Environmental Economics

Thursday Beer Post: Env-Econer Turns 60!

Happy 60th Birthday to Env-Econ co-founder John. Let's all raise a cold one to the brains behind this operation (before he forgets who we are). 

The End of a Free Ride

Two economists walk into an AERE happy hour in New Orleans.

One says, “Hey, are you and Economist 3 done providing that awesome public good?”

Two says, “Ya know, we’ve been thinking about providing it again!”

One says, “DO IT! It’s so useful to the world! I love free riding!”

Two sips beer. One sips beer.

Days pass, then… the provision of the public good begins again! Economist One is excited and tweets:

Then… Economist Two pounces:

…damn. 

I am Justin Roush, Assistant Professor of Economics at Xavier University, and I am no longer a free rider. Husband, dad of two wrecking balls (two boys), enjoyer of craft beer, triathlete. I research firm pollution. I enjoy thinking about emissions policy and have a growing interest in environmental nudges (I also research behavioral economics). My employer puts a great deal of value on teaching, so I publish in pedagogical outlets as well.

I’ll be dropping in from time to time to contribute. Thanks John and Tim for taxing me for the use of this public good inviting me to write!

Does this mean we'll have to start posting Thursday Beer Posts?

Friday Beer Posts have been a long and inconsistent tradition at Env-Econ. Right now I'm in Maryland for a quick visit with family and I saw this story:

A new Maryland House bill proposes to say goodbye to ‘Happy Friday’ as the traditional end of the week with a four-day workweek instead. The bill had its first reading in the House of Delegates this week.

Workers in Maryland we might soon say ‘Happy Thursday’ instead as the General Assembly takes a look at the Four–Day Workweek Act of 2023

Sounds like a plan to me. Time for Thursday Happy Hour.

Friday Beer Post: The best reason yet to oppose a trade war (and there are a lot of reasons)

This is appalling!

I'm aghast!

I need a beer.

Around this time last year, the Beer Institute (BI), a national trade association representing the American brewing industry, warned that President Donald Trump’s aluminum and steel tariffs would cost the beer industry $347 million annually and potentially lead to the loss of 20,000 jobs.

Well, as it turns out, the BI’s worst fears are coming true.

The Washington, D.C., lobbying group tapped Austin, Texas-based Harbor Aluminum — a research firm that specializes in the global aluminum industry – to study and estimate the cost of aluminum tariffs under section 232 of the Trade Expansion Act of 1962 since they were imposed on March 8, 2018.

According to the firm — which compiles, develops, and analyzes industry data and market intelligence for more than 300 companies across the aluminum supply chain — the U.S. beverage industry paid about $250 million for aluminum cansheet between March and December of last year.

During that same period, however, the United States Department of the Treasury collected just $50 million, while U.S. smelters and rolling mills pocketed the rest.

“We see beer as the crown jewel of American manufacturing,” BI president and CEO Jim McGreevy told CNBC last week. “This is really hurting us.”

Here’s the rub: The U.S. cansheet used to produce beverage cans contains 70 percent domestic scrap metal, which is exempt from tariffs. The other 30 percent comes from imported primary aluminum.

But according to the BI, domestic beverage manufacturers paid a tariff on 100 percent of the cansheet used to make beverage cans.

Harbor Aluminum estimates that U.S. rolling mills and smelters raked in $173 million and $27 million, respectively, over a 10-month period by charging end users a “tariff-paid price” on the entire aluminum cansheet used to make beverage containers.

In other words, rolling mills and smelters are effectively stealing from beverage manufacturers by overcharging for cansheet as if it was made entirely from imported primary aluminum.

“Brewers are paying a tariff price even on domestic aluminum,” McGreevy said via a press release. “I have heard from brewers large and small from across the country who are seeing their aluminum costs drastically increase, even when they are using American aluminum.”

Speaking to CNBC, McGreevy said many brewing companies have decided to absorb the increased costs of aluminum, while others have raised prices and passed it along to consumers.

