Weakonomi¢s » environment

What To Hope For Next Year

The Weakonomist — Thu, 22 Dec 2011 15:13:04 +0000

A peaceful resolution to the Euro crisis: As of right now this is the biggest issue facing the developed world. As scary as this crisis might be, we’ve come a long way since WWII.

Enough turnover in Congress to make them more able to enable legislation: At this point I don’t really care which party controls the legislature, because there’s such a small chance of Obama actually loosing next year. A prevailing idea over the last year has been that the economy is waiting on stability in Congress. I didn’t think that was the case earlier in the year, but I’m buying into it. If the GOP takes over it would be interesting to see if they actually passed the legislation they talk about.

Presidential campaigns that make it hard to pick who one should vote for: Even though Obama will likely win, I want a candidate that will keep it close and make me really think about who I’m voting for. This will bring both candidates to the center.

An increase in interest rates (though not due to a credit downgrade): Low interest rates haven’t spurred the economy. Rates need to go up before banks can even make money again on interest rate spread, much less make it worth the risk. However we don’t want rates to increase simply because the US credit rating gets downgraded again, which is a risk.

No collegiate scandals: There is nothing sadder than when a university is given a lashing for the behavior of someone who should know better. Even sadder is when it’s all due to sports. It would be great to think most of the scandals have fleshed themselves out so we can get back to being proud of our schools.

Stable energy price: Nothing could derail a recovery faster.

A new world changing product from Apple: Love them or hate them, but they keep pushing the industry forward unlike any other.

Decline of social issues in policy discussions: At worst these issues should be settled in the states. At best, social issues don’t have a place in government. Most ideas identified as “progressive” will eventually happen. I can’t wait to get a tax deduction for my sister-wives.

China’s continued growth: There is a worry of a real estate bubble in China. Hopefully that is not the case as China’s economy has helped hold the world together. We will continue to need this. Besides, as China’s economy improves wages increase and manufacturers are more likely to make their goods closer to home.

Some (macro) economist gets proven wrong: This is so hard to do, but everyone would just love it. Doesn’t matter who.

250,000 new jobs per month: This is the magic number we really need to decrease the unemployment rate at the same time people return to the workforce. Anything less is simply “better than job losses”.

Once again I defer to you, what do you hope for next year?

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A Look At Our Energy Situation In 30 Years

The Weakonomist — Fri, 16 Dec 2011 16:01:34 +0000

The following charts come from research by Exxon. They paint the picture of where we’re headed in terms of energy use and consumption in 2040. For the most part, things seem to look pretty good. But the caveat is the research could be biased given the source. I doubt very much that is the case, but it should be noted. On to the highlights:

It’s clear where we’re going to see growth over the next few decades. Welcome Africa to the world stage.

Meanwhile the US will make huge strides in reducing energy consumption per person. But it’s also obvious why global green policies are kind of meaningless without the US being involved.

Not surprisingly then the US will lag the world in the fuel economy of vehicles. We like our big cars and despite a more than two-fold increase in fuel efficiency we’ll still lag the world.

But there is an observable gain in the use of electricity for transportation. That’s saying plug-in hybrids and electric cars may make a meaningful dent over the next generation. Usage of coal for electricity will level off and while renewable energy will have made progress, it will still be a small fraction of electricity production.

Electricity doesn’t represent all energy demand. On the whole, oil usage will rise. Naural gas is getting very popular and is cleaner than oil and coal. This is expected to help bridge the gap to renewable. Nuclear will not increase enough to make a big dent. People are still a little afraid of that source.

And of course the reason for the popularity of fossil fuels is and will remain, cost. This last chart does a good job of showing the cost of various sources of energy, and includes what that cost would look like with a carbon tax.

Exxon’s report makes for interesting reading. If you like charts and pretty colors you can get a good idea of everything in 10 minutes of skimming. Exxon isn’t the only organization to do these kinds of projections but it’s good to see the world how corporations see it. I think many would expect and hope for more accelerated use of reneweables and cars that draw power from the grid. Exxon doesn’t benefit by under-reporting those numbers because it will just inspire people to get more active. Check out the entire report here.

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Wasteful Government Spending: Wasteful Conversation

The Weakonomist — Mon, 12 Dec 2011 15:15:52 +0000

There is no shortage of examples out there of government waste. Fiscal conservatives believe that government, especially the federal government, just gets in the way. In some cases, this is very true.

