Joe Romm misses the point

It's too bad this is blowing up on a Friday, because it has the potential to be a really fun discussion. Over at Common Tragedies, Rich Sweeney writes:

All of us at CT don’t even know how to begin to respond to [this post from Joe Romm at Climate Progress]:

Seriously, Dr. Stavins, just because you haven’t figured out how to walk and chew gum at the same time, doesn’t mean nobody else can.

I’m hoping that Environmental Econ can help clarify Stavins’ point in a simple (and funny) manner. I can think of few people who have done more to advance environmental regulation than Rob Stavins, and find the whole post infuriating.

John, while making a valiant effort at simplicity, missed the funny. So now it's my turn...

Joe summarizes Rob's argument as follows:

In short, whatever we do to address climate must not attempt to create jobs. And whatever we do to create jobs should make no effort whatsoever to get off our self-destructively unsustainable economic path. That would not be a Pareto optimum, I guess.

Seriously, Dr. Stavins, just because you haven’t figured out how to walk and chew gum at the same time, doesn’t mean nobody else can.

WRONG.  At the risk of putting my words in Rob's mouth (and I have no intention of doing so because that would significantly decrease Rob's intelligence), the point is not that we shouldn't try to meet both goals--good dinner and good shower--but rather, the policy of addressing both at once is STUPID.  Determining the best way to make dinner in the shower will result in a bad shower and bad dinner (both outcomes will be suboptimal). There are better ways to reach both goals. 

Targeting climate change under the mask of stimulus policy may result in suboptimal stimulus, and targeting stimulus under the mask of climate policy may result in suboptimal climate outcomes. 

The critics of Stavin's argument seem to be arguing that the only acceptable way to stimulate the economy is by addressing climate change.  The irony is that their own recommendations may very well be counter to their ultimate goal.  Good intentions--unintented consequences. That (I think) was Stavin's point.  A soggy dinner indeed.

OK, that wasn't very funny either.

And as for Romm's warning...

All kidding aside, I think the economics profession’s misunderstanding of climate science and its misapplication of cost-benefit analysis are among the single biggest impediments to serious and intelligent efforts to avoid humanity’s self-destruction. I will lay that out in future posts.

...I say bring it on...John's got my back. Right John? Ummm...John?

Comments

[odograph]

WRONG. At the risk of putting my words in Rob's mouth (and I have no intention of doing so because that would significantly decrease Rob's intelligence), the point is not that we shouldn't try to meet both goals--good dinner and good shower--but rather, the policy of addressing both at once is STUPID

As someone new to Tinbergen, I wonder if this bias might exclude what are otherwise natural and obvious solutions.

[rich]

excellent point ;)

http://commontragedies.wordpress.com/2009/01/09/more-on-the-stavins-quote/

[Tim Haab]

Odo,

You mean all those dollar bills laying on the sidewalk that everyone seems to be walking by? Point them out, I'm sure someone will grab them.

Tim

[John Whitehead]

Tim,

You didn't think this was funny?

My guess is that Rob CAN, in fact, walk and chew gum at the same time.

[Tim Haab]

Ok, I'll give you that one.

[odograph]

Tim, on pointing out dollar bills, have you ever heard of the attention economy?

It's a bit of an information age hubris, but still true in some fuzzy way. We can point out the win-wins, but people may not have time to focus.

(I for example don't have much time to focus here today.)

[Scott]

The fact of the matter is that we WILL walk and chew gum at the same time, we cannot avoid it.

Creating the infrastructure for green energy does create net jobs. There is a LOT of infrastructure that needs to be created. Therefore a LOT of jobs will be created.

As that infrastructure comes on-line and generation of green energy starts to replace generation of brown energy, jobs will be lost in brown and gained in green for probably a near net wash, nevertheless:

Net jobs will have been created to build the green infrastructure.

True that money could have been spent on something else, which would also create net jobs somewhere else or it might not get spent at all to keep the deficit from growing, but then that begs the question of what on earth could possibly be more important than limiting the impact of climate change?

"Green Jobs are Bogus" is a false meme. Period.

[Dano]

I often find that Joe uses a flame thrower when he should just raise his lighter and shout "Free Bird! Play Free Bird, man!"

I've told him his occasional p*ssing in his well makes people upset because many drink from his well.

Nonetheless, I'd say Stavins wants to take that back and try another metaphor.

Best,

D

[Eli Rabett]

You have proof of your proposition?

[Michael Roberts]

I sympathize with Rob Stavins' view, and with Jon and Tim.

But I expect he (and Jon and Tim) are probably wrong.

Economists do have a hard time walking and chewing gum at the same time. You see, it's hard enough getting people to think economically when dealing with one market failure. When there are two at the same time, we end up confusing even ourselves.

