of their individuality. We call that harrassment, and we generally think that people are justified in taking some coercive measures to act in opposition to harrassment.

If we adopt that standard, then it seems to me like we would also want to adopt another standard: people shouldn't perform actions that they can reasonably foresee pestering someone, even if the person haven't asked them to stop. Doing so would seem to fall short of treating people with respect, just like harrassing them does.

I think it's pretty reasonable to suppose that the people spamming Gene's blog are well aware that their actions are likely to pester him. If that's true, then they would indeed be failing to respect Gene by continuing to post their spam. And if libertarian conceptions of rights are built around the idea of due respect, then it wouldn't be unreasonable to suppose that Gene has some claim against having obviously irritating spam posted on his blog. If, then, we apply the same standard to obnoxious spamming as we do to harrassment, we could not unreasonably come to the conclusion that some degree of coercion might be justifiable in response to the incursion.

Now, exactly what kind of response (if any) we would advocate is an open question. But I don't think that it's so unreasonable to think that people who are knowingly seeking out and irritating other people should be stopped or reprimanded somehow. My solution: publish their names and addresses in the newspaper.

On Clean Coal (Or the Lack Thereof)

[Reposted from University and State]

I have a confession. There's something that's been eating at me for a long time, and I need to get it off my chest before my soul caves in on itself and I break a television in a rabid fury. I HATE THIS COMMERCIAL:

I'm saying this up front: this post is going to be way longer than is reasonable for a response to a tiny commercial. But someone needs to say this, so I'm saying it.

Let's dig a little bit into what's going on here. This Is Reality is a collaborative project between a number of environmental advocacy organizations, but I think it's pretty clear who's ringleading this operation: Al Gore's advocacy group, the Alliance for Climate Protection. So because it would be impossible to direct my ire at all of the organizations behind this commercial (since they all have different positions), and because the website for This Is Reality is filled with links to other Alliance projects, I will point my comments at the Alliance.

The Alliance has two other projects besides This Is Reality which represent its constructive alternative to the use of coal technology to generate electricity: We Can Solve It and Repower America. But to understand what they're talking about, it will be necessary to get some background on how electricity is currently generated. So here it goes:

Electricity demand fluctuates on a daily basis, like this:

Source: http://www.reliant.com/en_US/Platts/art/CEA_offices_fig1.gif

That's not actually an observation of demand; in reality things are a lot choppier. But the basic point you should take from it is this: during the work day when people are running lots of electricity-intensive equipment (and particularly in the summer and winter, space heaters and air conditioners), there's a rise in the amount of electricity demanded. You'll notice that there's a minimum amount of electricity that is always needed but the grid at any time of day. This daily minimum amount of power is called the "base load." And there's also a cyclical daily hump in electricity demand, called the "peak load."

Currently, base load is predominantly generated by large, centralized coal and nuclear plants (and some hydroelectric plants). These are by far the cheapest fossil fuel plants to run in terms of marginal cost per unit of power generated. But they have an important and inherent limitation: they can't ramp their output up and down very quickly. So they just chug along, producing the daily minimum amount of power around the clock.

Peak load can't be met effectively by these large scale plants, and that's where we find "peaking" or "cycling" plants. These are predominantly natural gas plants with some diesel reciprocating engines thrown into the mix. Natural gas plants are like enormous jet engines, and reciprocating engines are like giant motors; they can both be ramped up and down relatively quickly, and are therefore better suited for handling intraday fluctuations in demand, even though they cost more to operate.

So remember: Base load is the electricity that the grid needs around the clock, and it's produced in huge coal and nuclear plants (as well as hydroelectric plants). Peak load is the electricity that the grid needs to meet intraday fluctuations in demand, and it's produced in smaller natural gas and diesel plants. It all works out so electricity generation comes out looking like this (chart from 2006):

Source: http://upload.wikimedia.org/wikipedia/commons/d/d4/ Sources_of_electricity_in_the_USA_2006.png

As you can see, coal generation makes up about 50% of our current electricity production. So now I think we can turn to the Alliance's proposal, from its Repower America project: "100% clean electricity within 10 years." What's going on here? Exhibit A: There is no such thing as clean coal. Exhibit B: We want 100% clean electricity within 10 years. Exhibit C: America currently generates about 50% of its electricity from coal plants, and a large majority of its baseload power.

So how, exactly, do they plan to eliminate all of the coal generation capacity in America in 10 years (never mind all the other fossil fuel generation which likely gets the label of "unclean" as well)? Repower America has a four part plan. But before trotting it out, let's look at exactly what they're trying to do, using their own graphics:

...Yea. So here it goes:

Step 1: Energy Efficiency. Now, the Repower America authors rightly cite a Department of Energy document forecasting an increase in American electricity demand by about a quarter of current use over the next two decades. To counter this, the authors propose that 28% of future electricity demand be cancelled out by efficiency gains. Let's give them the benefit of the doubt (I don't feel like fact-checking this one), and suppose that this can be done. We're saying, then, that we can keep electricity demand essentially flat over the next decade while this transformation is supposed to take place. So now we're sort of at square one: we're supposing that energy efficiency will not make the problem any worse, but we haven't made things any better yet. I don't even want to begin to think about how much it would cost to eliminate 28% of American electricity demand with energy efficiency measures. We're not talking about changing light bulbs or installing better windows. But more power to them if they can do it. Okay then, we're at flat electricity demand for the next ten years; three steps left to replace coal!

