Environmental Economics

Freedom is not just another word for free

Paul Krugman:

For historical reasons, the federal government owns a lot of land in the West; some of that land is open to ranching, mining and so on. Like any landowner, the Bureau of Land Management charges fees for the use of its property. The only difference from private ownership is that by all accounts the government charges too little — that is, it doesn’t collect as much money as it could, and in many cases doesn’t even charge enough to cover the costs that these private activities impose. In effect, the government is using its ownership of land to subsidize ranchers and mining companies at taxpayers’ expense.

via www.nytimes.com

It's the taxpayers who should be angry at the federal government, not the cattle ranchers.

Marx was an efficiency freak?

In a major victory for benefit-cost analysis:

In a major victory for the Obama administration, the Supreme Court on Tuesday upheld the authority of the Environmental Protection Agency to regulate the smog from coal plants that drifts across state lines from 28 Midwestern and Appalachian states to the East Coast.

The 6-to-2 ruling bolsters the centerpiece of President Obama’s environmental agenda: a series of new regulations aimed at cutting pollution from coal-fired power plants. Republicans and the coal industry have criticized the regulations, which use the Clean Air Act as their legal authority, as a “war on coal.” The industry has waged an aggressive legal battle to undo the rules. ...

The interstate air pollution regulation, also known as the “good neighbor” rule, has pitted Rust Belt and Appalachian states like Ohio, Michigan and Kentucky against East Coast states like New York and Connecticut.

In its arguments before the court, the E.P.A. said the rules were necessary to protect the health and the environment of downwind states. East Coast states in particular are vulnerable to pollution blown by the prevailing west-to-east winds of the United States. The soot and smog produced by coal plants are linked to asthma, lung disease and premature death.

In her decision, Justice Ginsburg noted that in reining in interstate pollution, regulators must account for the vagaries of the wind. ...

In a dissent, Justice Antonin Scalia, joined by Justice Clarence Thomas, said the regulation was unwieldy and suggested it was Marxist. As written, the regulation will require upwind polluting states to cut pollution in relation to the amounts of pollution each state produces, but also as a proportion of how affordably a state can make the cuts. In other words, states that are able to more cost-effectively reduce pollution will be required to cut more of it.

“I fully acknowledge that the proportional-reduction approach will demand some complicated computations where one upwind state is linked to multiple downwind states and vice versa,” Justice Scalia wrote.

“I am confident, however, that E.P.A.’s skilled number-crunchers can adhere to the statute’s quantitative (rather than efficiency) mandate by crafting quantitative solutions. Indeed, those calculations can be performed at the desk, whereas the ‘from each according to its ability’ approach requires the unwieldy field examination of many pollution-producing sources with many sorts of equipment,” he said, paraphrasing Karl Marx.

via www.nytimes.com

Economic incentive based policy, such as a carbon tax, can be used to cut pollution in proportion to how much is produced and is cost-effective (here is some background). With a carbon tax lower cost polluters end up cutting more pollution and the overall cost falls. Equating the efficiency properties of incentive-based policy with Marx is odd.

Here is Rachel Cleetus' reaction:

Today’s Supreme Court ruling reinstating limits on sulfur dioxide (SO₂) and nitrogen oxides (NOx) from coal-fired power plants, as required by the Cross State Air Pollution Rule (CSAPR), is a significant victory for our public health. The 6-2 decision makes clear that CSAPR’s provisions fully conform with the Clean Air Act and should be implemented as directed. ...

In 2011 EPA estimated that, by 2014, the rule would prevent an estimated 13,000 to 34,000 premature deaths and 400,000 cases of aggravated asthma, providing $120 to $280 billion in annual health and environmental benefits. These benefits would be achieved at annual costs of $800 million due to the rule.

Who knew acid rain was so toxic?

As predicted here, just when Mark Trail is patting himself on the back about how great his life is something terrible happens. He got a flat tire on a cliff, a bear attacked him and he plunged down a waterfall into a pool of acid rain causing his face to melt off his skull:

Source: http://comicskingdom.com/mark-trail/2014-04-25

Somehow the amazing bear following him down to the water and continued the chase. With a hurt shoulder I don't give Mark Trail much chance. I give it a few more weeks before he is eaten and buried in the Lost Forest. What comic, other than Funky Winkerbean, should I start reading then?

