Environmental Economics

Archie Bunker had his own problems, didn't he?

Harvey Mansfield in the WSJ:

In this happy season of college graduations, students and parents will probably not be reflecting on the poor choices those students made in selecting their courses and majors. In colleges today, choice is in and requirements are out. Only the military academies, certain Great-Books colleges and MIT (and its like) want to tell students what they must study. Most colleges offer a cornucopia of choices, and most of the choices are bad.

The bad choices are more attractive because they are easy. Picking not quite at random, let's take sociology. That great American democrat Archie Bunker used to call his son-in-law "Meathead" for his fatuous opinions, and Meathead was a graduate student in sociology. A graduate student in sociology is one who didn't get his fill of jargonized wishful thinking as an undergraduate. Such a person will never fail to disappoint you. But sociology has close competitors in other social sciences (including mine, political science) and in the humanities.

...

Others try to imitate the sciences and call themselves "social scientists." The best imitators of scientists are the economists. Among social scientists they rank highest in rigor, which means in mathematics. They also rank highest in boastful pretension, and you can lose more money listening to them than by trying to read books in sociology. Just as Gender Studies taints the whole university with its sexless fantasies, so economists infect their neighbors with the imitation science they peddle. (Game theorists, I'm talking about you.)

via www.morningstar.co.uk

In addition to the that implied by the title of this post (I'm not out looking for clear thinking from Archie Bunker) this editorial has its problems. I would argue that "social scientists" are trying their best to understand human behavior. If that is boastful pretension, then so be it. It is not a failing of the discipline or its methods that some economists are jerks.

Hat tip: Matt Kahn.

Not to be picky, but...

From the inbox:

"Year Without a Summer" Brings Cool, Wet Conditions Great Lakes / Ohio Valley / Midwest

The end of the La Nina pattern will threaten to make this area a region "without a summer." Repeated intrusions of cool air from Canada along with showers and thunderstorms will keep temperatures below normal in many areas. Temperatures topping 90 F may be rare.

It was 93 in Columbus, Ohio on Sunday; 95 yesterday.  Today it's forecast for 90.

It's May.  Columbus averages one 90 degree day in May and 16 for the year. Temperatures over 90 in a normal year are rare.

 

Using moral hazard to a state's advantage

Moral hazard: When preventative measures against risk cause more of the risky behavior the preventative measures are designed to reduce.  Examples: Government subsidized flood insurance creates incentives to live in flood prone areas; or, mandatory seatbelt laws may increase automobile accidents; or,  

BP faces billions of dollars in fines for last year's spill, and 80 percent of that money should be spent restoring the areas affected by the disaster. That's fair. It's also in the best interest of our nation's economy, food supply and security...

Yet senators from other states have filed disparate proposals that seek to grab most of the funds for other, non-environmental uses or that propose rigged formulas for distributing the money.

A bill by Sen. Ben Nelson of Florida, for example, would distribute some of the fines based on a state population and the length of its shoreline

via www.nola.com

Compensation based on population will create incentives to increase state populations in disaster prone areas.  Compensation proportional to damages will possibly create incentives for people to inefficiently locate in disaster prone areas.

Do all RGGI governors have alliterative names?

I try to avoid the NYTimes (and WSJ) editorial pages, but I don't disagree with this one:

On Thursday, [NJ gov. Chris Christie] ... abandoned the 10-state initiative in the Northeast that uses a cap-and-trade system to lower carbon-dioxide emissions from power plants. The program has been remarkably successful, a model of vision and fortitude. Lacking that, Mr. Christie has given in to the corporate and Tea Party interests that revile all forms of cap and trade, letting down the other nine states trying to fight climate change.

The system works by requiring utilities to either lower their emissions or buy allowances to pollute. Money from the allowances goes to states for clean-energy programs. Since it began in 2008, the system has created more than $700 million for these programs; New Jersey has spent some of its share on helping cities become more energy-efficient. Greenhouse emissions from power plants in the region went down about 12 percent from 2008 to 2010 for many reasons, including lower natural gas prices. Programs like the regional initiative are estimated to have produced more than 10 percent of that decline.

Mr. Christie ... claimed this week that the program was not working, a notion that was quickly refuted by five other governors. “Governor Christie is simply wrong when he claims that these efforts are a failure,” said Gov. Martin O’Malley of Maryland. He said they had an equivalent effect of taking 3,500 cars off the road in his state.

For now, at least, the far right has killed cap and trade nationally, but the idea is far from dead. Several Western states are gearing up for a cap-and-trade program; California has been particularly aggressive. The Northeast state compact will survive Mr. Christie’s exit. It is New Jersey that will be the poorer, with less to invest in smarter energy programs, more carbon dioxide and a leadership vacancy at its helm.

Clarifications:

1. Corporations don't "revile" all forms of cap and trade. They kinda like cap and trade when allowances are given away. 
2. The far left, and not so far right are also working to kill cap and trade.

Any other clarifications should be placed in the comments.