When governments fund programs or initiatives, they often come with a number of strings attached. This is likely a result of paranoia over wasting taxpayer moneys. And short of breaking any laws, one of the worst things that can happen to an incumbent at any level of government is to be in charge of something that ends up being a huge waste of money.

Sometimes though government does a lot of good. Again, there are no shortage of examples for the good things that come out of government and government funded projects. If you’re having trouble thinking of stuff, go check out NASA, the National Science Foundation, the Smithsonian, any public university (or private one using govt grants), etc… For every example of bad and wasteful government programs, there’s an example of a good one.

Below is an example of the former.

A study of Indiana road building had interesting, though not surprising results. It’s the closest example yet of being able to compare road construction holding all factors constant, except for the funding. So the roads were in the same area, built by the same contractor, had the same standards, etc. But one used federal funds while the other used local ones. The local project cost about $1mm per mile. The federal one – almost 3 times as much. Part of this is due to all the strings that come attached to federal money. Legitimate strings or not, the road cost a lot more and the locally funded road is still projected to last longer and be of better quality than the federal one.

This kind of study will give any small government supporter all the fodder they need to make their case for small government through the next election cycle. But should it?

Does this example look bad? Of course. It seems very wasteful and the local money road looks to be the clear winner. But that doesn’t mean there is a direct translation of all big government funding acting this way. In many circumstances the strings attached come down to fair wages, environmental protection, and other likely liberal benefits. While the road may cost more, the impact on the surrounding area may be greater. That was not a part of the study.

And even if this is truly a perfect example of big government getting in the way, it shouldn’t translate back to all big government money being wasteful. It’s like saying a hospital sucks for having to charge higher prices for being extra clean and overly safe. It may be worth the cost.

Examples of wasteful spending should be treated on a case by case basis. The goal should be to make government more efficient. Both sides of the political spectrum benefit from efficiency. Sadly though, we all know what is more likely to happen. The right will accuse the left of supporting big government and wasting taxpayer dollars, the left will accuse the right of being in the pocket of corporations and not supporting fair wages and environment protection.

As wasteful as this road program may seem, the most wasteful thing coming out of it will be the political conversations that come from it.

Read: Limited mileage when feds spend

Image: Nicholas T

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A Case Against The Consumption Tax

The Weakonomist — Fri, 09 Dec 2011 14:39:04 +0000

“Call it a consumption tax, a luxury tax, or whatever. The name doesn’t matter. It’s a tax on buying more than you actually need. Taxing for the sake of taxing is bad, but taxing items with externalities on the surrounding world may not be a bad idea. The best example of this, especially in the US, are cars.”

That’s what I said yesterday when I made the case for a consumption-like tax. Basically, when someone buys a big, gas hogging vehicle, everyone suffers as a result. Gas is more expensive due to inflated demand, everyone has to buy more expensive cars with required safety features to handle a hit from the big cars, and they take up more space in parking lots and freeways. Should this be taxed? Yesterday I explained why it should, today I’ll take a different approach. Primarily…

There already are taxes on all these things. A new consumption tax would be redundant. Let’s start with gas. At the federal and state level gas is already taxed. More fuel efficient cars pay less of this tax, subsidized by the gas hogs. A car that gets 30mpg compared to one that gets 15mpg pays half the taxes for each mile driven. And the ultimate gas hogs are charged a Gas Guzzler Tax*.

Other taxes impact larger and more expensive vehicles too. Though regulations are set by local governments, I would posit that most everyone pays a yearly tax based on some kind of value for the vehicle; it’s a property tax. If you have a car worth $50k you’re going to pay a lot more in taxes than a car worth $15k. This revenue could (directly or indirectly) offset the damage done to streets and subsidize parking lots for cars that pay lesser taxes. In generic economic theory, it wouldn’t have to directly go to road funding.

But what about those bigger cars making roads more dangerous for everyone? Once again you have to look at the flow of funds. Bigger and more expensive cars have more profit built into them. Most manufacturers make small cars too, with slimmer margins. The more expensive cars subsidize the R&D needed to make a safer small car. And the increase in safety needed to deal with the impact of a larger vehicle may not be all that significant. Other factors, such as speed and shape of the vehicle may be more important in an impact.

Besides, by people buying more than they need they subsidize the price for those that need it. Trucks would be so much more expensive if only businesses that needed them bought them. The people that buy trucks for commuting subsidize the price for others.

