Environmental Economics

We must be on the list of "25 Economics Blogs Hardly Anyone Can Appreciate"

From the inbox:

I’m a writer for Onlineuniversities.com and we just published an article “25 Economics Blogs Anyone Can Appreciate”. I think you’d like, since your blog often covers the same subject matter. Feel free to share the article with your readers if you have a place for it in upcoming post schedule.

Thanks for the pointer. Could you also send me a link to the list of "25 Men That Women Find More Attractive Than You" or "25 People That Are Better Athletes Than You" or "25 Economists Who Are Smarter Than You"? I would find that very helpful.

How about if I submit a link to Onlineuniversities.com of the list of "25 Websites Promoting Online Universities That Doesn't Include Onlineuniversities.com"? I think you'd like.

While his own dang pants are on fire

Thomas L. Friedman teases Gov. Perry and Rep. Bachmann for their poor grades in science class ("here is the Texas governor rejecting the science of climate change while his own state is on fire") and then, in a surprising twist, turns his attention to economics:

Not only has the science of climate change come under attack lately, so has the economics of green jobs. Here the critics have a point — sort of. I wasn’t surprised to read that the solar panel company Solyndra, which got $535 million in loan guarantees from the Department of Energy to make solar panels in America, filed for bankruptcy protection two weeks ago and laid off 1,100 workers. This story is an embarrassment to the green jobs movement, but the death by bankruptcy was a collaboration of the worst Democratic and Republican impulses.

How so? There is only one effective, sustainable way to produce “green jobs,” and that is with a fixed, durable, long-term price signal that raises the price of dirty fuels and thereby creates sustained consumer demand for, and sustained private sector investment in, renewables. Without a carbon tax or gasoline tax or cap-and-trade system that makes renewable energies competitive with dirty fuels, while they achieve scale and move down the cost curve, green jobs will remain a hobby.

Here is a link to my latest attack on the notion of green jobs. The basic idea is that the Federal Reserve, The President and Congress should pursue full employment. The Environmental Protection Agency (EPA) should work to cost-effectively protect the environment. We should be color blind on the issue of jobs. If the EPA (or Congress) is trying to create green jobs then the EPA (and Congress) has taken its eye off the cost-effectiveness ball.

At least in the U.S., the worst thing you can do to try to protect the environment is make environmental protection too costly. "A carbon tax or gasoline tax or cap-and-trade system" are environmental policies that reduce the costs of achieving most any given environmental quality target.

Econ 101: Onion-style

A study of more than 1,200 subjects by the Consumer Research Institute at Loyola University has found that a significant majority of U.S. citizens want. "Regardless of their age, gender, class, education, or religion, Americans are remarkably alike in their capacity to want," Dr. Stanley Murcheson told reporters Tuesday, noting that 33 percent of survey respondents indicated they not only want, but want really bad. "And among those who want, a growing number also demand, feel entitled to, and actually expect." The study concluded that while more Americans than ever desperately need, fewer than 6 percent of them will ever get.

via www.theonion.com

Supply and Demand Quiz of the Day

OPEC sharply revised down its forecast for world oil demand for this year and expected consumption would remain weak in 2012, citing on Monday waning economic growth in key industrialized nations and a weak U.S. driving season.

The 12-nation group that supplies about a third of the world's crude oil slashed its global oil demand forecast by 150,000 barrels per day for 2011 and by 40,000 barrels per day for 2012, saying "turbulence in world economic recovery has resulted in considerable uncertainty for demand growth next year."

It also lowered its estimate for crude produced by OPEC nations by about 100,000 barrels per day in 2011.

via www.google.com

Based on your knowledge of supply and demand and the information in the above article, predict the effect of the revised oil demand forecast on the market for oil today (or tomorrow or the near future).

A laurel and hardy round of applause for the best answer.

I respect Paul Krugman's right to express his opinion. I wish he would return the favor.

