Environmental Economics

My best post of 2008

I left a comment on a green jobs post the day after pagan celebration of a Christian holy day:

That is why economics is known as the dismal science. We strange economists are most adept at recognizing the opportunity costs of various decisions. No one else really seems to care if opportunity costs offset some, or all, of the benefits of a good idea.

Opportunity cost is a strange notion to some (especially intro micro students) ... it is the value of the next best alternative whenever a choice is made. For example, if I purchase a $1000 flat panel LCD TV, the true cost of the TV is not $1000, but what I could purchase instead (such as $500 in each kid's college education 529 plan [sorry kids]).

In the case of green energy subsidies, if you are an economist then you must at least wonder if this is the best way to spend the money. There are benefits of pushing down the costs of green energy (e.g., improved air quality), and there are opportunity costs. Ignoring the opportunity costs is likely to lead to wasteful spending. Considering the opportunity costs is likely to lead to better social decision making -- regardless of whether the benefits of the subsidies exceed the costs.

The notion of opportunity cost, its recognition and the inevitable result that not all great sounding ideas are really great ideas, is the most important thing that economists bring to many policy discussions. Pointing out the unpleasantantries of opportunity cost is one of the purposes of this blog. The dismal part of the dismal science can not be avoided.

What I'm reading and why I should have read it earlier

I've seen the movie, I've watched the TV show, now I'm reading the book.  Friday Night Lights, the movie, focuses on the personal stories of football players for Permian High School in Odessa, Texas in their chase of the Texas state high school championship.  Friday Night Lights, the TV show, focuses on the sex lives of Dylan (Permian) High School football players, cheerleaders and coaches.  Friday Night Lights, the HG Bissinger book that inspired the movie that inspired the TV show, uses Permian High School and the town's obsession with high school football as a backdrop for an economic story of boom and bust. 

Take a look at the passage to the right from the book. 

Sound familiar?

Keeping cool in a world that's Hot, Flat, and Crowded

I wrote a review of Friedman's Hot, Flat, and Crowded over at Climate411.org:

New York Times columnist Thomas Friedman, three-time winner of the Pulitzer Prize, has completed his transformation from Middle East specialist to green energy expert. He wants the United States to similarly switch focus.

Hot, Flat, and Crowded, Friedman's latest book, explains how and why we must stop relying on "fuels from hell" (coal, oil, and gas) as our primary source of energy, and instead switch to "fuels from heaven" (wind, water, and solar). Without this shift, he argues, not only will we cook the planet, but wreck the economy and destroy our way of life. It is tough to quibble with Friedman's assessments.

Read the rest of the review here.

 

Throwdown!

From Mankiw's Blog:

Each year, I meet a number of highly promising students who were accepted by [MIT and Harvard] and are having trouble choosing between them. Here is my advice:

1. Don't sweat it. You will get a great education at either place.
2. Look up your favorite ranking of economists' productivity and look at which school has more faculty near the top. Those are the profs you want to hang around and learn to emulate.

For example, if you use this standard ranking and look at the top 50, you will learn that MIT has 3 and Harvard has 12.

That should settle the question.

Not quite.