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*

On Distributive Justice and the Indeterminacy of the Market Process

This turned into a long, long post. But I really like it a lot, so hopefully you will too!

Introduction

This post started out as not much more than a stream of thought. But I'm pretty happy with where it went, so here's an introduction to help you figure out what the heck is going on. In this post, I wanted to explore the idea of distributive justice, basically just to get a handle on how I felt about it. I started by hammering out a few thoughts on the simple fact that we're not actually talking about the justice of an act of distribution, which has led some thinkers to reject distributive justice. In that section, I offer some reasons for thinking distributive justice can still make sense without an actual distributive act. I then consider what I take to be the most obvious objection to my argument, which comes from Robert Nozick's Anarchy, State, and Utopia. In the process of thinking about distributive justice through the lens of Nozick's argument, I end up rejecting Nozick's position, but I nevertheless arrive at a conclusion that I think might be unpalateable to most proponents of conceptions of distributive justice. I then offer some closing thoughts about why I think we can satisfy the desires of those who hold these views without depending on the idea of distributive injustice. Because I basically wrote this off-the-cuff, there might be a little less organization than normal, but I hope it will still be readable enough to get through.

Distributive Justice Without Distribution

The concept of distributive justice is an interesting one. After all, social resources are never actually distributed. So what can distributive justice mean when resources are never distributed? Some thinkers are quick to say, "nothing." But notice that there is more sense of the word "distribution". There is the sense where we take a distribution to be an outcome of an act of distribution, but there is also the sense of a statistical distribution. If the word "distributive" in "distributive justice" is to be understood coherently, I contend that it will need to be the statistical sense of "distribution" which informs our understanding of the term.

But how can a statistical distribution be just or unjust? After all, our normal conceptions of justice tend to apply between individual human beings, not vague statistical aggregates. Imagine a man who, after his ship struck a reef and sank, managed to swim to safety on a small, uninhabited island. Surely he would be at the far low end of the distribution of social outcomes. But could he coherently get upset at the reef for wronging him? At the island for being unjustly hospitable? At the cosmos for not preventing the shipwreck from happening in the first place? I don't think so. It seems important in thinking about justice that the problem be one where people could coherently have had a say in determining the outcome.

So injustice needs to involve people somehow, but does it need to be the result of human design? In "The Atavism of Social Justice," Hayek writes (58):

Justice has meaning only as a rule of human conduct, and no conceivable rules for the conduct of individuals supplying each other with goods and services in a market economy would produce a distribution which could be meaningfully described as just or unjust. Individuals might conduct themselves as justly as possible, but as the results for separate individuals would be neither intended nor foreseeable by others, the resulting state of affairs could neither be called just nor unjust.

Surely it is true that each individual's fate in our spontaneously organizing society is not the intended outcome of the market process. And it also seems true that in most cases, no one would have been able to foresee exactly how things were going to turn out for each individual over any considerable time scale. Accordingly, we might think that Hayek is right to say that we cannot consider the outcome of a market process to be unjust. The outcomes of the dynamic market process are simply not within our control, and when thinking about its products, we might say that (to take a line from George Reisman [13]) "the proper way to regard them is as the equivalent of acts of nature."

But in Progress and Poverty, Henry George notes (7):

...just as...a community realizes the conditions which all civilized communities are striving for, and advances in the scale of material progress--just as closer settlement and a more intimate connection with the rest of the world, and greater utilization of labor-saving machinery, make possible greater economies in production and exchange, and wealth in consequence increases, not merely in the aggregate, but in proportion to population--so does poverty take a darker aspect. Some get an infinitely better and easier living, but others find it hard to get a living at all. The "tramp" comes with the locomotive, and almshouses and prisons are as surely the marks of "material progress" as are costly dwellings, rich warehouses, and magnificent churches. Upon streets lighted with gas and patrolled by uniformed policemen, beggars wait for the passer-by, and in the shadow of the college, and library, and museum, are gathering the more hideous Huns and fiercer Vandals of whom Macaulay prophesied.