Paul Krugman writes:

Is it just me, or are the 9/11 commemorations oddly subdued?

Actually, I don’t think it’s me, and it’s not really that odd.

What happened after 9/11 — and I think even people on the right know this, whether they admit it or not — was deeply shameful. Te atrocity should have been a unifying event, but instead it became a wedge issue. Fake heroes like Bernie Kerik, Rudy Giuliani, and, yes, George W. Bush raced to cash in on the horror. And then the attack was used to justify an unrelated war the neocons wanted to fight, for all the wrong reasons.

A lot of other people behaved badly. How many of our professional pundits — people who should have understood very well what was happening — took the easy way out, turning a blind eye to the corruption and lending their support to the hijacking of the atrocity?

The memory of 9/11 has been irrevocably poisoned; it has become an occasion for shame. And in its heart, the nation knows it.

I’m not going to allow comments on this post, for obvious reasons.

I think Krugman is underestimating the ability of the nation to separate the atrocity from the politics that followed.  Unfortunately, Krugman himself is no longer able to separate his own disgust for anything done by someone who labels themself conservative from objective analysis of a situation.  I'm assuming fron the tone of this post that Krugman feels that a liberal president would have somehow avoided a war? 

Regardless, I have no problem with Krugman using his forum to question the response, or to question the motives behind the responses.  I do, however, have a problem with Krugman hiding behind an off switch when he expresses an opinion that he know will evoke an emotional response.  Does he have the right to do so? Sure. Is it cowardly? I'll leave that for others to decide.

I will allow comments on this post.  For obvious reasons.

Beware arguments over government policy counting jobs lost or gained

From the Under the Dome blog:

Here’s a wonky fact-check to mull this weekend. 

In the [North Carolina] state budget debate this session, Democrats and interest groups tossed out massive numbers -- 14,500, 18,000, 30,000 -- to quantify the jobs Republicans were cutting in the 2012 spending plan.

But the near-final number is actually much less: about 6,455.

The legislative fiscal research division tabulated that figure this week at the request of Rep. Bill Faison, who wants to put state workers back to work with a penny sales tax hike. (For his part, Faison received the numbers moments before his presser started but continued to suggest layoffs reached 14,500.)

This is how the actual layoffs break down:

-- 438 in state agencies and departments

-- 567 in community colleges

-- 2,418 in public schools

-- 3,032 in the UNC system.

The only number that gets close to the original projections from the budget debate is the number of positions eliminated (vacant and filled): 13,403.

Again the breakdown: 1,762 at state agencies and departments; 814 at community colleges; 6,308 at public schools; and 4,519 in the UNC system.

The economics department at ASU has one of those vacant jobs that was not filled. We were recruiting for two last year due to retirement and attrition and were allowed to hire only one. We're down to 16 faculty, from 17. I would count that sort of vacant job loss. There are others in the system that were unfilled. I wouldn't necessarily count those.

Not seeing the forest for the trees?

Nancy Folbre promotes the notion of green jobs at Economix and then gets down to business:

The biggest gains from investments in new renewable-energy technologies are not easily captured in private transactions, because they produce environmental services that are largely unpriced. Companies can sell consumers with a conscience a “share” in global greenhouse gas reduction – that’s what the growing business of carbon offsets is all about. But consumers who don’t pay also get the benefits, creating a strong temptation to free ride.

Companies can’t market to the consumers likely to benefit most, because they haven’t yet been born. Conventional fossil fuels are cost-effective now only because the environmental costs are dumped into a global commons that imposes costs on other people and future generations.

Public policies could remedy this problem, by imposing a tax on carbon emissions so that their market price better approximates their social cost. Adopting clean-energy standards would also increase demand for clean and green production, giving private companies greater incentive to invest.

This last three paragraphs are spot on, whereas the rest of the piece argues against the usual green jobs red herring criques -- they are too costly and they are difficult to count. These are red herrings because cost of green jobs vs ... what exactly? ... is not the comparison one should be making. We should be comparing the cost of the policy to the environmental benefits of the policy. Once you realize that, the definition and counting issue goes away.