I think it'll be useful, before moving on, to quickly adjust the figures to take out the influence of energy efficiency, to normalize the contributions to actual energy produced (which should roughly match up with today's total demand). In the Repower America Scenario A, solar photovoltaics, biomass/municipal, and geothermal will be relied on for 4% of electricity production each, wind for 37.5%, and solar thermal with storage for 18%. Notice that today, these technologies combine for only 2.4% of total production. If the Alliance gets its way, we have a lot of work to do in 10 years, and it's going to be expensive! So on now to step two, where we find out how they're going to produce all that power without fossil fuels.

Step 2: Renewable Generation. And I quote: "Generate 100% of US electricity from truly clean carbon-free sources. Renewable energy generation technologies like solar thermal, photovoltaics, wind, geothermal and biomass have been adding clean reliable power to the grid for more than a decade...It is now time to dramatically ramp-up the contribution of renewables to the energy mix." Now, conspicuously absent from that list is hydroelectric power, and for good reason: there really isn't much potential for expansion there (and there are also some important environmental concerns associated with the dams that are used to generate it), and the authors accordingly hold hydroelectric generation constant in their analysis. Even more conspicuously absent is a word barely mentioned in the Repower America plan: "Nuclear." Even though nuclear electricity generation produces no CO2, is projected to increase substantially in coming years, and is currently the only major existing large-scale alternative to coal for baseload power, the authors hold nuclear generation constant as well.

We'll touch on this point again later, but for now, it will be useful to once again jiggle the calculations. So let's cancel out the influence of nuclear and hydroelectric generation, which account for roughly a quarter of total electricity production today and in the future according to the Repower America scenarios. What's left is the current influence of renewables and the fossil fuel generators: coal, natural gas, and petroleum; together they account for about three quarters of the total power generation, and we'll call this the "flexible space" (since apparently we're holding the other quarter fixed). In the future, renewables will ostensibly fill this entire space, even though they only fill about 3% of it now. Currently, the space is two-thirds filled by coal, a quarter filled by natural gas, rounded out by a 2% contribution from petroleum. In the Repower America plan, we get solar photovoltaics, biomass/munipal, and geothermal each on the hook for 6% of the flexible space, solar thermal for 26.5%, and wind for 55%.

I want to focus on the fact that "Other Renewables" make up a whopping 2.4% of electricity generation today. In spite of all the hype, this is not actually all that surprising, as there are three main hurdles facing renewable energy generation technologies today. 1) They are generally more expensive than conventional methods of generation; 2) It is often the case that the ideal places to generate electricity from renewable resources are not the places where people live, and it is expensive to build transmission lines that can carry electricity over long distances; and 3) The generation characteristics of many renewable technologies are such that electricity is either not produced consistently and reliably, or production cannot be coordinated to respond to demand. Because we're dealing with a one-dimensional analysis (that is, preventing climate change is clearly the only thing that matters to these people, no matter the cost), we'll just throw out (1) for now. Who cares what it costs! But how does Repower America respond to (2) and (3)? We need to go to the last two steps to find out.

Step 3: Build a Unified National Smart Grid. Because renewable energy is often produced far from demand centers, Repower America proposes to build a giant system of transmission lines across the entire country in order to ensure that renewable energy can be integrated into the grid. Remember, kids: cost is no object; we're fighting climate change! So now, and I quote: "It will allow us to connect solar power in Arizona with manufacturing centers in Ohio or allow us to use evening wind power on the East Coast to support late afternoon peak demand in Nevada." So what're we looking at for a price tag? American Electric Power drew up a proposal for something like this at the behest of a group of wind power advocates, and projected the cost at $60 billion (or about a half of a percent of US GDP, or six months in Iraq). But I should note that AEP's plan was based on producing enough transmission capacity to allow wind power to reach a 20% share of America's electricity needs; I'm not sure the transmission system they've described could handle the kinds of transfers that would be needed to make 100% renewable energy feasible. But remember, cost is no object, and this apparently can be done.

So now we're a little closer to seeing how coal could be replaced, but there's still an important hurdle: many renewable energy sources are either inconsistent and unreliable, or don't produce energy at the same time that it's demanded.

