Environmental Economics

PhD Comics: The Claus Hypothesis

Source: PhD Comics

My Top 10 Albums of 2011

A lot of env-econ.net readers use my annual list for their holiday shopping and I am happy to share it for another year. As always, the list is based on revealed preference. I bought each of these (CDs ... not downloaded to the IPad I don't have) and the ranking is based some mix of (a) the order I'd like to listen to them right now and (b) how many times I think I listened to them this year.

Here it is as posted at No Depression:

1. Decemberists - "The King is Dead"
2. Drive-By Truckers - "Go Go Boots"
3. Cake - "Showroom of Compassion"
4. BoDeans - "Indigo Dreams"
5. Gourds - "Old Mad Joy"
6. Wilco - "The Whole Love"
7. Jason Isbell and the 400 Unit - "Here We Rest"
8. My Morning Jacket- "Circuital"
9. Steve Earle - "I'll Never Get Out of This World Alive"
10. Old 97s - "Grand Theatre Vol. 2"

Honorable Mention: Gillian Welch - "The Harrow and The Harvest" (there are a couple more that are resisting my memory right now)

Numbers 1-7 really got me through the year. There is a distinct lack of female voices this year. I heard Gillian Welch on campus, which was great, but the album didn't really grab me (and I realize that is [one of] my problem[s]). I'll make up for that with Shelby Lynne's Christmas album.

I've also submitted this to WNCW Top 100 contest. I'm fairly sure that I'll be a winner this year:

One lucky contestant will win the Top 10 CDʼs of the year. Nine others will win a grab-bag of other great WNCW favorites, hand-picked by your hosts!

WNCW required that the BoDeans and Steve Earle are write in votes (Cake is on their list but not Steve Earle, how weird is that?).

Happy Holidays!

I'm a registered Republican but I happen to agree with his findings, so what does that make me?

Here's one of the comments on my colleague, Mark Partridge's, objective study of job numbers from from shale drilling in Ohio:

These are the sort of things which make me embarrassed to call myself an Ohio State alum. So the jobs will be temporal? OK. No less temporal than "green jobs' in Solar and Wind (where 99% of the jobs vanish after the build out phase is over). The esteemed Doctor Patridge is also ignoring the ancillary benefit of prolonged low energy prices. Huge shale gas reserves will effectively cap electricity prices for a very, very long time. This lowers the cost of production in Ohio manufacturing and lowers residential energy bills. When manufacturing costs go down, jobs increase. When home energy bills fall, people have more money to spend on other things. "Economically" this is a pure SLAM DUNK. I listen to environmental concerns or issues around drinking water. Those are real. But to make an "economic" argument against shale gas?!?! Doctor Partridge is a fool and shill.

This will no doubt "shock" everyone, but Partridge is a registered Democrat..... (no bias aginst Kasich, I'm sure....) https://vote.franklincountyohio.gov/voter/voterSearch.cfm?mode=®istrationID=60032397&candidate=&committeeMember=

So I am assuming that registering to vote automatically biases all academic research?

Here is a link to the full study for those relying on a newspaper for the facts (the reporter interviewed Mark less than 1/2 hour after receiving the 38 page report).

Here is part of what Mark concludes:

Our broad analysis shows the expected employ-ment effects of natural gas are modest in comparison to Ohio‘s 5.1 million nonfarm employee econ-omy. We show this through (1) an assessment of impact analysis, (2) comparison of drilling counties with similarly matched non-drilling counties in Pennsylvania, (3) statistical regressions on the entire state of Pennsylvania, (4) employment comparisons with North Dakota‘s Bakkan shale region, and (5) an examination of the employment life cycle effects of natural gas and coal per kilowatt of electricity. Specifically, we estimate that Pennsylvania gained about 20,000 direct, indirect, and induced jobs in the natural gas industry between 2004-2010, which is a far cry fewer than the over 100,000 jobs re-ported in industry-funded studies (and the 200,000 expected in Ohio by 2015). Given the anticipated size of the boom, Ohio is expected to follow the Pennsylvania‘s experience. We believe 20,000 jobs would be a more realistic starting point for what to expect in Ohio over the next four years and is in line with what other independent assessments have suggested. However, our 20,000 job estimate does not account for displacement losses in other indus-tries such as tourism, and we also note that local economic effects could appear larger in heavily impacted areas. Moreover, we find that mining counties had considerably faster per-capita income growth than their non-drilling peers, which likely results from royalties/lease payments and the high wages in the industry. Thus, we expect the near-term boom to be associated with frothy increases in income but more temperate job effects.

