Environmental Economics

Tracking the price of climate change

A new analysis by the Natural Resources Defense Council, the NRDC, finds that the federal government spent three times more than the private insurance industry on climate change impacts last year. And, of course, those federal efforts are entirely funded by taxpayers.

“It is in effect a climate disruption tax, equivalent to a 2.7 percentage point increase in what Americans paid in sales taxes last year.” That’s Daniel Lashof, director of the NRDC’s Climate and Clean Air Program and co-author of the report.

We spent nearly $100 billion in 2012 on drought-related crop insurance, storms like Hurricane Sandy, floods and wildfires. By comparison the nation spent $95 billion on education last year and just $91 billion on transportation.

via news.yahoo.com

When the choke value is really high?

An update on Gamefish economics:

A bill that would have banned commercial fisherman from catching and selling puppy drum, speckled trout and striped bass will not be passed by the General Assembly this session.

Rep. Paul Tine, D-Dare, said Wednesday the gamefish bill would not make it out of a House committee because of opposition from Democrats and Republicans. ...

House Bill 983, introduced by Rep. Tom Murry, R-Wake, and Rep. Michael Wray, D-Northampton, would have only allowed recreational catches of the three popular species with hook-and-line. It also would have compensated commercial fisherman for losses and funded inlet dredging projects. ...

Attempts to pass similar measures in the 2009 and 2011 sessions also failed.

“This bill pitted the recreational interests against the commercial fisherman, the consumer, the fish houses, the restaurants and the seafood stores,” Tine said.

via outerbanksvoice.com

The choke price is the price that is so high that quantity demanded is equal to zero. In a recreational-commercial allocation model, the marginal values of each catch face off and the allocation should be set where they are equal. So, is where the marginal value curves hit the vertical axes the choke values? If that is what we can call it then this decision indicates that the choke value for gamefish must be really high (at least politically). 

Because schools in Kentucky suck...

Ohio State's president told a university committee in December that Notre Dame wasn't invited to join the Big Ten because they're not good partners, and joked that Catholics can't be trusted.

The recording of Gordon Gee speaking to Ohio State's Athletic Council also captures him saying the Notre Dame priests who run the university are holy on Sunday and "holy hell" the rest of the week.

Gee spoke about conference expansion in the recording obtained by The Associated Press. He says Notre Dame "wanted to have its cake and eat it, too."

Gee, who has a history of verbal gaffes, also questioned the academic integrity of schools in the Southeastern Conference and the University of Louisville. He said Big Ten presidents would never agree to admit Louisville or Kentucky.

via espn.go.com

My boss has an oral surgeon on retainer to remove the foot that frequently lodges in his mouth (but he's still a good boss...why the awkward silence?).

Funny, but Appstate doesn't have a PhD program

Alex Tabbarok:

From EJMR:

I have a new paper that I consider my best work. For a variety of reasons, the marginal return professionally for this paper is very small for me. But I think it has an excellent shot a top
journal, I would estimate 1/3 at the AER (I have published there before). So I am offering it for sale. Here are the details:

1. This paper is not yet posted on my website. It has not been circulated and I have not yet presented it.

2. The paper is applied micro although I will sell it to anyone.

3. Email bids to [email protected]. Use a fake account and make sure to send no revealing information.

4. Your bid is for an AER or QJE. If it ends in Restud, you pay 65%. If it ends in the Journal of Labor Economics, Journal of Public Economics, or EJ, you pay 35%. Other journals are negotiable. You can choose the submission path as long as it starts with one of the top journals.

5. I will contact the winning bid (or highest real bid) to arrange an in person meeting in Philly at the meetings. We will never leave a paper trail.

6. Half of payment is due with a revise and resubmit. I will also make the needed changes. The final half is due with final acceptance.

7. Spare me any discussion of the ethics here. I am dead serious and I will not be commenting further on this thread.

The whole thing could be a troll or an experiment but let’s assume it’s real. An AER could easily be worth 50k, especially for someone early in their career but that’s for one you wrote yourself. An AER written by someone else has a significantly lower expected value since, if revealed, it may end your career. Moreover, suppose the buyer, as unlikely as it seems, takes advantage of the big push and makes it big on their own. Is the buyer not then vulnerable to blackmail from the seller who already has signaled their ethics? I can see this appealing, however, to the scion of some dictator who could afford to pay well over 50k and also afford to make the seller pay if the secret is revealed. Caveat emptor and also caveat venditor. True, there are not many econ PhDs among the dictator set but there are a few and sadly this kind of thing does have precedents.