A little more background is needed here. As I said before, some of the biggest problems with renewable electricity generation from technologies like wind and solar have been about timing and control. For example, photovoltaic solar generators only produce energy during the day, and they can't really be adjusted to produce only the electricity that you need. During the summer and winter, when there's a lot of space heating or air conditioning going on, that doesn't matter too much. Most electricity use happens during the day anyway, and grids can pretty much use whatever electricity they can get during those times. But in the spring and fall, when intraday fluctuations are smaller, those operating characteristics aren't particularly helpful. From one study exploring the impacts of large-scale use of solar generation:

Source: http://www.nrel.gov/pv/pdfs/39683.pdf

Source: http://www.nrel.gov/pv/pdfs/39683.pdf

As you can see, in the second chart, the contribution of solar energy drops the residual peak demand (that is, the demand during peak demand periods after the impact of the contribution from the solar generator) significantly below the normal daily minimum level. If this electricity were going to be used by the system, the baseload plants would need to be ramped down to the new minimum levels, and expensive peaking plants would need to fill in the gaps. Needless to say, this wouldn't happen; utilities would just dump the extra power. This means that if solar power were going to be implemented on a very large scale, it would need to be profitable even with the use of only a portion of the electricity generated by the systems. Looking at wind generation, one can see that the problem is exacerbated by the fact that wind generation doesn't necessarily line up with the peak demand period for a grid. One example from New York yielded this result:

Source: http://www.nyiso.com/public/webdocs/documents/white_papers/ wind_management_whitepaper_11202008.pdf

At least part of the rationale for the National Unified Smart Grid seems to be the idea that power can be sent from areas with unneeded excess generation to those where the electricity can be used, so that something along the lines of a "law of averages" approach would help to ensure a more stable grid system. But can wind power really be relied on the carry the burden of base load? I'm not sure. Remember, of the flexible space in the area of generation, big baseload coal takes up about two thirds of the generation we need to replace. Solar thermal, which apparently can be effectively (if expensively) utilized for baseload power when combined with storage technology, is being relied on for 26.5% of the space. The 6% each taken up by biomass/municipal and geothermal could ostensibly go towards base load requirements as well. But we need to acknowledge that wind is being asked to do a whole lot of work here, and I'm not entirely sure if that's realistic.

And unlike natural gas and diesel plants, it appears to me that none of these technologies can be dispatched on the scale that would be necessary to completely address jumps in peak demand. You simply can't just demand that the wind blow harder or the sun shine brighter. If a heat wave comes along and the wind is dead along the West Coast while people are blasting their air conditioners like there's no tomorrow, we need a source of on demand power. Natural gas currently serves a very important role in bringing flexibility to the grid. It doesn't appear to me that there's any generation technology with that characteristic in the Repower America portfolio.

A piece of the solution to this problem is provided by the "Smart Grid" component of the "Unified National Smart Grid" plan. This basically mirrors the Department of Energy's vision of the future of the electricity grid, and involves the use of smart metering technologies and communication between utilities and end-users of electricity to allow for "demand response" programs. This would allow utilities to tell their customers in times of system stress or unexpectedly high demand that they should reduce their electricity consumption. Utilities would generally pay customers to do this, and some plans include the ability for utilities to remotely control some of the appliances in their customers' facilities in order to initiate these drops in demand instantaneously. But there's a limit to how effective a demand response program can be. Ultimately, it's an important part of the job of a utility to be able to provide electricity on demand, and relying on customers to put up with unavailability of electricity is simply not a feasible option.

What's needed to make this plan technologically feasible is an effective form of energy storage. This would allow grid operators to build up energy reserves to respond to unexpected changes in supply or demand which could not be remedied by the almost nonexistent responsive capacity of a generation portfolio pretty much entirely dependent on resources which can't ramp production quickly up and down when needed. And that's where the final step comes in.

Step 4: Clean Plug-in Cars. When I saw this, I first thought, "Here is where, as they say, the plan jumps the proverbial shark."

The way that Repower America apparently expects to provide added stability to the electricity grid of the future is to basically use plug-in electric hybrids as batteries which can be charged when excess electricity is available, and drawn upon when electricity is needed by the grid. Now, a lot of people are talking about this as an important part of our energy future, and I'm one of them. I think plug in cars are a great idea. But the authors at Repower America are nuts if they think that the adoption of plug-in hybrid cars widespread enough to bring about this kind of energy storage capability would be consistent with their use of the Department of Energy's projection of electricity demand! A large plug-in hybrid fleet (in addition to taking longer than 10 years to materialize) would put an enormous strain on the electricity grid, forcing the already tenuous production of electricity from only renewables to somehow come up with thousands or millions more gigawatts of electricity. Perhaps it could be done; after all, we're not taking cost into account, remember?

But it's at this point where we really have to step back for a moment and ask ourselves, is this really what we think is going to happen? Even if we really want to stop climate change, does it make sense to try to completely eliminate fossil fuel technologies from the electricity generation landscape? Should we really just close the doors on billions upon billions of dollars in infrastructure investment? Is it really the best idea to try to force utilities to stop using coal, natural gas, and diesel to power their grids (or to offer them the money to convince them to do it voluntarily)? OF COURSE NOT!

So now we can finally get to why I hate that frikkin' commercial. There is such a thing as CLEANER coal technology, and we'd better darned well be ready to work towards implementing it! And we'd better keep an open mind towards expanding the use of cleaner natural gas and petroleum generation (which can be more energy efficient than coal) as well! And we SURE AS HELL better start building nuclear plants!