“Any downstream user of aluminum is being affected by this increased tax,” he said. “Repeal, in our view, is the only way to go.”

In a conversation with Brewbound last March, Robert Budway, the president of the Can Manufacturers Institute (CMI), said President Trump’s 10 percent tariff on aluminum would add about 1 penny to the cost of every can. At that rate, a brewery making 10,000 barrels would be forced to pay an additional $20,000 annually.

Last June, MillerCoors CEO Gavin Hattersley said the tariffs would cost his company $40 million. And according to McGreevy, Minnesota’s Summit Brewing shelled out an extra $160,000 in 2018.

“This is affecting brewers of all sizes,” he told CNBC.

Approximately 60 percent of the beer produced and sold in the U.S. is packed in aluminum cans and bottles, the BI estimates.

In addition to the BI and the Brewers Association, the American Beverage Association and the CMI oppose tariffs on steel and aluminum.

AERE sessions at the SEA meetings are posted @AEREorg

There are 17 sessions with 5 papers each (no discussants), 3 student sessions (with discussants, organized by Elaine Frey) and 1 panel discussion (the last session so attendance will be lower than our usual "tips" session):

Tips for Students and Newish Economists

Moderator: Elaine F. Frey, California State University, Long Beach

Panelists:

• Jill L. Caviglia-Harris, Salisbury University, "Applying Design Concepts to Increase the Impact of your Presentations"
• Christopher F. Dumas, University of North Carolina - Wilmington, "Adding Logic and Proof Concepts to Your Intro Courses"
• Sarah Andrea Jacobson, Williams College, "Social Media but in a Way That's Kind of Useful"
• Will Wheeler, U.S. Environmental Protection Agency, "Writing Grants is a Skill: Tips for Success"
• John C. Whitehead, Appalachian State University, "Consulting on the Side"

Here is the link to all of the sessions: https://www.southerneconomic.org/current-year-program/?conferenceId=4&organizationId=2.

 

Thank you EU, I guess this means more cheap whiskey for me...oh, and there's an economic lesson in here too.

Don't take this as support for tariffs, my inner economist is strongly opposed to tariffs on economic efficiency grounds, but my inner hillbilly is slightly happy that an EU tariff on American whiskey is likely to lower U.S. whiskey prices (at least in the short run).  Life can't be all beer...

Jack Daniel’s Tennessee Whiskey prices will rise in the European Union (EU) due to the member countries’ new 25 percent tariff on imported U.S. whiskey.

Brown-Forman Corp. spokesman Phil Lynch told The Associated Press that the price of Jack Daniel’s in the EU will likely rise by about 10 percent, a change which will go into effect over the next couple of months.

For those not familiar with the economics of tariffs, when a tariff is placed on an imported good, the price of that good rises in the importing country.  So let's say for some odd reason, the President of the United States decides to place a tariff on all imported, oh, I don't know, let's say steel imported into the U.S.  (I know, that's far fetched, but go with me here).  The result of the price increase on imported steel is an increase in the price of ALL steel in the U.S.--steel we import, and steel we produce domestically.  The impact on the rest of the world is an increase in the supply of steel on the world market, causing prices for the rest of the world to fall. 

Who benefits?  Domestic steel manufacturers benefit from the tariff on imported steel, because they can now sell their U.S. produced steel at higher prices.  But that comes at an expense--U.S. consumers of steel lose because they have to pay more for steel.  But here's the kicker--the losses to U.S. consumers are GREATER than the gains to U.S. producers.

All of this of course ignores the effects on the rest of the world.  What happens there?  

The manufacturers in the tariffed country (the country producing the good being imported) will lose because they are forced to lower their prices to sell all of the stuff they used to export to the tariffing country.  So when the U.S. puts a tariff on imported steel, manufacturers of steel in the rest of the world are penalized...but consumers of steel in the rest of the world gain from lower priced steel.  But here's the second part of the kicker--the losses to steel manufacturers in the rest of the world are GREATER than the gains to consumers in the rest of the world.