Damn shill.

Economists are such a**holes when it comes to job creation

The huge discoveries of natural gas and oil just starting to be tapped in eastern Ohio are expected to generate jobs — but only a fraction of the number that the industry forecasts, according to a report led by an Ohio State University professor.

The study released yesterday predicts that the boom in drilling will lead to 20,000 new jobs over the next several years, far fewer than the 200,000 that the industry has predicted will come from drilling in shale formations for oil and gas. The 20,000 jobs would be those created both directly and indirectly from drilling.

“We need to be setting realistic expectations,” said Mark Partridge, an economics professor specializing in urban and rural development at Ohio State. He led the study with doctoral student Amanda Weinstein.

via www.dispatch.com

Math dork cartoon of the day

Picture of the day

Caption: "Best boat name for a fisheries economist"

Photo Credit: Scott Crosson

Breaking wind

An update on the wind energy market (Buyers of wind power lacking):

The developer of the largest wind farm ever proposed in North Carolina says the project has stalled because no utility wants to buy the power the project would produce.

Iberdrola Renewables, having put more than three years into a 31-square-mile wind farm near the coast, this week began notifying property owners and public officials in Pasquotank and Perquimans counties that the project is on hold indefinitely. If built, the Desert Wind Energy Project near Elizabeth City would have ranked among the largest wind farms in the country.

Iberdrola has developed more than 40 wind farms in this country, but the Spanish company has been unable to find a buyer for the power output of Desert Wind. The $600 million undertaking was to include 150 turbines, enough to supply power to as many as 70,000 homes....

The Desert Wind project began in early 2009, with millions of dollars invested since then in wind studies, environmental impact statements and engineering analyses of roads, soils and transmission systems. The N.C. Utilities Commission approved the project in May in a proceeding remarkable for the absence of public protests. Iberdrola has signed real-estate agreements with some 40 property owners who would be paid annual fees of $6,000 or more in exchange for hosting turbines standing 500 feet tall at the upper tip of the blade.

But months of talks with neighboring power companies have failed to yield a contract. Iberdrola will not be able to finance the project until it can show institutional lenders a long-term contract with guaranteed cash flow.

Progress Energy in Raleigh, one of Desert Wind's potential customers, ended talks with Iberdrola after the parties couldn't come to an agreement. "Generally, their price was higher than other prospective wind projects," Progress spokesman Mike Hughes said.

Power companies such as Progress are shutting down old coal-burning power plants and building power plants fueled with natural gas, considered the cleanest fossil fuel.

Copleman said slack energy demand in the wake of the recession, coupled with historically low natural gas prices, are creating a competitive disadvantage for wind farms nationwide. Electric utilities in North Carolina and elsewhere pay a premium for wind power under state energy policies that require a certain commitment to clean energy. ...

Iberdrola had hoped to begin construction this year to qualify for a 30 percent federal incentive payable in a lump sum. The company could still qualify for another form of the incentive paid out over a 10 years if the project is completed by the end of 2012. Both incentives are scheduled to expire, and it's not clear if Congress will extend them.

One's only conclusion can be that one needs more government subsidies (sarc).

"The island's tourist economy needs a reliable highway"

Or does it?

Prodded by the urgent need for long-term repairs to a storm-ravaged Outer Banks highway - and constrained by the limits enforced by federal environmental regulators - the state Department of Transportation is moving toward a solution expected to include elevating more than four miles of N.C. 12 onto bridges, at a cost of several hundred million dollars.

The seven villages of Hatteras Island were cut off from the mainland Aug. 29, when Hurricane Irene blew out a section of N.C. 12 near Rodanthe and blew open a new inlet in the middle of the Pea Island National Wildlife Refuge. Traffic was restored seven weeks later after DOT filled gaps with dirt and erected a 660-foot-long temporary steel bridge across what locals call the New Inlet.

DOT engineers will meet today with officials from 13 regulatory agencies to winnow their options for repairs intended to stabilize these fragile sections of N.C. 12 for at least 50 years. ...

That would leave just one of the alternatives floated so far: a pair of long bridges on N.C. 12. Early estimates put the combined construction cost at $211 million to $387 million. ...