Smaller, decentralized coal plants can be used to provide heat to nearby buildings and homes, typically producing energy efficiencies much higher than can be achieved at large, centralized plants. Natural gas turbines typically operate at higher efficiencies as well, and they can be harnessed for combined heat and power too. By gasifying coal, petroleum coke, and other carboniferous feedstocks for use in Integrated Gasification Combined Cycle (IGCC) plants, we can also increase energy efficiency, even if we don't use the more concentrated resulting CO2 exhaust stream for Carbon Capture and Sequestration projects. Higher energy efficiency means less CO2 emitted, and doesn't necessarily force us to completely abandon cost-effectiveness. Looking for synergies for the use of waste CO2 could also be part of a solution. By burying our heads under the sand with a proposal to completely eliminate fossil fuel technologies, we draw attention away from these critical possibilities, and ultimately obstruct their development and implementation.

Nuclear power is CO2-free, and also needs to be a part of the answer. We simply can't expect to replace all of our baseload coal capacity without relying on nuclear power to help fill in the gap. To be sure, the increased use of renewable resources will need to be a huge and central part of our energy future. But to expect it to be the only part is flat out ridiculous, and trying to convince the American people otherwise is simply unreasonable and counterproductive.

Like it or not, we need fossil fuel technologies to meet our energy demands. And in addition to the technological feasibility we've discussed so far, and the monetary cost, that's because we're not going to employ the entire frikkin' country and its resources producing renewable generation facilities for the sole purpose of preventing climate change. Perhaps the most grating part of the Repower America plan is its repeated focus on job creation.

Here's something to chew on: When people consume their income, they consume goods and services that are produced by everyone else. If a substantial percentage of people are employed removing our existing infrastructure and replacing it with new infrastructure that serves exactly the same needs as the stuff that was there before, then it means that the people whose products are being consumed by the "green workers" are getting nothing in return for what they created. Imagine that Tom, Dick, and Harry are an economy. Tom produces food, Dick produces liquor, and Harry produces dirty magazines. At the end of the period, Tom, Dick, and Harry each have enough from selling to the others to end up with enough food, booze, and porn to go home happy. Now in period two, the government hires Harry to replace Tom's and Dick's doors with new doors that are no different from the old doors, except they're better for some reason which doesn't directly impact Tom or Dick. Tom and Dick still produce their food and booze, and the government taxes them to pay Harry for his services. Harry ends up with some food and some booze, but not as much as before, and Tom and Dick are in similar situations. And no one has any porn! What a terrible shame! So we can talk about jobs all we want, but what's really important is that at the end of the day, what goes around is what people produce. And if people are producing stuff that doesn't do anyone any good, everyone ends up worse off for it.

Now, it will immediately be countered that talking about costs is well and good when we're thinking about what to make for dinner, but climate change is a matter of justice. And while that would shift the debate away from my objection, which was that it's infuriating that Repowering America keeps harping about its plan's potential for job creation when it's undoubtedly going to make people generally worse off, I'll grant the point. The debate about climate change ultimately does come down to a question of ethics. But as Tom Athanasiou and Paul Baer point out in their book, Dead Heat: Global Justice and Global Warming, "The real issue, even ethically, is what will work..." (118). And this plan being pushed by the Alliance simply won't work.

Going a step farther, I defy anyone to give me a legitimate ethical argument which ends in the conclusion, "...and therefore, we must repower America with 100% clean energy in ten years, or else we will neglect our moral duty." I can't believe I'm about to sound like Bjorn Lomborg (*shudder*), but I'm not stopping myself. Watch:

Much of the climate change we can expect in the future is already in the pipeline. Taking a slower approach to reducing emissions, and embracing our need to maintain some carbon-intensive generation, would produce enormous efficiency gains and seriously accelerate progress in other areas of our economy. If we took some of the hundreds of billions or trillions of dollars that we would save by not implementing Al Gore's plan, and put it towards fighting malaria, restoring the rainforests, researching AIDS, promoting better energy efficiency in the developing world, and helping those who will need to adapt to the now inevitable impacts of climate change, we could likely do a lot more good in the world, even from the perspective of dealing with the impacts of climate change. Further, our descendents would likely be richer and better able to deal with their changing climate, and to help those who were not brought along by the rising tide of economic prosperity.

I'm not saying that nothing should be done to fight climate change. But driving our entire economy into the ground in order to fight a problem which is already partly out of our control doesn't seem like it's the best answer from anyone's perspective: even the victims', and even the environment's. We can be more energy efficient. We can use less coal and natural gas and oil. We can learn to harness the sun and the wind and the soil. We can learn to live as responsible members of the biotic community. But we have to learn to do that. And everyone will be better off if we don't rush ourselves into a more impoverished lifestyle to make it happen. Remember, before we were comfortable and well taken care of, the environment was the last thing on anyone's mind; look at China.

And remember, we're saving the world for future generations. Imagine if the industrial revolution had been stopped to prevent mercury poisoning. 'Nuff said.

