Environmental Economics

Washington Post calls for an end to Federal Flood Insurance.

In an editorial today, the Washington Post has called for an end to federal flood insurance.  THey argue:

The theory of the program is that people who choose to live in areas prone to flooding should pay for that risk by buying insurance; they should not expect taxpayers around the country to rescue them from their own recklessness. But the truth is that, after a disaster like Katrina, the federal government will bail everybody out whether they are insured or not; it's humanly and politically unthinkable to do otherwise. Because the likelihood of a federal rescue is so strong, there never was much incentive to buy insurance. 

From the blatantly obvious headline file...

Oil rises sharply as Rita enters Gulf

Really?! Who'da thunk it? (note the heavy sarcasm).

An example of the trade-offs involved in reducing carbon emissions

As an economist, I am trained (brainwashed) to think about the trade-offs involved in making bold policy statements.  Like this one (breitbart.com): 

The [British] government says it wants a 60 percent cut in carbon dioxide emissions by 2050, compared to 1990 levels, as the nation's contribution toward preventing an increase in temperatures that would threaten a dangerous level of climate change.

I want my ITQ!

On Monday (9/19) the Bush Administration proposed to reauthorize the Magnuson-Stevens Fishery Conservation and Management Act. From the Washington Post (Bush aims for market approach to fishing):

The administration's bill would be the biggest change in fisheries management in a decade. It aims to double by 2010 the number of "dedicated access privileges" programs, which allocate shares of each fishery to individual fishermen, who can then can buy and sell their shares. In Alaska, for example, fishermen are granted a portion of the allowed halibut catch and can trade these quotas among themselves; in most U.S. fisheries, regulators govern the annual catch by limiting how many days fishermen operate and how much they collect each trip.

These "dedicated access privileges" programs are known as individual transferable quotes (ITQs) to economists. As the story points out ITQs have been successful in managing halibut in the North Pacific (e.g., fixing the infamous derby fishery) but have been banned in the U.S.

I don't know much about the details in the current proposal, but ITQs are a great idea.

Hahn on the economics of rebuilding cities

Hahn on the Economics of Rebuilding Cities: Reflections after Katrina (AEI-Brookings) concludes with this:

Clearly, economics can’t tell us all we need to know in deciding whether to spend billions of dollars in rebuilding a great city. Yet, it is equally apparent that the failure to frame the issues in terms of costs and benefits leaves us flying blind. As Americans grow wealthier and more of them choose to live in places at greater risk, we can be sure that the costs of rebuilding after disasters will inevitably grow. It would be nice to hope that the knowledge of how to rebuild would grow, too.

The idea is that we should compare the benefits to the costs of rebuilding.

Thanks to Will Wheeler for the tip.

Opinion Poll: Should we build category 5 levees?

The Environmental News Network reports:

Given enough money, engineers agree that they could eventually build a system of levees and other flood control structures sufficient to protect New Orleans from another Katrina or even a stronger hurricane. But it would cost billions, and the work might not be completed for up to 30 years.

The cost of the levees ranges between $2.5 billion and $3 billion. This would allow full blown re-colonization of New Orleans with costs estimated up to $75 billion (Hahn, AEI-Brookings).

We want to know what you think about rebuilding New Orleans. The new Env-Econ opinion poll asks:

Do you support or oppose building a system of levees to protect New Orleans from a category 5 ("catastrophic") hurricane?

Vote early and often in the right hand column!

We're boring

It's official, in response to the opinion poll question, "The political ideology at the Environmental Economics blog is best described as," we're middle, middle with a little skew left. How can you have a decent econ blog that's not authored by libertarians or bug-eyed liberals?

And: What does 17% voting none of the above mean? We're complete idiots?

What does an optimal city look like?

I had an interesting exchange recently with Elena Irwin, an expert regional and community economist here at Extra Big State University, and all around nice person.  The exchange started like this:

Elena: A while back I asked you a hypothetical question about optimal land use.  As I remember it, my question was, if we could wipe the slate clean and plop down a new city based on today’s preferences and technologies, what would the optimal allocation of land uses look like in such a city. Well…

Will there be a benefit-cost analysis?

From the WSJ (Conservatives balk ...):

The open-ended commitment by President Bush and congressional leaders to rebuild New Orleans and the Gulf Coast is stoking anger among conservatives over the Republican government's record of higher spending and debt.

Following the nation's worst-ever natural disaster, no Republican in Congress is opposing federal aid that already totals $62 billion and is expected to exceed $200 billion. But the party's conservative wing, led yesterday by Oklahoma's Tom Coburn in the Senate and Rep. Mike Pence of Indiana in the House, is calling for offsetting "sacrifices" in federal spending. And they're backed by a growing chorus of conservative activists, columnists and bloggers.

Here are two things I've always thought about federal spending. Big projects (over $100 million) require a benefit-cost analysis and economic impacts (i.e., spending), as opposed to benefits, are not allowed in a benefit-cost analysis at the federal level (because spending on one region easily moves elsewhere leading a a negligible effect on GDP, and this is what Ben Bernanke has been saying).

Based on what I think I think (with apologies to Peter King at SI) and what I've read, spending to completely rebuild NO won't pass a benefit-cost analysis. So, what am I missing here (and I know I'm missing something [other than the politics])?

Blame the environmentalists

From Saturday's Washington Post (Senate Panel ...):

A Senate committee asked the Justice Department this week to provide information about legal challenges to New Orleans levee projects by environmental groups, prompting accusations that Republicans are seeking to blame environmentalists for the damage wrought by Hurricane Katrina.

A Justice Department e-mail sent to U.S. attorney's offices in the Gulf Coast region asks for information on cases involving "environmental groups seeking to block or otherwise impede the Corps' work on the levees protecting New Orleans."

...

Many environmental groups and Democrats have suggested that global warming and wetlands depletion may have played a role in worsening storm damage, while many conservatives allege that efforts to protect New Orleans were hampered by environmental objections.

As the nation continues to pull together to deal with the Katrina catasphrophe (sarc).

Post-post note: As the last quote suggests, the greenies are just as guilty at attempting to assign blame for political gain as the Senate Committee/Justice Department. I haven't posted any of the those articles since it seemed like "same old, same old." When the federal government uses their vast resources in this situation it seemed to warrant some acknowledgement (I'm shocked. Shocked!).