If George is right to note that the same forces which promote progress in society also explain the emergence of poverty, then it will be a seemingly hollow position to argue that the undesirable outcomes produced by spontaneous ordering mechanisms are unforeseeable and unintended. Surely we could not predict or intend that each individual consequence were going to occur, nor could we foresee exactly who would be affected, and how and when. But we could nevertheless predict with relative certainty that someone would be affected by the dark side of the market process. Consider this observation from Henry Hazlitt's Economics in One Lesson (59-60):

Yes, we should keep an eye on Joe Smith. He has been thrown out of a job by the new machine. Perhaps he can soon get another job, even a better one. But perhaps, also, he has devoted many years of his life to acquiring and improving a special skill for which the market no longer has any use. He has lost this investment in himself, in his old skill, just as his former employer, perhaps, has lost his investment in old machines or processes suddenly rendered obsolete. He was a skilled workman, and paid as a skilled workman. Now he has become overnight an unskilled workman again, and can hope, for the present, only for the wages of an unskilled workman, because the one skill he had is no longer needed. We cannot and must not forget Joe Smith. His is one of the personal tragedies that, as we shall see, are incident to nearly all industrial and economic progress.

It seems to me that it is for this reason -- that is, it is because we can foresee that there will be undesirable consequences in a free market society, even if we can not foresee exactly what they will be -- that it can make sense to talk about distributive justice at all (I am here taking the opposite position as I did in this earlier post). As I discussed before, we cannot coherently do so if we have in mind an act of distributing, as no such act ever occurs. But to the extent that conceptions of justice apply to human conduct, and to the extent that a free market system is one way in which humans can conduct themselves in a social setting, it seems fair to think that we might be able to criticize the foreseeable statistical outcomes of the market process and ask whether something ought to be (or ought to have been done) about them.

But Wait! A Challenger!

Now in saying this, I will immediately be faced with an important objection, captured by Robert Nozick in his Anarchy, State, and Utopia (161):

If D1 was a just distribution, and people voluntarily moved from it to D2, transferring parts of their shares they were given under D1 (what was it for if not to do something with?), isn't D2 also just?

In other words, it's important to notice that when we lament any of the outcomes of spontaneous free-market organization, we lament circumstances which seem to arise without anyone doing anything that we could coherently point to as having been wrong, or wicked. The problematic outcomes are typically either emergent, or the consequences of people doing things that we generally think they have every right to do (where there is blatant mistreatment, we generally wouldn't think of the problem as being one of distributive injustice).

So does that mean that the outcomes are just? There are three ways to dispute Nozick's argument: a) to argue that the starting point at which people find themselves in a market society is not actually just, b) to argue that what arises from a just initial position from just steps is not necessarily just, and c) to argue that, contrary to intuition, the consequences of market organization do not necessarily arise from just steps. I will consider each in turn.

What Makes a Starting Point Just?

In thinking about Nozick's D1, we will encounter two very different issues, which we will need to separate in order to proceed sensible. The first issue is whether any starting point in our market society can be legitimately pointed to as being, or having been, just. But the second issue, which is somewhat more important for our purposes, is whether the problems which are contained in the idea of "distributive injustice" are the products of unjust starting points -- that is, whether it would be helpful in disputing Nozick's conclusion to pursue this kind of argument. Because I think that the answer to the second issue is "No," I will only have a few words to say about the first issue, even though it is certainly worthy of a much more thorough discussion.

So is there a "just" starting point from which we can think of a market society as having proceeded? Clearly there is nothing that is literally a starting point which is relevant to our purposes. The free market is an organic, constantly evolving ecosystem of human activity. It started when people started working together (or more accurately, when primates or their predecessors started working together), and continues on until now. It has been characterized through its history by countless injustices, atrocities, and oppressions. These past wrongs have so thoroughly influenced the current state of the system that it would be incoherent to talk about "reversing the damage" that they caused. The people who are alive today would not even exist if history had not proceeded the way that it did.