So in closing, I hate that commercial because it represents a loss of perspective. It takes an important issue and reduces it to a set of overly simplistic talking points. We need to address climate change, to be sure. And that means a shift away from CO2-intensive electricity generation and towards renewables and clean technologies. But taking half of the most reasonable and important responses entirely off the table is irresponsible and counterproductive. It makes it so I end up talking to people who say, "No! No new coal plants!" instead of, "Is the plant going to produce combined heat and power?" And that's a problem, because if they scream about wind and solar, the utilities are going to laugh at them, whereas if they scream about capturing the heat stream for the benefit of the community, they might actually end up having an impact. The commercial makes it so the people who care most about fighting global warming get the absolute wrong idea of how to go about doing that. And that's a darned shame.

Update:

For anyone interested, the current breakdown for electricity generated from renewable resources by technology is as follows: Biomass electricity accounts for about 1.1%, wind for 0.6%, geothermal for 0.3%, and solar for about 0.01%. Hopefully that puts the Alliance's plan in a little better perspective.

On the Unified Smart Grid

My boss had me take a brief look at Al Gore's WeCampaign's proposal for a Unified National Smart Grid, and I figured I'd post my summary here in case anyone cares about these sorts of things. I apologize to the hardcore libertarians in the audience for my decidedly less-hostile-to-statism-and-intervention tone, but such is life.

The Smart Grid: An Introduction
http://www.oe.energy.gov/DocumentsandMedia/DOE_SG_Book_Single_Pages.pdf

Smart Grid is the name of a Department of Energy initiative charged with the modernization of the national energy grid.

The Premise: Existing electricity infrastructure is approaching the limits of its capacity. It is in the public’s interest to have a secure and efficient supply of electricity. But because existing technologies do not allow generators to effectively communicate with their consumers, and because rates have historically been unresponsive to dynamic market conditions, the importance of increased efficiency and security has not been properly captured in the market price of electricity. Accordingly, the current incentive structure does not encourage electricity producers to invest in more efficient and reliable technologies. This can lead to socially costly system failures, power outages, and energy quality issues (the DoE estimates that these issues cost Americans $100 billion per year). Government action is being used to bring about a more efficient outcome by allocating social resources towards the modernization of our nation’s grid.

The Strategy: It appears to be twofold. First, the DoE will incentivize investment in new energy infrastructure and promote research into new efficiency-improving technologies. A cornerstone of this approach seems to be the widespread introduction of Advanced Metering Infrastructure (AMI) to allow customers to coordinate their energy use with grid conditions through the use of customizable personal profiles. The increased cohesion, responsiveness, and customizability of the Smart Grid would bring about lower costs, smaller loads put on existing infrastructure, and greater flexibility in responding to problems.

The second part of the strategy will be to promote decentralization of electricity generation through distributed facilities. By localizing production capacity and utilizing a broader portfolio of smaller scale production methods, grids would be better protected against problems. The technologies introduced through the first part of the strategy will also increase the potential for the success of distributed production methods, and allow for energy solutions that are more tailored to the specific needs of customers.

Unified National Smart Grid
http://www.repoweramerica.org/elements/unified-national-smart-grid/
http://www.repoweramerica.org/elements/analysis/

Unified National Smart Grid is a concept put forward by the WeCampaign, a project of Al Gore’s Alliance for Climate Protection.

The Premise: Our current national grid is plagued by “Balkanization” and an excessive reliance on CO2-intensive generation methods. The technology for a CO2-neutral economy exists, but realizing this goal would require a nationally integrated system of electricity transmission so that electricity could be used far away from its point of generation.

The Strategy: Most of the efficiency-promoting infrastructural improvements of the DoE’s Smart Grid program are embraced by the WeCampaign proposal. The major difference, though, can be found in the fundamentally different paradigms in thinking about the nature of an ideal future generation regime. The Smart Grid program is focused on encouraging decentralization and distributed generation, allowing communities to be more self-sufficient and independent of failure-prone regional systems. The WeCampaign proposal seeks to go in precisely the opposite direction, centralizing the production and distribution of electricity using a vast new network of transmission lines to transport electricity all over the country.

The most obvious question raised by this strategy has to do with the cost of erecting high-efficiency electricity transmission lines across the United States to create a nationally integrated grid: even if it were true that such a system could be constructed, and that if it were constructed it would be possible to have a CO2-free economy, it would be unclear that we would really want to pursue such an option. Surely there are other values besides mitigating climate change! A one-dimensional analysis like the one offered by the WeCampaign ignores the fact that there are other important things besides responding to climate change. Neither the monetary nor the opportunity cost of a nationally integrated system is ever addressed in the WeCampain analysis, and one can only suspect that both would be formidable.