I'm an anachronism

Robert A. Munchen at r4stats.com:

Learning to use a data analysis tool well takes significant effort, so people tend to continue using the tool they learned in college for much of their careers. As a result, the software used by professors and their students is likely to predict what the next generation of analysts will use for years to come. I track this trend, and many others, in my article The Popularity of Data Analysis Software. In the latest update (4/13/2012) I forecast that, if current trends continued, the use of the R software would exceed that of SAS for scholarly applications in 2015. That was based on the data shown in Figure 7a, which I repeat here:

via r4stats.com

I had a discussion over beers about this sort of thing after the SEP meeting on Monday. I have no idea what R is (or MATLAB before that); I thought that I was out of touch because I didn't use Stata! I still use SAS for data management and pretesting and then transfer the data to Limdep/Nlogit for finalizing the models (I teach SPSS for undergraduates in senior seminar ... and the next time I teach business stats, maybe). It is surprising that Limdep/Nlogit isn't even mentioned amongst the 25 or so softwares described in the article. Is it that much of a niche product?

Hat tip: Newmark's Door

Just playing with some numbers

Where I was Monday:

April 28, 2014: Socioeconomic Panel of the SSC

Meeting Location: Crowne Plaza, 4831 Tanger Outlet Boulevard, North Charleston, SC 29418. Phone (843) 744-4422, or (877) 747-7301.

Briefing Book Materials (revised 4/11)

Webinar Registration: 

• April 28, 12:00-4:00PM

via www.safmc.net

Did you miss the webinar? Dang!

From the transcripted minutes of the October 2012 meeting, here is my favorite Whitehead contribution:

Just playing with some numbers; I chose ten random numbers between 1,000 and 5,000. The simple average is about 2,900. Applying Boyles’ Law to these numbers gives me about 3,400, so it is about 450 greater than the simple average. Then applying a trend line gives me about 941 greater than the simple average. This doesn’t prove anything; it just shows that there are at least three straightforward ways of coming up with a number, and they give very different numbers. I don’t know which one is better. In terms of forecasting I think the trend line is better, but who knows?

Boyle's Law is an ad-hoc formula for determining allocations of quota between commercial and recreational sectors. The Socioeconomic Panel concluded that determining sector allocations by Boyle's Law would be less preferred relative to determining these by economic efficiency (either intersector trading or crossing marginal valuation curves). Boyle's Law is currently being used to determine allocations, but it is now called the Bowtie Rule, I think. 

I can at least say I practiced what I preach

I'm sure I have incomplete information, so some of my sarcasm here might be unwarranted.  But that's not going to stop me!  From the Chronicle of Higher Education:

Tension at Brown University over how Ph.D. students in the humanities and social sciences are financed in the later years of their programs fueled a series of protests on the campus last week, and administrators scrambled to secure money for students who were uncertain about how they would pay for their next year.

Get a job?

Doctoral students at Brown are guaranteed five years of tuition, health insurance, and a stipend starting at about $25,000 a year for living expenses. Starting in 2011, Brown began to require doctoral students in social-sciences and humanities fields to apply for continued support after their fifth year.

GASP!

Many such students were notified this month that they had been put on a waiting list for funds. The move especially worried international students, many of whom were pressed against a deadline that could have forced them to leave the country if they didn’t secure enough money.

Although as a department chair, I do like the model of centralized university funding for graduate students.  Takes a lot of hassle off the departments.  And really, I'm all about minimizing hassle.

The concerns raised during the rallies at Brown highlight the uncertainties that Ph.D. students late in their programs often face as they struggle to keep up funds for projects in which they’ve invested years of their lives.

Just so I have this straight.  The University has paid you for four years to pursue an education and research project of your own choosing.  You have failed to complete the project in a timely manner and are now upset that the University won't pay you to keep not performing?

