Environmental Economics

There REALLY is an easier way to tax miles driven...

As America's road planners struggle to find the cash to mend a crumbling highway system, many are beginning to see a solution in a little black box that fits neatly by the dashboard of your car.

The devices, which track every mile a motorist drives and transmit that information to bureaucrats, are at the center of a controversial attempt in Washington and state planning offices to overhaul the outdated system for funding America's major roads.

The usually dull arena of highway planning has suddenly spawned intense debate and colorful alliances. Libertarians have joined environmental groups in lobbying to allow government to use the little boxes to keep track of the miles you drive, and possibly where you drive them — then use the information to draw up a tax bill.

via www.latimes.com

Why, oh why do I have to keep reposting this (originally posted May 8, 2007)?

And please, oh please, read all the way to the end before dismissing my plan as too complicated.  The ending is ironic (I highlighted that part below in case you want to skip to the interesting parts).

Mr. President, please call me if you would like to discuss.

I hesitate to bring this up with gas prices being what they are now, but I think what I'm about to say is relevant.

I seem to be getting a lot of comments lately that much of the gas consumption/ high gas price problem could be solved if the greedy sumsabitches who drive big honkin' SUVs were forced to pay a gas guzzler tax. So I have a proposal--I'll call it a fuel efficiency payment.  Here's how it works:  All cars are subject to an annual fee based on miles driven.  The fee will be per mile driven and will be inversely proportional to the EPA calculated city fuel efficiency figure.  Keep reading for details...

Here's how it would work.  Each year, drivers will be required to have their mileage checked at an authorized service facility.  Based on the EPA certified city fuel efficiency rating provided by the EPA for the specific type of car, the car owner will pay a fee (call it F) per mile driven. The fee will be equal to the inverse of the EPA fuel efficiency figure. 

So consider two car types: a gas guzzler (GG) and a fuel efficient car (FE).  Suppose the gas guzzler has an EPA MPG rating of 15 mpg city and the FE car has a rating of 35 mpg city.  The per mile fuel efficiency payment for the gas guzzler will be $0.067 per mile drive (1/15) and the per mile fuel efficiency payment for the fuel efficient car will be $0.029 per mile driven.  If a driver of each type of car drives 12,000 miles a year, the GG driver will pay an annual fee of $804, and the FE driver will pay an annual fee of $348. 

The Fuel Efficiency Payment has a couple of nice features:

1) It places a higher burden on those driving less fuel efficient vehicles--that should satisfy those blaming the SUV drivers for all of the problems*.

2) It places a higher burden on those driving more.  By increasing the marginal cost per mile driven, total miles driven should decrease.

3) Assuming fuel efficiency and income are negatively correlated--that is, the rich tend to drive larger, more expensive, less fuel efficient cars--the Fuel Efficiency Payment places a higher burden on higher incomes.

4) It provides an incentive for drivers to switch to more fuel efficient vehicles.

Now that I've hopefully convinced you that a fuel efficiency payment will act as a type of gas guzzler tax that would be less of a burden on lower income drivers, would provide incentives for decreasing miles driven and would encourage a switch to more fuel efficient vehicles, I'd like to point out that the fuel efficiency payment is algebraically identical to a $1/gallon GAS TAX** that many economics including John and me think would go a long way toward solving many of the transportation related externalities.   

*In the interest of full disclosure, I am a gas guzzling SUV driving suburban commuter.  In short, I am the problem.  Why you may ask, would I stoop to such low moral standards?  Easy, I have 3 kids and a lot of sports equipment.  Try fitting 3 kids and a team's softball equipment in the trunk of a Prius.  Oh, and the SUV was a great deal.

**Multiplying the FEE=$(1/(miles/gallon)) by miles driven gives $Fee*miles=$1/gallon.

 

 

"Australia’s PM Takes on Carbon Tax"

A nameless RFF staff member:

Australian Prime Minister Tony Abbot revealed a draft bill last week that would repeal the country’s controversial carbon tax. The current per-ton tax, introduced by previous PM Julia Gillard, began as a fixed-price emissions scheme that would switch to market trading in 2015. Abbot’s alternative plan, which pays companies that keep pollution below a set standard, is viewed by many as “a less efficient way of cutting emissions.” ...

via common-resources.org

Everyone loves subsidies!