Here it's really difficult because the failures come from two very different areas of economics, environmental (very micro) and macroeconomics of the Keynesian variety. Environmental economists, many coming from Ag/Res economics departments, often get little training in macro. Keynesian macro still stumps us. So combining that with good large-scale Keynesian stimulus policy is, well, a bit jarring.

I don't know the answer. But if I were still a graduate student, and especially if I were a graduate student at a university with good environmental and good macroeconomics professors, I would think this might be interesting area of truly novel and truly relevant research that I might explore.

[Dano]

Eli, if you're addressing that to me, I don't. But if he wants to be clear, he'll use another, more apt metaphor. If no clarification, this is a useful data point as well.

Best,

D

[Dano]

Environmental economists, many coming from Ag/Res economics departments, often get little training in macro. Keynesian macro still stumps us.

If I had to do it all over again, Michael, I'd have finished my AgEcon as an undergrad to a full degree, and taken enough courses as a grad to get a certificate or something to say I'm a real EnvEconomist.

And I disagree in the implication (AIUI in your comment) that Macro is enough to have us understand/predict human behavior - I'd say Micro is better ( I got more understanding out of my UrbEcon coursework than any other Econ coursework). And to say that Macro allows us to understand societal behavior -- well, you have to discard Adam Smith for this to be true, or focus on Micro.

My training is multidisciplinary, and my grad Ecol and Env coursework was all multidisciplinary - because complexity requires it. We need to approach these problems multidisciplinarily (?) and to presume that one discipline can inform the rest is flat wrong.

Best,

D

[Eli Rabett]

No, sorry, Dano I was addressing it to John Whitehead's statement that

"the point is not that we shouldn't try to meet both goals--good dinner and good shower--but rather, the policy of addressing both at once is STUPID. Determining the best way to make dinner in the shower will result in a bad shower and bad dinner (both outcomes will be suboptimal). There are better ways to reach both goals.

Targeting climate change under the mask of stimulus policy may result in suboptimal stimulus, and targeting stimulus under the mask of climate policy may result in suboptimal climate outcomes. "

The first problem with this, is that while it may be common experience it ain't necessarily so. Whitehead himself admits that there can be policies that solve two problems simultaneously and, for the sake of efficiency it would be good to always look for them in any case.

The more serious problem with this proposition is that it assumes the two problems to be dealt with, getting rid of fossil fuels or at least limiting their growth and getting the economy moving again, are decoupled. Since they are not, since there is a huge amount of coupling between them, a unified solution is necessary.

To illustrate, priming the pump by dropping coal and oil costs, for example, by lowering taxes and pollution regulation, would obviously seriously exacerbate the climate change issue and make it much more difficult and expensive to deal with climate change. OTOH, simply raising the cost of fossil fuels without countervailing strategies to fill the gaps would obviously make the recession worse and longer.

The level of superficial in environmental economics, at least as represented here, is dispiriting. Given the defenders of deregulation in economics departments this should not be too surprising, but it is indicative that issues recognized long ago on USENET are just now penetrating the skulls of economists. Eli is thankful however, that this appears to be happening.

[Pete G]

Some of the problem is there is no real micro fundation to Keynesian macro fiscal policy. When there are idle resources land, labor and capital there is no micro-economic/traditonal opportunity cost that environmental is based upon. So when we refocus environmental economics to the macro economy we end up with more traditonal growth theory then Keyesian economics. So to me the important debate is more about green growth then green economic stimulus. I agree with Tim I don't really want a soggy dinner.

[Michael Roberts]

It seems to me that if the government needs to spend big money to stimulate the economy, it would be a good idea to target that spending on the most public goods possible.

I imagine a welfare maximizing micro guy ranking projects by their degrees of non-excludability and non-rivalousness, and spending from the top down until there's enough stimulation. After that, things need to pass a standard C-B analysis.

Now, if we weren't in a liquidity trap, and monetary policy could be used to solve the macro problem, then I might see the point of separating these issues.

Maybe I'm just a lousy economist, despite my multidisciplinary training. Because I just don't get why, in this context, it's a bad idea to kill two birds one derivative.

[Carlos Ferreira]

I believe it is suboptimal. The fact that trying to use one instrument for more than one objective is not ideal is the reason why economist advocate using more than one instrument, often one to take care of market failure, the other to achieve more equitable distribution.

The reason we've come from Pigovian taxes to cap-and-trade is that cap-and-trade is more economically efficient, meaning it achieves the same reduction of emissions with a smaller overall cost to society, although it's more complicated and has higher administration costs. The idea is to free-up resources for other needed investments. Now we are compromising efficiency for a potential gain in temporary, badly paid construction jobs? There has to a better way to create wealth.