So our starting point, no matter where we arbitrarily place it, will not represent a perfectly "just" starting point. But does that matter? To an extent, yes. But also, to an extent, no. As David Schmidtz writes in his book, Elements of Justice (212):

Dwelling too much on the past is wrong for the same reason that ignoring the past altogether is wrong: Excess in either direction reduces stability in transactions, thus making it harder to go forward in peace. A routine title search when buying a house (to verify that the seller's holding of the deed is in fact uncontested) is one thing; going back as many centuries as the land has been occupied is another.

But some will not object to our modern starting point because of mistreatment in the past, but rather because of the structure of the society in which we begin. Such a perspective is characteristic of the left-libertarians in the Steiner/Otsuka/Vallentyne mold, where the idea is that non-man made natural resources ought to be initially distributed according to an egalitarian principle.

It's here, however, that I want to pull the plug on this conversation, because as G.A. Cohen points out in Self-ownership, Freedom, and Equality (105):

I believe...that no such constitution is to be discovered: no egalitarian rule regarding external resources alone will, together with self-ownership, deliver equality of outcome, except, as in the case of joint ownership, at an unacceptable sacrifice of autonomy. There is a tendency in self-ownership to produce inequality, and the only way to nullify that tendency (without expressly abridging self-ownership) is through a regime over external resources which is so rigid that it excludes exercise of independent rights over oneself.

In other words, the problems which concern those focused on distributive justice do not find their roots in the starting point from which social evolution proceeds. Lamentable market outcomes are not simply the outcomes of unjust or unequal initial distribution, or of historical injustice and oppression. Rather, they are a product of that evolution itself. So it will do the proponent of distributive justice no good to focus on this aspect of Nozick's argument. Accordingly, I will move on to the next avenue of objection.

Do Just Steps Preserve Justice?

The next way to object to Nozick's argument is to contend that something that arises as the result of just steps is not necessarily just, even if we don't want to object to the initial set of conditions. On its face, it seems pretty uncontroversial to say that if there's no problem with an initial condition, and all of the changes from that initial condition were perfectly legitimate and just, then we don't really have grounds for calling the outcome "unjust." We may lament them -- as Hazlitt above lamented the fate of the workman who was displaced by the machine -- but we may not have reason to say that the outcome is unjust. Perhaps it is merely unfortunate. This is the intuition which Nozick seeks to capture, and does.

But consider this: In his essay, "The Institution of Property," David Schmidtz suggests:

Note a difference between justifying institutions that regulate appropriation and justifying particular acts of appropriation. Think of original appropriation as a game and of particular acts of appropriation as moves within the game. Even if the game is justified, a given move within the game may have nothing to recommend it. Indeed, we could say (for argument's sake) that any act of appropriation will seem arbitrary when viewed in isolation, and some will seem unconscionable. Even so, there can be compelling reasons to have an institutional framework that recognizes property claims on the basis of moves that would carry no weight in an institutional vacuum.

If a game can be justified even though individual moves, when taken in isolation, might not seem justified, then why couldn't we say that a game can be unjustified even if none of its moves seem problematic? I see no reason why not.

And this seems like exactly the kind of objection that is being raised by the proponents of distributive justice. That is, the problem with the market order is not that it is characterized by unjust moves, but rather that it is supposedly an unjust game -- it is a game which generates consequences that are unacceptable, even if none of the players do anything wrong at any particular time. In other words, the allegation is that market orders generate emergent injustices.

But do they really? Is it somehow unjust of us, as participants in a market order, to "play the game" that we do? Some libertarians and free-market thinkers will point out that all it means to "play the game" of market organization is to relate to each other in a purely voluntry way. By this conception, it would seem unreasonable to think of participating in a market order as contributing to injustice. After all, in a system of purely voluntary interactions, one individual's wealth is not gotten at the expense of anyone else's interests. No one, then, is made worse off in any way to which they do not assent. It might here be noted that a state of poverty is the natural state of man, and that it is wealth that is the surprising anomaly. Accordingly, we might think of the alleged "injustice" of capitalism as simply the product of some individuals being "left behind" by the rising tide of progress.