Conclusion

The Smart Grid plan described by the DoE is among the better kinds of government policies. It is clearly set out as a response to transactions costs which prohibit the attainment of certain public goods, and acknowledges that the decentralized planning of market actors must be relied upon in order to achieve an efficient solution to our electricity needs. The central features which distinguish the WeCampain Unified National Smart Grid proposal from the DoE’s plan are a single-minded focus on the use of CO2-free electricity production methods and an integrated national electricity transmission system. Both of these features, I think, would require substantial arguments which are not offered by the WeCampain, and on their face seem economically unfeasible. Accordingly, it’s very difficult to imagine that the DoE would amend their policy to accommodate the WeCampaign’s suggestions (unless the WeCampaign can generate enough public support to force the adoption of a clearly bad policy).

Some Thoughts on the Bailout and Consequentialism

It seems clear to me that the underlying justification for the economic bailout we're seeing right now is consquentialistic in nature, and is in no way based any conception of rights that the recipients of aid have to what they'll be getting. The idea, then, is that if we don't let the bailout go through, then a lot of people will suffer and have their goals frustrated, and that this would be a bad thing. In order to avoid this terrible consequence, then, we are morally obligated to undertake measures that would lessen the negative impacts on the people who are being hurt by the current financial situation. And we are obligated to do this even if we know that by trying to lessen these negative impacts, we set in motion events which will cause significant personal loss to those who would not have been significantly affected by the economic crisis.

Now, political economy of that kind is not really my specialty, and I don't really want to get into a discussion of what I specifically think should be done from a public policy standpoint. I don't really know, to be honest, and my opinion is basically worthless on this. But I was reflecting on this earlier, and I immediately thought of something John Simmons said in his totally unrelated (but nevertheless very interesting) essay, "On the Territorial Rights of States":

...one of the fundamental problems with all varieties of consequentialism is the way in which they permit their conclusions to be strongly influenced by the weight of frustrated expectations and desires, however unjustified these might be, and by considerations of simple convenience...

I don't mean to suggest that I think that convenience or frustrated expectations and desires are morally irrelevant, and I'm sure that Simmons would agree. But it is interesting to note that when we think only in terms of consequences, we often lose sight of the fact that there are other things that matter, e.g., the fact that the money that's being used to help these people who screwed up belongs to other people who worked hard for it and earned it, or that people may be frustrated because of their own poor judgment.

I'm not among the people who believes that there's no role for coercion in order to promote positive consequences. I do, however, think that we need to think long and hard about the fact that this bailout is not being used only to save lives and protect people from the worst kind of poverty and loss, but also to protect people from bearing the consequences of entirely unreasonable and irresponsible decisions that they made without giving proper thought to the risks that they were incurring and doing so, and to protect firms which unscrupulously invested in products which were founded in deception and predatory opportunism, and which are now being penalized for their lack of foresight and integrity.

I'm certainly not saying that everyone's mistakes were proportionate to the losses which they will likely incur as their result. But we live in neither a meritocracy nor a desert-based social order, and proportionality has nothing to do with the way that we live our lives. If I'm walking down the street and I accidentally step awkwardly on a crack, causing me to severely sprain my ankle, it seems fair to say that any absentmindedness I might have displayed in failing to watch where I put my feet would not make a severe ankle sprain my just deserts. But that doesn't mean that I could legitimately hobble into a nearby house and write myself a check for the price of crutches. As communities, perhaps we have an obligation to help people out when they're in need, and I would certainly think that if someone sprained their ankle in front of me, I ought to help them out in some way. But the idea that we have an enforceable responsibility to make people whole again when, in some cosmic sense, they don't deserve their fates seems odd to me, and somehow antithetical to the way we ordinarily think about our responsibilities to other people.

So ultimately, I'm not sure what to say about an ideal economic policy. It's not really my specialty. But what I will say is that from an ethical standpoint, there's something fishy going on.

But What About the Poor? (Education Edition)

On the LvMI message board, a common question was posed:

Hey guys just a basic question. How would the really really poor afford school for their kids under a complete free market system?? I mean what if a family was extremely poor?? It seems to me that this is a tough question to answer when I am asked it.

The conversation had already started by the time I saw the question, but I figured I'd throw in my two cents (which, of course, had expanded to about $3.50 by the time I was done). I thought it might be worthwhile to re-post my response here:

Well one way people could be provided for would be through voluntary community organizations aimed at ensuring certain kinds of social outcomes. For example, a home-owners' association could design a policy by which members who could not afford to send their kids to school would be granted financial support. Or individuals might participate in mutual aid societies which could perform similar functions.

As others have noted, we might also imagine the emergence of charitable institutions designed to help needy children afford an education, and it would be surprising to find schools failing to offer financial assistance in a decentralized educational system, given that most private schools already do so today.

Additionally, some children might be able to secure financial assistance for an education more directly aimed at preparing them for success in the workforce, where the ability to repay loans would likely be better and the education itself less costly. I have in mind here vocational schools with less emphasis on a broad liberal arts education and more emphasis on technical skills that would help children participate in the work force.

What we might find, however, in a radically decentralized system is that in communities that didn't place a high value on children receiving a broad liberal arts education, many children would end up going without one. It is somewhat reasonable to expect that given the sheer financial profitability of some level of education for a child, most families would be able to afford to have their children educated to some extent. But some facets of a liberal arts education may not be profitable in a financial sense, instead producing value for the child in the form of a rich life and improved intellect.