____

So that’s the case against the tax. Which side am I on? Since I’m not an elected official I can safely say I’m somewhere in the middle. It doesn’t really matter what side I’m on. But there is one clarifying point about consumption taxes I’d like to make.

Most people that support such taxes wouldn’t disagree with anything I said above. And most people against it would make the argument above I just did. Where’s the argument?

Aside from the Gas Guzzler Tax (which SUVs and trucks are exempt from), all the taxes are essentially linear. Everyone pays the same rate. So a richer person can easily afford the tax they are paying. A real consumption tax would be progressive. A good example of such a tax would be a property tax based on EPA fuel economy estimates. If your cars gets 30MPG the rate might be 1%, one that gets 15mpg might pay 2%, which is twice as much regardless of the value of the vehicle.

Only taxes like that really drive behavior that is better for everyone. That would push people into smaller and more fuel efficient cars. It’s something about making taxes exponentially more expensive that actually drives behavior.

Whether such taxes are good policy or effective in reality are unknowns to this author. We’d have to see real numbers on whether the existing taxes really offset the increased damage caused, and if a consumption tax would change the behavior. Also keep in mind that I used cars as an example, and every idea may not translate to other goods. I imagine a consumption tax would have different levels of effectiveness on other products.

*It’s a bit crazy, but the MPG ratings used to charge the gas guzzler tax haven’t changed since 1991. Probably time to update those and make them a bit more strict.

Image: KayOne73 (this is a BMW M5 from 2000, aside from being my dream car it is a guzzler. Gas guzzler taxes are only paid once, at initial purchase. Buying used gets you around it)

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A Case For A Consumption Tax

The Weakonomist — Thu, 08 Dec 2011 14:45:28 +0000

Call it a consumption tax, a luxury tax, or whatever. The name doesn’t matter. It’s a tax on buying more than you actually need. Taxing for the sake of taxing is bad, but taxing items with externalities on the surrounding world may not be a bad idea. The best example of this, especially in the US, are cars.

Most everyone buys more car than they need. Insecure boys buy big trucks and image conscious women still go for the big SUV. The libertarian side of me says it’s fine that people want to buy these things. Let them waste their money on buying more vehicle than they need. How am I actually hurt?

Well, a big car can really hurt you in a number of ways. Let’s start with physically. If you were to get in a car wreck, would you rather be hit by someone in a Lotus Elise which weighs less than 2000 lbs or someone in a Range Rover tipping the scales at over 6000 lbs, a weight so huge it qualifies for a business tax deduction? If every car weighed just 2000 lbs we wouldn’t need half of the saftey equipment we do have, which makes cars more expensive and heavier. But since cars all have to be able to survive crashes of a typical vehicle, overweight cars and too big trucks make ever car more expensive just by existing.

Don’t forget about the general size of many vehicles. Traffic congestion is a big problem in many cities, imagine how much better traffic might be if all those big cars were a foot or two shorter. You’re talking about hundreds of cars in increased capacity on a typical freeway in the morning commute. And of course half of these people can’t park to save their lives either. So they take of precious space by crossing over lines or make everyone in a parking deck take longer to get parked while they back up and adjust 4 or 5 times.

And it’s not just limited to big cars. Both big cars and performance cars are gas hogs. By using more fuel than is necessary to sit at a light or go 65mph down the highway you cause more problems for the rest of us. You have to go to the gas pump more. Increased demand increases price pressure on oil and gas. It wouldn’t be hard to imagine gas being at least a little bit cheaper if the gas hogs out there weren’t sucking down extra dinosaur juice.

That’s where the consumption tax comes in. It taxes people on anything they consumer over and above what is necessary. But of course how does one define necessary? For my transportation needs a motorcycle would probably work, but I prefer a sedan. Maybe the middle ground would be a subcompact car that got 40mpg while still seating 5 people (theoretically). Should the government really be regulating something like that though? Who is the government to set such rules?

Are we doomed then to live in a world of externalities? Well, yes. But does that mean we should have to deal with the 110lb soccer mom with the 8 passenger SUV about to run into us on the highway without her paying some kind of penalty for all the hell she puts us through? Perhaps the answer is out there.

Image: The Car Spy

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Eat Local – Destroy The World

The Weakonomist — Tue, 06 Dec 2011 15:47:31 +0000

Local honey is one of the tastiest things in the world. Maybe I just like the flowers near my home, maybe because when I was a kid it helped with my allergies, maybe I’ve been an eat local enthusiast all my life. Okay, maybe not the last one. But I love local honey.