Taking this point of view, we might come to the conclusion that a free-market order is not unjust. People who "play the game" are participating in a process which generates wealth for those who are successful, and which simply leaves the unsuccessful in their original state. We might lament the fact that we don't all win, but we would be hard-pressed to contend that this inherent inequality of outcomes is unjust. By this view, capitalism is a game which individuals play at their own peril, if they so choose; it is a system which allows each individual to do things the way that she thinks is best, on the condition that she respects others' right to do the same. As Ludwig von Mises wrote in The Anti-Capitalistic Mentality (2):

This is what the modern concept of freedom means. Every adult is free to fashion his life according to his own plans. He is not forced to live according to the plan of a planning authority enforcing its unique plan by the police, i.e., the social apparatus of compulsion and coercion. What restricts the individual's freedom is not other people's violence or threat of violence, but the physiological structure of his body and the inescapable nature-given scarcity of the factors of production. It is obvious that man's discretion to shape his own fate can never trespass the limits drawn by what are called the laws of nature.

But G.A. Cohen disagrees with this way of looking at things, arguing in Self-ownership, Freedom, and Equality that within a market society, a property-less proletarian "must either sell his labour power to a capitalist or die" (100), and accordingly "lacks self-ownership, in an effective sense" (ibid). Cohen is seizing upon the idea that if the choice is between voluntarily living according to someone else's plans at unfavorable terms on one hand, and starving to death or dying of exposure on the other, the sense in which one is free to choose one's own fate is "merely formal" (ibid; italics original).

This point can be more fully appreciated by calling on a definition from F.A. Hayek's The Constitution of Liberty (19):

By "coercion" we mean such control of the environment or circumstances of a person by another that, in order to avoid greater evil, he is forced to act not according to a coherent plan of his own but to serve the ends of another. Except in the sense of choosing the lesser evil in a situation forced on him by another, he is unable either to use his own intelligence or knowledge or to follow his own aims or beliefs. Coercion is evil precisely because it thus eliminates an individual as a thinking and valuing person and makes him a bare tool in the achievement of the ends of another.

Now, Cohen would not want to say that an individual employer forces a worker into his service -- that is clearly untrue. But he would likely want to contend that the market system, with its institutions of private property and endemic inequality, effectively coerces the proletarian with its choice between death and an emiserated survival by the grace of some exploiter. It is precisely because coercion is evil, by this point of view, that the so-called "free-market" system is unjust.

But if we are to condemn the system in which the proletarian is allegedly coerced, we must consider how the system supposedly brings about this state of affairs. Surely the objection to a market order is not raised to demand rectification for the fate of the person who led himself to financial ruin through bad decisions and poor judgment. Though we may lament such an outcome, it seems clear that we would not want to cite this sort of thing as an injustice. The critic of the market system is most plausible when targetting her objections at circumstances like the one discussed by Hazlitt above, where workers are displaced by the perpetual churning of the marketplace, or circumstances in which individuals are born into unfortunate lifestyles through an inherited lack of access to capital resources. We shall therefore examine each of these indictments in turn.

The destruction of existing order by dynamic market processes is indeed an inherent characteristic of a healthy market process. And it is therefore true that individuals may, as a result of this so-called "creative destruction" (to steal Schumpeter's term), find themselves in a position where they are effectively coerced by force of circumstances into a sort of proletarian existence. But I think that a good case can be made for the idea that this is simply a risk of participating in the market process. That is, it is surely a lamentable feature of that process that some people end up on the losing side, but I am unsure how we would justify calling this an unjust feature of the market. As F.A. Hayek writes in his essay, "Individualism: True and False" (21-22):

...if the individual is to be free to choose, it is inevitable that he should bear the risk attaching to that choice and that in consequence he be rewarded, not according to the goodness or badness of his intentions, but solely on the basis of the value of the results to others.

Perhaps I will need to think about this some more, but I can't see any reason for thinking about this sort of thing as anything more than an unfortunate characteristic of the market system.

More concerning, I think, is the state of affairs faced by the proletarian who is born into his situation -- forced by the nature of his upbringing into a sort of "wage slavery." The free-market proponent can undoubtedly point to a number of examples of such cases where through hard work, talent, and a little bit luck led the individual to a prosperous life. The critic can undoubtedly point to a larger number of such examples where no such thing took place. The point that the free-market critic makes in citing such examples is not that injustice cannot be overcome, as the free-market proponent's counterargument may often make it appear. Rather, the point is that such circumstances are unjust regardless of whether or not they can be overcome.