 

Ah, multiple use management

How'd you spend your weekend? Mine was (i.e., I am so very) awesome. On Sunday, we went to Roan Mountain State Park and did* 3+ miles of forest trails. Then we drove to Carvers Gap (see below for proof, the "welcome to NC" road sign is right behind) and did** 1.5 miles on the Appalachian Trail (and 1.5 miles back). Both of these are my first visits after almost 7 years living about one hour away***.

Afterwards, we watched the fourth John Adams (he becomes VP), 60 minutes (yikes) and Old School (did you know 24's Kim Palmer is also the high school volleyball player who is the daughter of Mitch's boss?).

*i.e., trail run (23 + 17 minutes, up and down). After some chores yesterday, I'm starting the work week exhausted ;->

**This time walking, rather slowly.

***Using rational choice theory you know that I value the trip more than $46 ($0.55 per mile, wage = $10, value of time = 0.33 wage). I'm not sure what my consumer surplus might be, but I probably would have paid a $100 entrance fee even with all of the other freebies nearby. You need to do that part of the AT at least once.

 

More political misapplication of demand and supply analysis

I'm starting to get the feeling we're going to be busy until November 2012:

Republican White House hopeful Newt Gingrich is calling for an “all-out” effort to expand U.S. oil-and-gas development that he alleges would bring down gasoline prices long before new supplies are produced.

via thehill.com

I suppose the idea is that expectations of low prices will cause suppliers to sell more now at high prices to avoid losing out when prices actually fall. The ECON 101 analysis is impeccable. Yet, new supplies won't do much to bring down prices (0% to 3%). The mistake is shifting the demand and supply curves too much.

Climate Federalism (call me an optimist)

An article in today's NYTimes wonders what's up with climate federalism? in the context of California's cap-and-trade experiment:

California’s climate change law, passed in 2006, was once seen as a beta test for a national push to limit greenhouse gases. Cast as a market-driven strategy that was preferable to a tax, cap and trade drew considerable bipartisan support before the nation’s political landscape shifted, climate legislation fizzled in Congress and the economic model became a focus of derision for ascendant Republican conservatives.

Is the own-price demand elasticity for gasoline increasing?

One thing that we always say is that, while the short run gas price elaticity is low, about 0.10, the long run gas price elasticity is higher as persistent high gas prices will cause consumers to shop for smaller cars, buy houses closer to work, etc. Maybe we've moved into the long run?

Nearly one in four vehicles sold in the United States in April was a compact or subcompact car, compared with one in eight a decade ago. Of the small cars sold in April, about 27 percent were American models, compared with 20 percent a year earlier. ...

The emphasis on smaller vehicles has proven to be a necessity for the recovering auto companies. Rising fuel prices have prompted a steady migration away from bigger vehicles since the spring of 2008, when gas hit $3.50 a gallon. Industry analysts and company executives say the shift is likely a permanent one, as consumers flock to small cars packed with features like heated leather seats, Internet access and voice-activated entertainment systems.

via www.nytimes.com

Bad news for efficiency of commercial fishing

From the SAFMC's South Atlantic Update:

In March, the Council approved a motion to “terminate all work relative to catch share development in Amendment 21” (catch share development would continue for the golden crab fishery and wreckfish). The amendment, known as the Comprehensive Catch Share Amendment, addressed the possible use of catch share programs for snapper grouper species currently under management through quotas with the exception of snowy grouper. The amendment also included options for effort and participation reduction and endorsement actions. ...

The South Atlantic Council has explored the use of catch shares over the past few years, using work groups and soliciting public input. During discussion of the motion, Council members noted that catch share programs are considered one of many management tools and that the removal of their consideration in Amendment 21 does not preclude their future consideration. The Council will review the remaining actions in Amendment 21 during its June meeting.

Catch shares are individual (transferable) quotos, more or less. The Socioeconomic Panel of the Statisical and Scientific Committee of the SAFMC (got all that straight) reviewed the catch shares provision of Amendment 21 and made some recommendations for the potential development of such a program. None of these recommendations included "terminate all work relative to catch share development in Amendment 21." Here is what we said about golden crab catch shares:

We recommend adoption of Alternative 2 under Action 1; Implement a catch share program for the golden crab fishery.  With the understanding that current permit holders favor the formation of a catch-share program, the SEP agrees that such a program will facilitate the management goals to “create incentives for conservation and regulatory compliance” and provide participants with the opportunity to earn “long-run benefits from efforts to conserve and manage the golden crab resource.”  Exclusive rights to shares of the allowable catch will allow permit holders the security to take least-cost methods to harvest the catch and may encourage harvest methods that maximize quality and ex-vessel revenues.  The net benefits of the program will likely be increased by increased transferability of the catch shares.

The snapper-grouper fishery is more complicated than golden crab but I think the same sentiments would apply.

 

Quote of the Day

"[The Regional Greenhouse Gas Initiative] is nothing more than a tax on electricity, a tax on our residents and on businesses with no discernible effect on our environment," [New Jersey Gov. Chris Christie] said. "We remain completely committed to the idea that we have a responsibility to make the environment of our state and world better. We're not going to do it by participating in gimmicky programs that don't work."

via www.delawareonline.com

Well, at least he recognizes the Env-Econ 101 equivalence between a tax and cap'n trade.  That's something. Right?