P.S. I did like the discounting by journal, a nice, accurate touch.

This is an interesting proposal and the comments at the original are funny. But now I'm sucked into the cesspool that is Economics Job Market Rumors:

Ouch. There are also references to "Appalachian Backwoods State" and "Appalachian Podunk State." Double ouch! Apparently, Appalachian State University is used as a euphemism for whatever word describes a soul sucking place where students from top 20 (50) schools go to die a horrible death.

A new "economics and environment and more" blog

ingmar schumacher:

According to some, the important and depressing graph missing is number 32 – beer prices across Europe on the rise. That is, unless you live in Ireland, of course, then, based on chart 32, life has been looking increasingly optimistic since 2010.

Chart 32

via ingmarschumacher.wordpress.com

I'll be following via email since I couldn't find the RSS feed. 

Economic Principals tut-tuts Paul Krugman

In the context of the over-the-top criticism of Reinhart and Rogoff, David Warsh:

Last week, Krugman on his energetic New York Times blog praised Laurence Ball, of Johns Hopkins University, for his “Four Percent Solution”:

Larry Ball makes the case that we would be a lot better off with a 4 percent inflation target rather than the 2 percent that is now central bank orthodoxy. Intellectually, this position is hardly outlandish; indeed, Ball’s case is very similar to the case Olivier Blanchard made three years ago, just stated more forcefully and with more evidence.

Here is Rogoff, writing in a December 2008 op-ed for Project Syndicate, “Inflation is Now the Lesser Evil”:

It is time for the world’s major central banks to acknowledge that a sudden burst of moderate inflation would be extremely helpful in unwinding today’s epic debt morass…. Moderate inflation in the short run – say, 6% for two years – would not clear the books. But it would significantly ameliorate the problems, making other steps less costly and more effective.

By any standard, that was a prescient call – a bit too early to build popular support, but a year earlier than Blanchard, and sufficient to demonstrate the Rogoff was anything but a single-minded budget-cutter. In 2011 he renewed the prescription.

A lawyer who withheld exculpatory evidence like that from his argument would have his case tossed out of court. A columnist for a great newspaper should be held to a similar standard.

I have known Krugman for a long time; I admire him. I share many of his convictions. I would even say that we are friends. His career as a journalist, like his career as an economist, has been studded with brilliant coups.

But as in the Little Rock case, he lacks a governor; or, in this situation, even an editor. The earlier episode ensured that Krugman would never again serve in government. (He had done a turn the CEA as a junior staffer under Martin Feldstein in the early 1980s.) This one surely cinches the case that he should never win a Pulitzer Prize. The habitual thumb on the scale has become contempt for the balance itself.

Whoa, that would make me stop and think. 

The "Little Rock case" refers to the time during the Clinton administration when Krugman ripped the administration economists, mostly Tyson and Reich, for daring to get the jobs and attention that he seemed to want. 

In terms of economics (and politics) I sometimes agree with Krugman. But after a snicker or too, I never agree with his "rip 'em to shreds" approach, which always detracts from his arguments. 

Attitudes about carbon taxes

Sightline Daily:

Today Yale and George Mason are releasing the third report from their latest national survey, Public Support for Climate and Energy Policies in April 2013. ...

A majority—61 percent—supports a carbon tax that would help pay down the national debt. But, as is typical, opposition to a carbon tax gains a majority (58 percent) when the specific cost to households is presented (in this case $180). Still, a large majority of Americans say they support a US effort to reduce global warming, even if it has economic costs.

Here is the graph that shows where 61% are in favor of a carbon tax on fossil fuel companies:

Most of the other policies that people are in favor of are already implemented or politically feasible. Here is the graph that shows how the support slips away when the cost is $180 per household:

What is interesting is that the $180 question gets slightly more support than a $0.25/gallon gas tax where the revenue is used to lower income taxes. Also, I wonder why the language changes from question to question. In the first graph the bad guys are described as "fossil fuel companies" and in the second they are called "companies that produce or import fossil fuels." When language changes it is never clear if the questions are directly comparable. 

