Environmental Economics

Don't cross the streams! (A problem with ethanol mandates)

Sometimes the only way to show how bad a policy is, is to have the market show you (from the NYTimes):

Two years ago, Congress ordered the nation’s gasoline refiners to do something that is turning out to be mathematically impossible.

To please the farm lobby and to help wean the nation off oil, Congress mandated that refiners blend a rising volume of ethanol and other biofuelsinto gasoline. They are supposed to use at least 15 billion gallons of biofuels by 2012, up from less than seven billion gallons in 2007.

And two years ago, I pointed out what a bad idea this is...

But nobody [including yours truly] at the time counted on fuel demand falling in the United States, which is what has happened during the recession. And that decline could well continue, as cars become more efficient under other recent government mandates.

Since many of the problems I pointed out with ethanol policy centered around the impact on the demand for food and energy, decreases in both would be a good thing, right?  Well, not exactly...

14 seeds!

An email from the Clementine people in response to an email about "seedless Clementine oranges":

Thanks for letting us know about your experience with our oranges. We’re sorry to hear about your disappointment and appreciate the concern you shared about your child’s experience with the fruit. I’m sure it was frustrating to discover that your oranges had seeds in them after counting on them to be seedless. Interestingly, the USDA interprets “seedless,” in the context of a marketing term for oranges, to mean fewer than seven seeds. That’s because it is virtually impossible to control the seeded nature of oranges. Often, oranges with seeds are grown in groves adjacent to oranges without seeds, like the mandarins you mention. Bees will fly from blossom to blossom and cross-pollination can occur. Most of our clementines do not have seeds, but nature works against us sometimes.

Here is what they say at Wiki:

Clementines lose their desirable seedless characteristic when bees cross-pollinate them with other fruit. In early 2006 large growers such as Paramount Citrus in California threatened to sue local beekeepers for their bees' trespass into clementine crop land.

I cracked one of those bad boys open this morning and spit out 14 seeds! What does the USDA say about that? Something like "an average of less than 7 seeds"? I propose that if it is "virtually impossible to control the seeded nature of oranges" then you don't call them "seedless," which, in my world, means "without seeds."

It's kind-of like saying that my conference paper is "mindless," when, in fact, there are more than one but less than 7 minds per paper (if you fail to see the connection then you aren't thinking hard enough ;-> ).

Look for me on TV tomorrow

No, I'm not on CNN talking about the recent SEA meeting, I'll be at a simple-minded sporting event (ASU opens postseason ...):

For the second year in a row, Appalachian State University will open the NCAA Division I Football Championship at home versus South Carolina State. This year’s first-round matchup between Appalachian (9-2, 8-0 SoCon) and S.C. State (10-1, 8-0 MEAC) is set for Saturday, Nov. 28 at noon at ASU’s Kidd Brewer Stadium. The game will be televised nationally on ESPNU.

My seats are on the first row behind the visitors bench on the left (as you are watching on TV) 40 yard line. If you don't see me, it will be my nephews in those seats and I'll be in row W.

Happy Thanksgiving

Some holiday statistics and economics from the WSJ Numbers Guy:

My print column this week considers oft-reported claims that Thanksgiving spurs the consumption of 46 million turkeys and the busiest travel period of the year. Both claims appear to be contradicted by government data.

Turkeys:

... But that [46 million turkeys] estimate was based on projected turkey purchases throughout November — much like a questionable stat about avocados consumed on Super Bowl Sunday turned out to be based on a two-week period.

... The turkey federation said that the average weight of a Thanksgiving turkey is 15 pounds. That’s two and a quarter pounds for every man, woman and child — more considering all the people who eschew meat, or prefer a different holiday meat. Even after accounting for discarded fat and bone, and leftovers, that’s a lot of per-capita giblet.

Travel:

Airlines develop sophisticated forecasting systems to decide how much to charge for flights and how to staff them. These have helped airlines maximize revenue per passenger, especially during predictable travel times such as this week, according to Peter Belobaba, program manager of the Global Airline Industry Program at the Massachusetts Institute of Technology. That meant tickets got much more expensive on the peak travel days, which may in turn have helped spread air travel more uniformly around Thanksgiving. “As airlines got better at extracting revenue, the natural effect was that other passengers, if they had the option, were able to search out lower fares on adjacent days,” Prof. Belobaba said.

SEA debriefing

This weekend I attended the Southern Economic Association meetings for the 20th consecutive year. Once again, I was amazed at how rewarding a small regional economics conference can be. The papers were of high quality, the AERE sessions were well attended and my friends showed up.