But how do these circumstances come about? The private property system itself seems like a popular target, given that the most obvious reason for the proletarian's state of affairs is her lack of access to the resources which would empower her to take better control of her life in order to direct it to her own ends, and the most apparent reason why she does not have access to those resources is a coercive set of institutions which will stop her if she tries to use them. As G.A. Cohen observes in Self-ownership, Freedom, and Equality (55-56):

The banal truth is, if the state prevents me from doing something that I want to do, then it places a restriction on my freedom. Suppose, then, that I want to perform an action which involves a legally prohibited use of your property. I want, let us say, to pitch a tent in your large back garden, perhaps just in order to annoy you, or perhaps for the more substantial reason that I have nowhere to live and no land of my own, but I have got hold of a tent, legitimately or otherwise. If I now try to do this thing that I want to do, the chances are that the state will intervene on your behalf. If it does, I shall suffer a constraint on my freedom. The same goes, of course, for all unpermitted use of a piece of private property by those who do not own it, and there are always those who do not own it, since 'private ownership by one person presupposes non-ownership on the part of other persons.

But is the problem really that we have a society in which there are rules delineating who has the right of way with respect to the use of specific objects? As David Schmidtz writes in his book, Elements of Justice (157):

We cannot live together without rules that secure our possessions, thereby enabling us to plan our separate lives.

Even Karl Marx, in his essay on "Estranged Labour," allows that material possessions are critical to one's ability to find fulfillment and to shape one's own identity. Marx writes:

It is...in his fashioning of the objective that man really proves himself to be a species-being. Such production is his active species-life. Through it, nature appears as his work and his reality. The object of labour is, therefore, the objectification of the species-life of man: for man produces himself not only intellectually, in his consciousness, but actively and actually, and he can therefore contemplate himself in a world he himself has created.

The problem with the market system, it seems, is not that it is characterized by property rules. Rather, the problem appears to be that the proletarian doesn't have property, and is therefore not able to pursue the self-defining ends which both libertarians and non-libertarians prize. In other words, the alleged "injustice" of the market system is not that there is property, but rather that the proletarian doesn't have any.

The critic of the market system must therefore build his case on the idea that the injustice caused by the market system is in bringing it about that the proletarian is born into poverty. But this is where the case crumbles. The case crumbles because it is decidedly not the fault of the market system that the proletarian is born into poverty. Rather, it is the fault of the proletarian's parents that she is born into poverty. Neither the market system nor its propertied participants can be blamed for the fact that the proletarian was put into a position where she had to choose between being a wage-slave and dying. The fact that the proletarian did not simply show up on the scene, but was rather brought to the scene by her parents, seems to absolve "the system" of guilt for the proletarian's position, at least in my mind.

Now there are two ways that I can imagine someone objecting to this conclusion. The first would be to pointedly ask, "Are you seriously saying that poor people shouldn't have children?," and then to rattle off a list of reasons why I am a heartless, evil jerk. To this I would respond that if it is true that it is an injustice for someone to have to live a life of wage slavery, and if it is further true that a parent can foresee that by having a child, she will be condemning him to a life of emiserated labor, in which he will be unable to pursue his own fulfillment, then perhaps that is what I am saying. But I would qualify this claim with the important point that even poor parents can prepare their children for an active and fulfilling role in society by raising them well, and would therefore be responsible for no injustice in having a child. My only claim is that if we find an individual whose life we wish to declare an injustice because of his upbringing and the circumstances of his birth, then it would seem odd to place the blame elsewhere than on the individuals who were directly responsible for that upbringing and birth.

The second kind of response I can imagine would be to insist that the system can be blamed for the state of the parents (or the parents' parents, and so on) because of some past injustice which explains the cycle of poverty in the midst of which we find our proletarian. And while that response is perhaps a legitimate one, I would have to point the responder back to the previous section for my reply.