HHOOO!

http://www.seattlepi.com/comics-and-games/fun/Mark_Trail/2013-10-25/

Johnny is going right over that cliff!

What does the debt ceiling have to do with environmental and resource economics?

And you thought the debt ceiling fight was about government spending ... ha! it's about water resources:

For the second week in a row, the House will consider legislation aimed at boosting federal funding for a water project along the Kentucky and Illinois border.

Last week, the House and Senate approved a debt-ceiling bill that authorizes up to $2.9 billion for the Olmsted Locks and Dam Project on the lower Ohio River. That's a $1.2 billion increase above the project's current authorization level, a bump that prompted some to criticize it as a "Kentucky kickback" for Senate Minority Leader Mitch McConnell (R-Ky.).

This week, the House will take up legislation that would increase the extent to which taxpayers pick up the cost of the project.

Under current law, water projects around the country are paid for through a 50-50 split between taxpayers and the Inland Waterways Trust Fund. That fund is similar to the gasoline tax for automobiles — a fuel tax is assessed on inland waterways users, and the money is used to maintain and repair those waterways.

The Water Resources Reform and Development Act, H.R. 3080, includes language in Section 216 that would require taxpayers to shoulder 75 percent of the costs for the Olmsted Project, instead of 50 percent. Under the bill, the trust fund would pay for the other 25 percent.

That bill could get a final House vote as early as Wednesday. If Section 216 remains intact, taxpayers will pay for $900 million of the

via thehill.com

Here is the beginning of Section 216:

SEC. 216. PRESERVING THE INLAND WATERWAY TRUST FUND.

(1) IN GENERAL- Notwithstanding section 102(a) of the Water Resources Development Act of 1986 (33 U.S.C. 2212(a)), for each fiscal year beginning after the date of enactment of this Act, 25 percent of the cost of construction for the Olmsted Project shall be paid from amounts appropriated from the Inland Waterways Trust Fund. ...

H.R. 3080 passed with 97% yea votes. Only an idiot wouldn't vote to "preserve the trust fund"!

 

Newmark's Door: "The 9 kinds of physics seminar"

Craig Newmark:

Physics is closer to economics than I thought. 

via www.newmarksdoor.com

A cautionary tale

http://www.seattlepi.com/comics-and-games/fun/Mark_Trail/2013-10-24/

Don't ever wound your big game target and cavalierly head back to your luxury cabin. Even that "old buck" knows that revenge is a dish best served cold. Look at those dark eyes. It gives me chills. 

Some background since my last post: Much to my surprise (not), Mark was able to successfully bluff The Senator and Johnny Walker about recording their illicit conversation on his giant cell phone. Mark then revealed the extortion plot behind The Senator's sponsorship of the Oil Exploration Act. Johnny then grabbed the phone from Mark and took off into the woods with Trail on his trail.

Did anyone not expect Johnny to be confronted by the wounded bull elk (male elks aren't bucks)? My guess is the elk menances Johnny until Mark arrives, simultaneously retrieving his cell phone and removing the bullet from the elk, who turns out to be the alpha elk who then fathers an awkward son and raises him with tough love after the nondescript and only briefly seen cow elk mother dies in a Disney-style drama and the son leads the herd north to safety when the forest temperature increases by 6C (i.e., while Mark wins this round against developers he fails in stopping climate change) finding love along the way with a cute young cow elk, who finally discovers the young bull's potential (who has grown less awkward with added responsibility, by the way) and they live happily ever after ... illustrating how adaptation to climate change is a cost effective alternative to economic incentive-based climate policy.

It will later be discovered that the billionaire Koch brothers funded the story line with dark money (how else could Mark fail to foil an evil plot against nature? duh).

Just a guess, folks, just a guess.  

A Chicken Sh*t Ruling

The U.S. Environmental Protection Agency has no legal right to force a West Virginia poultry grower to obtain water pollution permits for runoff from her Hardy County farm because it is routine stormwater discharge, a federal judge ruled Wednesday.