DOT awarded a $215.8 million contract in July for a 2.8-mile bridge to replace the worn-out structure that carries N.C. 12 across Oregon Inlet, just north of Pea Island and Hatteras Island.

via www.newsobserver.com

If I'm reading this correctly, maintaining N.C. south of Oregon Inlet will cost between $427 million and $604 million. According to the North Carolina Department of Commerce: "Domestic tourism in Dare County generated an economic impact of $834.29 million in 2010." Hyde County adds $30 million more. Applying some ad-hoc assumptions, 50% of spending is due to out of staters and 50% of that is south of Nags Head, then the annual benefits of having a road down the Outer Banks to North Carolina is about $216 million (of course, from a national standpoint the tourism benefit is $0 as those dollars would flow elsewhere without N.C. 12). The payback period (to NC) on road building looks to be about 3 or 4 years.

Note: The total tourism impact for North Carolina is $17 billion according to the NCDOC, about 7% of total state income, which sounds reasonable.

Jobs and environmental regulation

Wow, Econ4 has already had an impact, people are starting to do benefit-cost analysis (sarc)!

Gernot Wagner:

In a 2010 analysis of rules passed in the prior decade, the non-partisan Office of Management and Budget calculated benefits-to-cost ratios across various government agencies. The EPA came out on top with the highest ratios by far, with benefits from its regulations exceeding costs by an average of more than 10 to 1. If you care about well-functioning, free markets, the EPA would be the last federal agency you’d want to cut.

None of this is magic. It’s something much more mundane: honest accounting.

As any economist worth his or her professional crest will tell you, regulation solves problems that markets ignore. For example, they ensure that the costs of those who pollute show up on their own books, rather than increase the costs for others — either those left with cleanup costs or the healthcare expenses of those who live downwind or downstream.

Those who create costs pay for them — that simple idea is the logic behind the Clean Air Act and most other environmental regulations. It forces markets to reckon with the true costs of doing business, to be more efficient, and to innovate. And it does so at a great benefit to society, even boosting GDP in the long run by making us all healthier and more productive.

via e360.yale.edu

The post goes on to argue that tighter EPA regulations are good for the macroeconomy in the short run, increasing net jobs through investment ("Yes, EPA regulation does bring down the unemployment rate ...."). I'm not quite ready to go there (are there any published studies that show that?), since in a simple demand and supply model a regulation raises production cost and price so that the net effect on consumer and producer surplus is negative. It takes inclusion of nonmarket benefits to make a regulation pass the benefit-cost test, and not all do.

Hat tip: Gernot's publicist.*

*Gernot has a publicist?

Don't mainstream economists already embrace benefit-cost analysis?

The Chronicle of Higher Education examines challenges to mainstream economics (Economists Push for a Broader Range of Viewpoints in Their Field):

Recently critics have mounted a more fundamental line of attack on mainstream economists, taking aim at the ideology that has grown dominant over the past 30 years, which they say played a significant part in causing the Great Recession and not doing much to help solve it.

The dispute, which has been echoed in critiques made by Occupy Wall Street activists, has roiled blogs, op-ed pages, and university campuses. Students at Harvard University recently walked out of one prominent professor's class.

Critics call this ideology "free-market fundamentalism," and it rests on certain core tenets: The market is the most efficient way to allocate resources; people generally make rational decisions when buying goods and services; and government regulations are to be minimized because they risk undermining purer market forces and can lead to corruption. ...

Critics want an alternative vision—or visions—of the discipline to be more widely accepted. "We need an economics that aims to secure long-run human well-being, not an economics preoccupied with maximizing short-run output and profits," reads the mission statement of a new group, called Econ4, which was started at the University of Massachusetts at Amherst in September. ...

The founders of Econ4 want the economy, and the study of economics, to pay more attention to such issues as the fair distribution of opportunities; to emphasize minimizing vulnerability in the economic system instead of maximizing efficiency; and to strive to give a fuller accounting of the costs and benefits of market and government decisions, including consequences for the environment and the value of caring for dependents.

Here is the link for Econ4: http://econ4.org/. This Econ4 video makes it seem as if the entire profession ignores market failure when, in fact, it is a major chunk of the micro principles course. How is "true cost pricing" different from Pigouvian taxation?

 

Econ4 - The Challenge from Softbox on Vimeo.