Such worries could intensify as graduate-school budgets get tighter and universities seek ways to shorten the time to a doctorate.

This is a common theme in almost all graduate programs with which I have experience.  How do we get PhD students to finish faster?  If we guarantee students continued funding regardless of progress, guess what happens?  Students stick around longer.  If we shorten the guaranteed funding window, guess what happens?  Time to graduation shrinks.  But does quality suffer?  I can't generalize, but in my experience, time to completion and quality of dissertation are at best uncorrelated and at worst, inversely correlated.  Good students have good ideas and good motivation to get the hell out and get real jobs (making more than $25,000 a year).  Students who are happy with $25,000 stick around. 

And before you think I am getting all high and mighty...

The protesters at last week’s rallies voiced the concerns that the generation of professors and administrators now trying to shorten the time to a Ph.D. did not themselves practice what they preach.

...I finished my PhD in 4 years. 

Why? 

Because I am brilliant of course!

Not really.

Because my funding dried up!

It's amazing what happens to motivation when someone tells you you have no more money.

In my time at OSU, our department has shortened the average time to PhD completion from 6-ish years to 5-ish years.  How?  By telling students they are expected to complete in 4-ish years (and funding is unlikely after 4 years). 

Incentives improve motivation. 

And they reduce costs.

I love efficiency.

 

 

Hello there Mr. Freebie

From the inbox:

Water Resources and Economics was launched along with three other new interdisciplinary Water Resources journals in 2013. The journal has already proved to be a welcome addition to the academic community, publishing research that addresses the financial and economic dimensions affecting the use of water resources on an international scale. To mark a first successful year for the journal, we invite you to read the Top 10 Downloaded Papers of 2013 for free online until 25th June 2014. This includes the top downloaded paper from 2013: Water use restrictions or wastewater recycling? A Canadian willingness to pay study for reclaimed wastewater Diane P. Dupont Visit the journal homepage to access the articles, or to discover how to submit your own paper to this journal.

Double-dividend

Adele Morris at Tax Vox:

The U.S. Environmental Protection Agency (EPA) is developing a proposed rule due out in June that could allow states to use carbon excise taxes or fees to limit the one-third of U.S. greenhouse gas emissions that come from power plants. The tax approach, one of several options EPA could offer states, could provide an important test for price-based limits on climate-changing activities.

A national price on carbon currently has little traction in Washington, but EPA’s power plant rule could open the door for a straightforward state-based tax. EPA just needs to set a minimum tax trajectory that any state could adopt. Here are some potential benefits to such a system ...

Here are two of the 10+ reasons why this would be a good idea:

1. A carbon fee discourages each fuel’s use in exact proportion to its damage to the climate. This changes the relative prices of different fuels and encourages all pollution reductions that cost less than the tax. EPA can set a tax that reflects the Administration’s estimates of the damages of the pollution.
2. States could use the revenue however they wish. For instance, they could lower inefficient taxes, potentially providing pro-growth state tax reform along with environmental benefits.

But we still get to keep Google Scholar, right?

Source: http://xkcd.com/1361/

 

Help us get to #289,552

John and my latest page turner: Environmental and Natural Resource Economics: An Encyclopedia is currently #289,553 on Amazon's bestseller list.  For $84.55 and free shipping, you can help our rapid ascent into the upper eschelon of dorkitude.

And you can get breathtaking prose like this:

Under shadow of the 2010 Deepwater Horizon Oil Spill in the Gulf of Mexico, in an Op-Ed in the New York Times marking the 40^th anniversary of Earth Day, Nobel Prize winning economist Paul Krugman referenced the 1969 Cuyahoga River fire and the subsequent publicity as a signature event in the founding of the U.S. environmental movement, Earth Day, the establishment of the Environmental Protection Agency, the passage of the landmark 1970 amendments to the Clean Air Act and perhaps most significantly, the passage of the 1972 Clean Water Act (CWA). 

If that doesn't make you want to buy a copy, well, I'm really at a loss.

Update (4/25/2014): Amazon Best Sellers Rank: #192,375 in Books