U.S. District Judge John Preston Bailey said litter and manure washed by rain into Chesapeake Bay tributaries at Lois Alt's Hardy County farm is agricultural runoff, not a fixed pollution source such as a factory. That means it's exempt from the requirement that it be permitted and regulated under the federal Clean Water Act, he said.

"The term 'agricultural stormwater discharge' was not and has not been defined in the statute" covering permitting, Bailey wrote. "The fact that Congress found it unnecessary to define the term indicates that the term should be given its ordinary meaning."

via finance.yahoo.com

No analysis. I just thought the title would be funny.

Thirsty Thursday beer post: the effect of beer consumption on economic growth

Yes, beer does make Homer less productive. Resul Cesur and Inas Rashad Kelly in Economic Inquiry:

Few studies explore the linkages between health behaviors and macroeconomic outcomes. This study uses 1971–2007 state-level data from the United States to estimate the impact of beer consumption on economic growth. We document that beer consumption has negative effects on economic growth measures once the endogeneity of beer consumption is addressed. Our estimates are robust to a range of specification checks. These findings run parallel to a large body of literature documenting substantial social and economic costs stemming from alcohol use.

Note that this is our first post in the "Beer" category. What took us so long?

From Hopeless to Curious? Thoughts on Hausman's “Dubious to Hopeless” Critique of Contingent Valuation

For those who have followed our anticipatory posts, good news in the inbox this morning:

I am pleased to inform you that Oxford Journals has published your article [From Hopeless to Curious? Thoughts on Hausman's "Dubious to Hopeless" Critique of Contingent Valuation by Timothy C. Haab; Matthew G. Interis; Daniel R. Petrolia; John C. Whitehead] in Applied Economic Perspectives and Policy.

Here's the abstract:

Hausman “selectively” reviewed the contingent valuation method (CVM) literature in 2012 and failed to find progress in the method during the 18 years since Diamond and Hausman argued that unquantified benefits and costs are preferred to those quantified by CVM. In this manuscript, we provide counter-arguments to Hausman's claims, not with the intent to convince the reader that the debate over CVM is settled in favor of the method, but rather to argue that the intellectual debate over CVM is ongoing, that dismissing CVM is unwarranted, and that plenty of work remains to be done for the truly curious researcher.

For those who want to read the full paper, click here.  Once you click, be sure to download a full text version of the paper (either pdf or html)...OFTEN...one for each computer, iPad or iPhone you own.  And I'm sure you need a copy for your office, your living room, your kitchen, your bathroom (probably the most appropriate place)...

We want to give Harry de Gorter and David Just a run for most downloaded AEPP article: 20,500 full text downloads to date. 

And don't forget to cite our paper in every contingent valuation paper--oh what the hell--every paper you write.  Just cut and paste this:

Haab, Timothy C., Matthew G. Interis, Daniel R. Petrolia, John C. Whitehead. "From Hopeless to Curious? Thoughts on Hausman's "Dubious to Hopeless" Critique of Contingent Valuation."
Applied Economic Perspectives and Policy. 2013. doi: 10.1093/aepp/ppt029.

And don't forget to put it on your class reading list. Just cut and paste this:

Haab, Timothy C., Matthew G. Interis, Daniel R. Petrolia, John C. Whitehead. "From Hopeless to Curious? Thoughts on Hausman's "Dubious to Hopeless" Critique of Contingent Valuation."
Applied Economic Perspectives and Policy. 2013. doi: 10.1093/aepp/ppt029.

And since the Nobel Committee set a precedent this year for giving the prize to economists with opposing views, if Hausman is to ever win the prize, I think it's only logical that we join him on stage.

Did I mention you can (and should) download a copy of the full paper by clicking here?

Environmental and Natural Resource Economics: An Encyclopedia (coming soon)

Look what we just got in the inbox! It's not the actual encyclopedia, just the cover art.  But, for those of you who are planners, you can order it in advance on Amazon for $71.20.  Just imagine the picture below in the little spot where it says 'No Image Available.'