When did I become such a deficit hawk?

From Econbrowser (Yes the future deficits are worrisome):

Paul Krugman ([1], [2], [3]) has been arguing vigorously that U.S. budget deficits are no cause for concern. I see things differently.

...

Is it possible that some time within the next five years, the U.S. Treasury will run an auction in which there are not enough bids to roll over the debt? My answer is yes.

In other words, "crowding out" (an increase in interest rates due to high government borrowing) is a real possibility.

Breaking news (Tim loves to say that so why can't I?)

From the inbox:

Breaking News Alert

The New York Times
Wed, November 25, 2009 -- 10:45 AM ET
-----

Obama to Offer Firm Pledge on Emissions Cuts in Copenhagen

President Obama will travel to Copenhagen next month for the United Nations meeting on climate change, a White House official confirmed Wednesday. At the conference, he will offer to reduce greenhouse gas emissions "in the range of 17 percent below 2005 levels by 2020," the White House said.

Copenhagen in a sentence

From the USAToday today:

Technologies to cut back carbon dioxide emissions from factories and vehicles that feed the global economy add costs to fuel, food and more, an option that appeals neither to industrial nations struggling with the global economic meltdown or developing nations trying to ramp up economic growth.

How much energy are you using right now?

One of the problems with energy consumption is that consumers often don't know exactly how much energy they are consuming at a given moment, or how much that consumption is costing.  Typical consumers get a bill at the end of the month reporting total consumption and the total bill.  But efficient energy pricing requires the consumer to know the marginal cost of the next unit consumed--how much will it cost me to toast this frozen waffle?  It looks like someone has figured out a way to move us towards real time energy consumption and pricing information in the house:

A couple of years ago, Seth Frader-Thompson was driving a Prius. Priuses have little screens on the dashboard that tell you what gas mileage you're getting, in real time, as you drive. It crossed Frader-Thompson's mind that houses should have something similar. So he built the EnergyHub Dashboard, a little device, with a screen, that can talk wirelessly to your furnace and your various appliances and let you know exactly how much electricity (or gas) each one is using and how much it's costing you. It can also turn appliances on and off and raise or lower the temperature in your house so you can rein in the real power hogs. EnergyHub is currently partnering with utilities for trials and will be available direct to consumers in early 2010.

Cool.  Now I'll have a way to charge my kids for leaving their bedroom lights on.

Why students protesting tuition hikes in California are well-intentioned, but misguided

From CNN.com:

Students were occupying buildings Friday on several campuses of the University of California system in protest of a 32 percent tuition hike.

...

University officials said the $505 million to be raised by the tuition increases is needed to prevent even deeper cuts than those already made because of California's persistent financial crisis.

Protesting students said the hike will hurt working and middle-class students who benefit from state-funded education.

While well-intentioned, the students are failing to recognize the simple economics of education.  Students demand education--therefore there is a demand curve for education(click the diagram to the right)  that is downward sloping: some are willing and able to pay more than others.  Private educators are willing to supply education, but it is costly (Private Tuition).   For a variety of reasons--affordable access to education, reduced crime, increased productivity--society, through state and federal tax revenues is willing to subsidize education thereby reducing the costs of education (S_public).  This downward shift in the supply of education decreases tuition (Public Tuition) and increases the number of people willing and able to get an education.

So what happens when the state reduces the subsidy, as California is currently doing? Starting from the fully subsidized situation (S_public ), the reduced subsidy will shift the supply curve back to the left raising the market clearing price of education (Current Tuition + hike) and reducing the number of number of people receiving an education from Q_before to Q_+hike.  Not only are fewer people educated, but those losing access to education are those with the lowest willingness to pay OR ability to pay.  And this is where the protests come in.  The increased tuition reduces education among those with the lowest ability to pay.  Sounds protest-worthy, right?

But, what happens if tuition isn't raised in the face of the reduced subsidy?  In that case, the price of education would stay at the current Public Tuition level in the diagram, but the supply curve still shifts left (actually up) by the amount of the reduced subsidy.  If tuition doesn't rise, the quantity of education supplied at the current tuition would be less than if tuition rises (Q_nohike in the diagram). 

Contrary to the tuition hike case, it would then be a crap shoot as to which students lose out on education, but the end result in unambiguous: a successful protest for no tuition hikes (assuming state funding for education is cut) will result in less total education than allowing tuition to rise. 

 Is that really what the protesters have in mind?