A proponent of radical decentralization would need to ask herself: In the event that charitable individuals and organizations in a community did not feel that a broad liberal arts education for needy children was worthy of supporting, and such an education would simply fall outside of the means of some families, would it be permissible to coercively take money from some individuals in order to ensure a liberal arts education for all children? If so, who would be justified in doing so, and how would they have to administer the support? Further, is failing to support a liberal arts education for poor children a violation of a duty, such that it would be morally impermissible to defend yourself against someone coercing you to do so?

I think that a case can be made on both sides in this debate, but ultimately I would expect to see the issue to be a moot point in most communities. As mentioned above, there are a number of mechanisms by which education could be supported in a decentralized system, and I would be surprised if we really ended up with communities where parents wanted to send their children to school, but simply couldn't find a way to afford it. It could be that in some communities, poor children might end up with more "practical" (i.e. market-participation-oriented) educations, which could be very regrettable. But the upshot is that these children would likely grow up to be able to afford better educations for their own children. And I would imagine that many communities would offer the kinds of assistance necessary to ensure that all children received a broad education, regardless of financial background.

Ultimately, though, what's needed is not an immediate abolition of the current educational system, but rather a movement away from centralized planning and towards more decentralized, competitive provision. Once we commit to that trend, we can start debating about the intricacies of a radically decentralized system. For now, we should focus on the area on which I think we share common ground: this is not an issue in which the federal government needs to interfere.

Open and Shut: Should Same-Sex Marriage Be Legal?

Update:

Despite the rather confident tone in which I wrote this article, I now believe that I was incorrect. Please see my followup post here.

A lot of the issues we deal with in political thinking are genuinely difficult, where no obvious answer presents itself, and controversy and disagreement are nearly inevitable. But same-sex marriage is not one of them. It is entirely inexcusable that this discussion has gone on as long as it has. Here is what I take to be the crux of the problem:

1) According to some people, marriage is a sacred institution, and its sacred status is somehow linked to homosexual couples not being allowed to be married.

2) In our country, marriage is not only a religious institution, but is a distinct legal status. The fact that this legal status is only available to heterosexual adults seems to be discriminatory to homosexuals. And institutionalized discrimination is contrary to our government's founding principles.

Oh heavens? What is to be done? Watch:

3) Our government is founded on the idea that church and state should remain separated. Because marriage is a sacred institution, the state should be barred from being involved with it in any capacity. If the government wants to accord a special legal status to cohabiting parties to certain kinds of contracts, then fine. It can't be "marriage," because that's a sacred institution. It would be like according a special status to people who have been Bar Mitzvah-ed. Not allowed.

See how easy that was? Good. Now we can all go home.

Cap and Trade vs. the Carbon Tax

So I've been addressing the issue of anthropogenic climate change for some time now, and I haven't said much in the way of addressing specific policy proposals. But I was just given a delightful present by one of my fellow FEE associates: a copy of the American Institute for Economic Research's latest Economic Education Bulletin, entitled "The Global Warming Debate: Science, Economics, and Policy." I didn't read the whole thing, but my favorite part was definitely when William R. Cotton, a professor of atmospheric science at Colorado State, closed his completely science-oriented essay, "Summary View of Climate Change," with:

There are strong indications that our global climate is warming. But the question is, is the warming due to anthropogenic greenhouse gases, or is it due to some other forcing mechanisms (or their transient absence) and natural variability. As human population on Earth continues to increase, the chances of human-induced changes in climate due to greenhouse gases, aerosol pollution, or alterations in land use become increasingly likely. Thus, rather than consider climate engineering, we should devise methods of encouraging the reduction of population growth through economic and quality-of-life incentives.

Period, end of conversation. No comment on that gem anywhere else in the entire essay. Who's got two thumbs and loves it? This guy.

But anyway, that's not the point. Later in the publication was an essay by Kenneth P. Green, a resident scholar at the American Enterprise Institute, where it was argued that a carbon tax is superior to a cap-and-trade system. I bounced between frustration, amusement, and glee as I read it, and felt an immediate need to comment. Not because Green did a bad job--he did just fine--but because he was guilty of something which is very common among people who discuss climate change: he discussed the possible "solutions" to climate change without addressing the reasons that a policy was to be implemented in the first place, and how the different solutions worked to address those reasons. His argument for a tax scheme over a cap-and-trade scheme was simply that a tax scheme could achieve the same goals, but with better economic side-effects and less potential for failure. Fine, I'll even grant it. But taxes and caps are fundamentally different policies, which only make even a little sense when confronted by specific sorts of problems.

I should explain what I mean. I've discussed elsewhere the idea that in order to make any sense from an ethical point of view, pollution taxes need to be based on the idea that an individual is justified in polluting if and only if she pays compensation to her victims for any damage done to them. That idea is controversial, but for our purposes we don't need to address that controversy. The point is only that even if we accept that idea as true, there are still only certain kinds of instances in which the injustice of pollution can legitimately be dealt with through a tax on pollution. The paradigm cases are those instances in which the damage caused by pollution is directly proportional to the amount of pollution that there is, so that the tax becomes the "price" of compensating the victims of one's actions for the costs one imposes upon them.