So, then, it seems to me that in declaring a distribution to be unjust, one cannot blame the market system itself, or the society which participates in that system, for unjustly "playing the game." The game, it seems to me, is not at fault for alleged distributive injustices.

At this point we should pause and retrace our steps. The problem with which we are here concerned starts with Robert Nozick's claim that any outcome which arises through just steps from a just initial starting point is itself just. We were concerned because this claim is at odds with the concept of distributive justice, which suggests that some of the outcomes of market processes are disturbing for intuitively moral reasons. We first asked whether we could save our intuitions by rejecting Nozick's implication that the market process has a just starting point, but concluded that this would not help our argument. In this section, we objected to the idea that just steps preserve justice, pointing out that a system of institutions can itself be unjust. We then considered whether or not the market system is itself an unjust system, and concluded that in the cases where we might intuitively want to identify distributive injustice, we cannot coherently blame the market system for unjustly bringing about those outcomes. Accordingly, rejecting this part of Nozick's argument will not help us to defend our intuitions about distributive injustice.

At the outset of our discussion, we said that there were going to be three steps in our examination, which leaves one left: the claim that the outcomes to which we object do not actually arise from a just initial starting position through just steps. But because we have objected to the structure of Nozick's argument, it will be irrelevant for us to explore this question -- we have seen that just steps do not necessarily preserve justice, and that it is irrelevant whether an initial starting point is in some sense "just." But we can rephrase the issue in light of the conclusions that we have drawn so far.

Ought We Really to Rely Upon the Market Process to Ensure Desirable Outcomes?

We will therefore ask: Even if we do not wish to take exception to some past state of affairs from which our current circumstances evolved, and even if we do not wish to claim that the market system itself is somehow an "unjust game," is it really true that we have no reason to object to the social process by which people have ended up in undesirable circumstances? Another (I think) equivalent way to think about this question is, if it is the case that undesirable outcomes arise for certain individuals purely through the normal workings of the market process (to which we do not want to object), and if those undesirable outcomes are allowed to stand, will it necessarily be the case that everyone has a claim to moral blamelessness?

In his essay, "Famine, Affluence, and Morality," Peter Singer writes:

...if I am walking past a shallow pond and see a child drowning in it, I ought to wade in and pull the child out. This will mean getting my clothes muddy, but this is insignificant, while the death of the child would presumably be a very bad thing.

In the example, we are not supposed to assume that the individual walking past the pond has put the child in the pond. No crime is supposed to have produced the child's unfortunate circumstances. And further, it is by no systemic injustice of the complex web of social interrelationships that the child is drowning. Yet if we simply watched the child drown, would that not seem wrong?

Perhaps it is the case that, as individuals who appreciate each other's value and moral worth, we owe it to each other to lend a helping hand in times of need. And if we did not lift a finger when others were facing crisis, that we would be failing to uphold our duties as morally responsible people. To say this implies no injustice in the market system which brings about unfortunate outcomes, nor does it imply that somehow we need to find some point in the past to serve as a "source" of injustice. Rather, we can think of distributive injustice as a recognition that in a community or society where so many live free of need, there are individuals among us who struggle to survive, without so much as a helping hand from their neighbors.

Of course, the mere existence of need and want surely cannot entail the presence of injustice. The same respect for the value of life which commands us to care about our neighbors also commands us to recognize the importance of living our own lives according to our own goals and desires. Earlier, we noted an idea from F.A. Hayek that coercion is evil because it "eliminates an individual as a thinking and valuing person and makes him a bare tool in the achievement of the ends of another." We suggested that the tragic need which drives individuals into exploitative labor relationships is evil for this reason as well. But we must now acknowledge that the attitude which places on the successful individual the burden of caring after the world's needy is evil for exactly the same reason (I discussed this in a previous post). Addressing one evil through the introduction of another seems like a questionable way to proceed. But it does not seem that either extreme -- ignoring the suffering of others or sacrificing oneself for the good of those in need -- is the correct one. What is needed is a balance between the two.

With this realization, we can declare our analysis to be complete. I think I'm happy with this conclusion. Thanks for reading along!

