Environmental Economics

Fact checking for the lazy?

While teaching macroeconomics I mentioned that the stock market crash of October 1929 lead to a number of window leaps to the death. A student heard that this was a hoax. I attempted the 15-minute Google research and didn't find anything definitive and can't find my copy of Galbraith's The Great Crash. Any fact-checking help out there?

Another spin on the broken window fallacy

You hit a baseball and break your neighbor's window. Your neighbor hires someone to fix the window. Economic activity increases. So, breaking the window is good for the economy. Right? Wrong: the opportunity cost of the labor is high. It could have been pursuing more productive activities instead of fixing something broken.

The broken window fallacy is an argument frequently heard after natural disasters and other negative events "create jobs."

However, maybe in the long run a natural disaster leads to some sort of creative destruction where destroyed aging capital stock is replaced with newer technologies? On my reading list is a newly published paper that empirically examines this assertion:

JESÚS CRESPO CUARESMA, JAROSLAVA HLOUSKOVA, MICHAEL OBERSTEINER (2008) NATURAL DISASTERS AS CREATIVE DESTRUCTION? EVIDENCE FROM DEVELOPING COUNTRIES, Economic Inquiry 46 (2), 214–226 http://www.blackwell-synergy.com/doi/abs/10.1111/j.1465-7295.2007.00063.x

I'm applying this theory to the fire-damaged Boone Saloon. Maybe it will re-open with a reconfigured stage, no smoking after 10 pm, bands that start playing before 11 pm, and other desirable features aimed at the mid-40s demographic.

I took the "lost green jobs challenge"

Mike Giberson at Knowledge Problem provides some data to estimate the effect of lost wind energy tax credits on employment. My dependent variable is the unemployment rate from 1989 to 2007. Growth in the percentage change in GDP and growth2 is its square. Wind is the decrease in "installed wind capacity" for 1999 (93%), 2001 (73%) and and 2003 (77%). The regression model finds that the unemployment rate decreases with the economic growth rate (at an increasing rate) and each % decrease in installed wind capacity drops the unemployment rate by .016 -- although this effect is only significant at the 88.4% level (less than conventional standards) [R-squared = .353]. I might be encouraged to pursue this result and argue for green power subsidies based on macroeconomics, but before that, I need to fill in the data for the wind variable. What are the increases in "installed wind capacity" for the other years in the data series.

Don't get me wrong. I think that subsidies for green power are likely justified based on microeconomics arguments (i.e., benefits greater than costs). I don't think that green power has much if any macroeconomic impact.

Green jobs rhetoric: curiouser and curiouser

From Grist:

Wind- and solar-boosting folk are crossing their fingers that new Senate legislation will succeed in extending renewable-energy tax credits set to expire at the end of 2008. The Clean Energy Tax Stimulus Act is framed as an economic boon: "If both houses of Congress don't pass a bill and the president doesn't sign it into law soon, we will start to see as much as $20 billion of anticipated investment in 2008 delayed or cancelled and more than 100,000 jobs lost," warns cosponsor Maria Cantwell (D-Wash.). The bill has bipartisan support, in large part because, unlike previous failed legislation, it would not seek to fund clean-energy incentives by removing tax credits for oil companies.

More than 100,000 jobs lost? Is that net jobs lost? As in the U.S. economy? Or gross jobs lost? Which may be offset by jobs gained in another sector?

Tired of me asking questions? Take the challenge below ...

I'm more reasonable than the cap & trade fear-mongers

From Terra Rossa (where conservatives consider a new energy future):

One of the most common concerns raised by opponents of cap & trade is it will cost a lot of Americans their jobs. Given folks’ anxiety about the state of our economy today those concerns, whether true or not, have an impact.

The Feds can have my house for only 10% above appraisal, because I'm a victim of low interest variable rate mortgages

From the WSJ Afternoon report:

Sen. Hillary Clinton, aiming to pick up votes from the all-important Pennsylvania primary voters, proposed that, to ease the housing crisis, President Bush should appoint a summit of economic experts (e.g. Alan Greenspan) to determine if the government should buy up homes. The campaign for Sen. Clinton's rival, Sen. Barack Obama, said he proposed a similar measure.

Are we serious?

1. Alan Greenspan (I change plumbers when one busts my pipes)?
2. Buy, Actually B-U-Y, houses? The moral hazard is getting out of friggin' control.
3. If Hillary announced that she was going to jump off a cliff, would the campaign for Obama say that he was going to as well?

Market Power NCAA pool trash talk

Phil: you could have been Tim's 50th participant. He is royally bummed out that he has fallen short on yet another one of his goals:

Hey John Whitehead

I tried to join your NCAA group via Environmental Economics, but I lollygagged and didn't get it done in time.  Too bad, cuz I would have been the winner!

Au contraire, mon ami, au contraire.

Quote of the day

... I am more optimistic than Paul Krugman ...

Alex Tabarrok, Marginal Revolution, March 18, 2008, in a post titled Fear

Alex thus joins 303 million+ others in the "I am more optimistic than Paul Krugman" club (e.g., Who ya gonna call).

 

Do national economic woes directly affect you?

Think of this as a seeded discussion thread.

The media--and John--have been doing a lot of reporting lately on the pending recession, downturn, crisis, catastrophe, apocalypse...In the past, when the U.S. economy has taken a downturn I've wondered, are most people really directly affected by the downturn or do people perceive an effect due to the intense coverage. 

For example, while I see higher gas prices, and higher food prices, and houses sitting on the market longer, and I hear stories of job insecurity, these things have little direct affect on me.  I'm lucky enough to have a secure job and a household income that can serve as a short term buffer to higher prices.  Who knows what will happen in the long term, but as of today, the current economic situation hasn't had any noticeable effect on my family's day to day consumption behavior. 

So I'm wondering, how many people are directly affected by a recession?   

Please don't read any intent into the question.  I know I am cynical and sarcastic at times, but in this case, I really am interested in knowing whether the effects of a recession are the consequence of direct economic impacts on individuals or a reaction to perceptions.

Let me know in the comments.   

Low opportunity cost

I said it before Freakonomics said it. Who's freaky now?

This can mean only one thing. The value of my next best alternative is lower. Much, much lower.