This graph might be the most interesting:

When people are taxed and not "companies" support withers. Of course, students of economics know it doesn't matter who pays the tax. Also, the large numbers of "don't know" responses makes one wonder. Do respondents truly not know how these proposals might affect them or are they satisficing? My guess is that it is the former since these are complicated issues. 

Another survey question issue: the question asks about "how likely would you be to support or oppose the proposal ..." but the answers are not in a "likely" Likert scale (i.e., very likely, somewhat likely ...). Have things in survey design changed while I dumbly marched through time?

In case you are wondering, the sample is fine. From Appendix II:

The data in this report are based on a nationally representative survey of 1,045American adults, aged 18 and older, conducted from April 8 – 15, 2013. All questionnaires were self-administered by respondents in a web-based environment. The survey took, on average, about 27 minutes to complete.

The sample was drawn from GfK’s KnowledgePanel®, an online panel of members drawn using probability sampling methods. Prospective members are recruited using a combination of random digit dial and address-based sampling techniques that cover virtually all (non-institutional) resident phone numbers and addresses in the United States. Those contacted who would choose to join the panel but do not have access to the Internet are loaned computers and given Internet access so they may participate.

The sample therefore includes a representative cross-section of American adults – irrespective of whether they have Internet access, use only a cell phone, etc. Key demographic variables were weighted, post survey, to match US Census Bureau norms.

Hat tip: http://standupeconomist.com/in-the-news-90/

What is wrong about this headline?

NY Times:

Home Prices Rise, Putting Country in Buying Mood

Maybe nothing, but it makes me think that higher housing prices make consumers want to buy more houses (and that is wrong ... unless consumers only want to buy houses when housing prices are on the rise, signaling this is a good investment). The article, however, says that this is a macroeconomic effect. Higher housing prices are raising consumer confidence which is increasing overall consumer spending.

Weitzman on climate change

PBS Newshour:

Paul Solman: Are headlines trumpeting the fact that carbon dioxide levels in the earth's atmosphere have now passed 400 parts per million for the first time in something like three million years unduly alarmist? Or are they a timely warning?

I asked noted environmental economist Martin Weitzman to address the question. ...

... Weitzman has also been working on environmental economics and most recently, in a series of widely cited academic papers, on the economics of global warming; the most famous, on the "Economics of Catastrophic Climate Change." ...

---

Martin Weitzman: Recently the concentration of atmospheric carbon dioxide (CO2) reached an unprecedented level of 400 parts per million. What is the significance of this "milestone"? Does it portend catastrophic climate change? The short answer is no. The long answer is a more complicated and more nuanced maybe. ...

The whole piece is only 2474 words and well worth a read, especially if you don't understand Weitzman when he writes for the journals (i.e., there are no equations as in, e.g., REStat, 2009):

Economics of Natural Hazards on public spending for safe rooms at schools

More Kevin Simmons:

The Dallas Morning News ran an op-ed I wrote about where to spend tornado safety funds. The most tragic element of last week’s tornado in Moore was that an EF-5 tornado, an extremely rare event, hit two elementary schools with full force.  Few structures are designed for that type of stress but engineered buildings would be about the best choice you could have.  Most residential structures would be leveled. ...

If you consider that Oklahoma has 1,780 campuses and estimates to provide a safe room run from $500,000 to $1,000,000 per campus, the outlay to protect all schools would be immense, $1 to $2 billion dollars. ...

In general, my research suggests that using public money to save lives from tornado fatalities fails the benchmark that spending is considered reasonable if the cost per avoided fatality is less than $10 million.  In our book Economic and Societal Impacts of Tornadoes and the follow up to that book DeadlySeason:  An Analysis of the 2011 TornadoOutbreak, Dan Sutter and I show that these programs are well outside that benchmark for most uses of the program.  Using the funds to reduce fatalities in mobile homes is the one exception for some states.

Should that be "greater than $10 million"? And, $10 million is much higher than the value of a statistical life used in other areas of public policy (e.g., traffic, air quality) making safe rooms in schools even more difficult to justify with benefit-cost analysis.