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!!!!!!!!!

My Education Article in The Freeman!!!

It's official: Real ink has been applied to paper by professionals to capture my ideas in textual form for distribution to the masses. See the evidence here! Sure, it's an article that has already been available for months, and sure many of you have already read it. But darn it, it's The Freeman, and a lot of frikkin' people see it! I'm excited!

Update:

It appears that in the middle of the first page of the print version of the article (pages 37-38), there is a rather large photograph of Dr. David Schmidtz. I am thoroughly amused by this choice (which was not mine), particularly since I have applied to the University of Arizona's PhD program in philosophy, and have never spoken to or seen Dr. Schmidtz in my life. I've just notified him of this development; we'll see what he says!

Update 2:

He's glad for the publicity! Thanks for being a good sport, Dr. Schmidtz!

Properly Framing Skepticism: A Reply to Knappenberger

Update: Please see the comments for further discussion.

A few weeks ago on the MasterResource blog, Paul Knappenberger noted that, in light of generally stagnant global average temperatures over the last decade (and falling temperatures over the last half dozen years), we might justifiably begin to doubt the reliability of the models on which much of the concern over global climate change is based. On the basis of this concern and a few allusions to other lines of evidence which seem to cast doubt on the case for alarm, Knappenberger concludes that:

While coming years may or may not continue the cooling trend of the past several, they will almost assuredly continue to add to the growing evidence that our coming climate will likely be far less detrimental than the popular projections of it to which we are often exposed.

In writing this response, I don't want to create the impression that I think that Knappenberger does a bad job in his post. I think he built a very reasonable case for concern over the reliability of climate models, and to a large extent I agree with him. About a year ago, I wrote a post on this blog discussing some of my reservations about climate modeling, noting that models raise uncertainty in at least five important ways: There may be problems resulting from "tuning" models; the IPCC uses averages from multiple models, potentially distracting us from serious and different flaws in each model; the models cannot effectively model small-scale phenomena which could be important in determining the future state of the climate system; they make use of proscribed variables; and they cannot effectively capture unprecedented, game-changing possibilities without opening themselves up to radical uncertainty. Knappenberger discusses a number of these issues in his post, and I think he does a good job.

But I do have one objection to his handling of the issue with which he concerned himself in his post: his conclusion was not at all supported by his argument. I believe that Knappenberger has mistaken the absence of evidence to be the evidence of absence. He coherently argued that climate models had made a vague prediction about what would happen in the future, and that since the prediction has not obtained as expected, we have reason to doubt that the climate models are reliable. However, he then appears to jump from the claim that climate models (which predict warming) are unreliable to the claim that warming is unlikely. But this jump cannot be sustained without further evidence.

To illustrate the problem, we might imagine that we are on our way to the mall with a particularly superstitious friend when she suddenly exclaims, "I bet we find a parking spot right away; we've gotten green lights the whole way so far, and that usually means I'm going to find a parking spot!" We might be skeptical of this claim, and regard her thesis as entirely unsupported. But what does that mean about the prediction that we'll find a parking spot? It simply doesn't tell us anything. We'd need to throw out our friend's claim entirely and appeal to entirely different lines of evidence to discuss the truth of the matter. In the same way, showing that climate models' predictions of future warming are unreliable does not suggest that there will not be warming. It simply suggests that we should place less emphasis on their predictions in forming our outlooks, or discard them completely.

The reason I belabor this point is that I think there's a broader point to be made here. There is a fundamental and important difference between an argument that says, "The state of scientific knowledge is not advanced enough that we can make a reliable prediction that distressing or catastrophic global climate change will occur in the relatively near future as a result of human activities," and an argument that says, "The state of scientific knowledge is advanced enough that we can make a reliable prediction that distressing or catastrophic global climate change will not occur in the relatively near future as a result of human activities." In his post, Knappenberger supports (effectively!) the first kind of argument. But in his conclusion, he advances the second kind, and without justification. I think it's critical that in thinking about climate change, we make sure to keep in mind this distinction and frame our skepticism in a way that we can defend.