Cap and trade schemes, on the other hand, are built for an entirely different kind of problem. In a paradigm cap and trade situation, there is a threshold level of pollution with which policymakers are concerned, and at the threshold, a certain amount of damage is anticipated. The cap and trade scheme accordingly sets the cap at the relevant amount of pollution, and then distributes "shares" of the "environmental space" below that threshold in some way (e.g., auction, grandfathering system...). Because the allocations may be economically inefficient for whatever reason, the shares can then be traded in accordance with the wishes of their owners in order to ensure that the right to pollute is distributed to those individuals who are willing to pay the most for it (note that the normal objections to the "willingness to pay" criterion are avoided by passing the buck to the distribution process, which of course must be justified separately).

The point I want to make here is that global climate change is a very different phenomenon than the sorts of phenomena for which either of these policies is built to provide a solution. As noted elsewhere, climate change is an emergent problem. That is, climate change is not the result of any individual's actions, but rather is the consequence of many individuals acting separately, so that no individual can reasonably be said to have been able to prevent climate change from occurring, and no individual could have caused climate change singlehandedly. Accordingly, it does not make sense to talk about the consequences of climate change in terms of marginal contributions. The amount of damage caused by climate change will not likely change recognizeably with an additional increment of CO2 (or any other forcing agent), so it's not reasonable to try to put a price on how much damage "a unit of climate forcing" (expressed, perhaps, in terms of GWP, or Global Warming Potential, as defined by the IPCC?) causes.

A tax on contributions to climate change, therefore, seems like a policy which would require a bit of shoehorning. Individuals paying the tax would not be paying the "social cost" of their particular contribution, taken in isolation, because that would be basically zero. They would need to be charged for their "portion" of the total amount of damage done by climate change. So what policymakers would need to do would be to determine the total amount of damage which would be done at the equilibrium price for pollution permits, and then sell the permits at that price. The problem then becomes one of economic calculation. It could be done to some degree, but it would be inherently imprecise. And remember: the end result needs to be that the victims get compensated, so the government would have to go into its own pockets (that is to say, the pockets of its treasury or, more realistically, the pockets of its Federal Reserve printing press) to take care of the balance if it aimed low. And as my wonderful economist friends would point out, there would be a considerable incentive to aim high, creating a surplus revenue stream for the government which would almost certainly not be returned. So the tax is doable, kind of, but the problem is not the kind of thing that the tax is designed for. It's just that you can use the tax to accomplish the end goal if you want.

The cap and trade system is a little harder to adapt to the task, but there are a number of ways that the idea can be useful. First, there is a level to which we could collectively exert a forcing on the climate system without producing objectionable consequences. This level of climate forcing is a threshold which could be amenable to a soft cap and trade scheme (soft like the baseball salary cap). In this kind of policy, the cap would be set at the level of forcing which would produce no negative consequences, and this "environmental space" would be allocated somehow (or, if people find this to be a bad idea, we would simply say that these shares should be allocated in proportion to one's contribution to climate change, so that the soft cap has no effect). People not receiving these shares, or polluting in excess of their shares, would be filling environmental space which represented something like "harmful social emissions". Because these emissions would not be legitimated by the soft cap, they would be the ones which would be subject to the obligation to compensate the victims (again, if the soft cap isn't being used, as mentioned above, it would just be that everyone would have to participate in compensating the victims).

Here a potential for another cap would become apparent: We might imagine that policymakers would decide on a level of pollution (corresponding to some amount of total damage) which was determined to be "socially desirable" somehow. Perhaps, using the same reasoning involved in the tax scheme discussed above, the policymakers would arrive at the level of pollution which would clear the market if everyone paid some price for it. Or perhaps the policymakers would identify a level of pollution beyond which unacceptable results would occur, and the cap would be set there. In any case, you would then have to set a cap and allocate the shares. So again, the policy could be made to work. But the problems are simply that it's difficult to identify a level of "unacceptable" pollution, it's just as difficult to identify a market clearing price in this scheme as it is with the tax (assuming that the shares are auctioned, of course), and any other way of running the scheme is sure to carry either difficulties of its own, or charges of arbitrariness which would sever the connection between the problem and the solution.

So ultimately, what we're faced with is a situation in which the only two policy suggestions that are on the table are not particularly well suited to the task of "solving" the problems arising from climate change (and I haven't even begun to address the question of how the compensation process would even work, or whether compensation could make climate change legitimate!), and the only way to make either of them work is to basically stretch and contort them until they are made to do the job acceptably. Doing so, it will be noted, requires in both cases that government decision-makers possess knowledge and foresight which they almost certainly do not have, and even then it's unclear that the policies would work properly.

Obviously, there's a lot more to say about this. I just wanted to get some preliminary thoughts down, and I think this was a good start.