The excerpt realizes that the focus should be on enacting environmental policies that provide incentives to clean up air and water. And note, and this is really more than a note, the last sentence of the excerpt is likely more costly than the preceding sentence. Standards are more costly than economic incentives which means ... standards likely create more green jobs than incentives! Ugh.

Some people argue that green jobs are a side benefit of environmental policy (i.e., "win-win"). I mostly disagree. In the energy sector, environmental policy should create clean energy jobs and reduce dirty energy jobs. In the consumer product sector, environmental policy should create jobs for people figuring out the best ways to produce goods and services while reducing pollution. Net jobs generated by environmental policy are largely unproductive; these jobs are producing something that people really don't want, which is final goods and services. When was the last time energy efficiency entered your utility function? What people want is cheaper energy so that they can spend money on other things.

People also want clean air and water but the demand for these is very different than the demand for final goods and services. There is no market for clean air and water so people will mostly want those things while at the same time not wanting to pay for environmental policy. Most everyone is more than willing to free ride. But, if you actually ask someone if they are willing to pay for clean air and water you'll find that the demand and willingness to pay is out there. People recognize that nothing is free and if they want clean air and water they must give up something in return.

The green jobs issue plays to the politics that there is a free lunch and only jobs matter in environmental policy. This could not be further from the truth. What matters is the extra market benefits produced: improved health, visibility, recreation and et cetera.

I'm hoping that environmental policy produces very few green jobs. This would indicate that businesses have found low cost ways to achieve clean air and water.

If you have 10 minutes today, I highly recommend Jon Stewart's take on the U.S. Postal Service

*My kids use Andy Rooney as a signal that the football-delayed 60 Minutes episode is almost over and a new Survivor (or is it Amazing Race?) is about to start.  No really.  They DVR Survivor which is always delayed bacause of football.  The beginning of the recording is usually the last half hour or so of 60 Minutes.  They fast forward until they see Any Rooney and then yell "There's the old guy, stop there!"

Did you watch the jobs speech?

Surprisingly, I did (I usually prefer to read the criticism), and this part got more of my attention than the rest, especially after the smog regs were not implemented:

President Obama’s big jobs speech Thursday takes an apparent shot at GOP efforts to scale back environmental regulations.

It touts the administration's own regulatory review efforts, noting "We should have no more regulation than the health, safety, and security of the American people require."

But Obama added:

But what we can’t do — what I won’t do — is let this economic crisis be used as an excuse to wipe out the basic protections that Americans have counted on for decades. I reject the idea that we need to ask people to choose between their jobs and their safety. I reject the argument that says for the economy to grow, we have to roll back protections that ban hidden fees by credit card companies, or rules that keep our kids from being exposed to mercury, or laws that prevent the health insurance industry from shortchanging patients. I reject the idea that we have to strip away collective bargaining rights to compete in a global economy. We shouldn’t be in a race to the bottom, where we try to offer the cheapest labor and the worst pollution standards.

Obama himself scuttled planned EPA smog regulations last week, but the White House is vowing to defend a suite of other air-pollution rules, such as air toxics standards for power plants.

via thehill.com

Now I'm watching the Packers beat the Saints -- I actually showed emotion, something I try not to do, when Randall Cobb scored his first TD.

Would it be wrong?

If I'm not too upset about this one?

The president rejected a proposed rule from the Environmental Protection Agency that would have significantly reduced emissions of smog-causing chemicals, saying that it would impose too severe a burden on industry and local governments at a time of economic distress.

Business groups and Republicans in Congress had complained that meeting the new standard, which governs emissions of so-called ground-level ozone, would cost billions of dollars and hundreds of thousands of jobs.

via www.nytimes.com

But not because it is a job-killing regulation, rather, the positive net benefits aren't overwhelming.