That means that a 'hypothetical' tariff on an imported steel in the U.S. will benefit U.S. steel producers, and steel consumers in the rest of the world.   U.S. steel consumers and steel manufacturers in the rest of the world will take a loss.  And the total losses will ALWAYS be greater than the total gains.  

So I guess you could say that if the U.S. were to impose a tariff on imported steel, it would be a signal that the U.S. likes foreign consumers more than domestic consumers, likes domestic manufacturers more than foreign manufacturers, and likes creating economic losses.

But that's just hypothetical of course.  Let's get back to the more import issue at hand--whiskey.  

An EU tariff on imported U.S. whiskeys will raise whiskey prices to EU whiskey consumers, create an economic gain for EU whiskey producers, create an economic loss for U.S. whiskey producers (probably the whole point), and create an economic gain for U.S. whiskey consumers.

And the total losses will be GREATER than the total gains.

But who cares?

I get cheaper whiskey.

And that's all that matters.

Right?

     

Where I'll be this weekend ... [don't get excited, I'm not going to "America's top roots based music festival"]

From the website:

The Department of Economics and the Center for Economic Research & Policy Analysis at Appalachian State University will hold the 2018 Appalachian Experimental and Environmental Economics Workshop on April 27-28, 2018 at the BRAHM in Blowing Rock NC.  
 
This workshop is part of a regular series of workshops hosted by Appalachian State that brings together junior and senior scholars that use experimental methods (lab, field and survey) to study issues related to environmental and natural resource policy.

Here is the program: https://2018-exp-env-workshop.weebly.com/program.html. 

BTW, who scheduled this during MerleFest?

Call for papers: AERE @ the Southern Economic Association Annual Meetings

The Southern Economic Association Annual Meetings will be held November 18-20, 2018 in Washington, D.C.: https://www.southerneconomic.org/conference/

Submit your abstract for presentation in an AERE session at the 2018 SEA here: http://www.mymeetingsavvy.com/aere-sea/login.aspx

You will be asked to enter relevant author information and upload a pdf document with your paper's title, author names and an abstract of no more than 1,000 words. Authors may submit more than one abstract.

Abstracts are due March 15. Authors will be notified of paper acceptance by March 30. A draft AERE program will be available on April 15 when sessions are due to the SEA.

Please note that:

1. The presentation of research in AERE-sponsored sessions is a benefit AERE provides expressly for its members. Although membership is not required to submit an abstract for consideration, if your paper is accepted, you will be required to join AERE, or renew your membership, in order to be placed on the draft program on April 15.
2. Presenters are required by the SEA to register for the SEA meetings.

Correlation vs Causation Example of the Day

I was an assistant professor at East Carolina University from 1995-2000.  I have been on the faculty at Ohio State since 2000.  In 2017, they are the #2 and #4 party schools in the country. 

Coincidence?

AERE sessions at the Midwest Economics Association

via Lea-Rachel Kosnick:

Abstract submissions for the AERE sponsored sessions at the MEA meetings are due in just two weeks, onSeptember 1, 2017.  This year, we have a fancy new submission portal through the AERE website, so you don’t have to bother with remembering my personal email any longer. 

Submit your abstract here:  http://www.aere.org/aere-mea

Meeting Details:  The 2018 MEA meetings will be held in Evanston, Illinois, from March 23-March 25 and, as in years past, submission through an AERE organized session is free.  Additionally, if you participate in an AERE sponsored session you will be included in all planned AERE networking activities that will take place during the MEA meetings – last year this included not just a dinner, but a cocktail hour as well with drinks sponsored by AERE. 

Please consider submitting an abstract – we had such an amazing program last year, let’s do it again!  Should you have any questions, please feel free to contact me personally at [email protected].  Also, please pass along this email to any colleague you think would be interested.