It’s not because the truck that delivered the honey to my local farmer’s market used less fuel than the Walmart truck that drives across the country and is better for the environment, because that may not be true. Allow me to do my part to kill the eat local movement.

Eating local seems like a good idea and is a good marketing ploy for people that are into that sort of thing, but if you really want to see the country or the world switch to local food sourcing prepare for a few things: food shortages, even more expensive produce, 100% obesity for those below the poverty line.

Why? Commercial farming is one of the greatest innovations in the last 200 years. It’s literally right up there with landing on the moon. Commercial farming has enabled the growth of the world’s population, and only innovations in the commercial space will continue to support that growth. As much as it sickens you to think of trains full of potatoes from Idaho headed to the southeast, it’s much more efficient (economically and environmentally) to do this than have local farmers growing potatoes and shipping them in the back of pickup trucks to your local market.

And New-Englanders, forget about ever eating citrus again. Enjoy scurvy. Of course the Idahoans will have to get by without blueberries and cranberries. Even if any of that could be grown locally it wouldn’t last long and would be so pricy only the 1% could afford it. Like chocolate to 16th century Europe. You know what will be cheap? Corn syrup and foods packed with so many preservatives it could actually prolong your life.

The thing with agriculture is all about yield: how much food can you get out of a square foot of land. Land is not infinite, and local farming is wasteful in this sense. As nice as it would be if the world population would actually decline, that’s not happening, so we need more food. Instead of wasting energy on the local food movement, we should be pushing forward to the innovations that will allow farms to be built up. Yes, up. Imagine growing a food that needs sunlight 10 feet above food that doesn’t. It’s called vertical farming, and it will have to happen if the population keeps growing.

Sustainable farming is all well in good, that actually increases yield over time. But that’s different than eating local. If my grocery store has local apples or something I’ll surely pick them up, especially when the only other option is an organic apple that was shipped from another part of the world. Local farming has it’s place, and that’s all well in good, but it’s not sustainable for the masses.

I’ll take my food varieties by the cornucopia please. Ship my beloved pears from wherever, and get those bananas from wherever you get them because at dimes on the pound I can’t get enough. And I’ll support commercial farming because it’s the only way to keep produce as cheap as it is. Don’t worry about believing me, I’m not credible. But the guys below are.

Read: The Inefficiency of Local Food (Freakonomics)

Image: Andrew Stawarz (ps, I want that last name)

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Green Turds

The Weakonomist — Wed, 26 Oct 2011 14:48:26 +0000

Obama had it made this spring. Winning the reelection was going to be a breeze. The economy was in (a slow) recovery, Bin Laden was dead, and Republicans were showing themselves to be no more useful than Democrats at running a chamber of Congress.

But the tides have turned lately. The economy weakened, Obama didn’t ride the Bin Laden train, and the GOP is in an attack mode they’ve been planning for a couple of years.

Steadily creeping into the national media have been a series of failures by Obama’s administration to enact a decent liberal agenda on energy policy. The most famous failure was Solyndra. But there have been issues enacting all kinds of rules from fuel economy mandates to weatherizing homes. The homes weatherization is particularly interesting as a case study since it shows what can happen when states are given additional power (read: money).

This has given opponents of the green economy tons of carbon based fuel, but it probably shouldn’t. Getting to “green” is hard work. Not only is there resistance from the establishment, but it is kind of like trying to reinvent the wheel because we’re out of rubber. There are going to be failures along the way. Failures in businesses that get government money, failures of stimulus funding to work as advertised, and failures of people not knowing what they’re doing.

Most of these failures are preventable. But the cost of preventing every failure is often too high and so it’s worth the risk. For example, if I’m an investor and am considering an investment of $10 million in a company, I’m not going to spend $20 million trying to figure out if it’s a good investment. The CEO of the company may be an idiot, but I can’t determine that by the limited funds I can commit to due diligence. I have to take a chance.

But there are failures that are preventable, and cheap. In many environments when an organization fails the organization sacrifices the leader to move on. Coaches get fired, CEOs get thrown under a bus, and nerds in government go back to their posts in academia. Enter Steven Chu, the nerd in charge of the Department of Energy. By all measures, he is a brilliant guy, so are all the people in his family actually. Among a group of high achievers, Chu barely stands out from his family, and he has a Nobel Prize and his boss is the President.

But Chu may have bitten off more than he could… eat when he took the post at the DoE. As a proponent of environmental causes, I could see why Obama wanted him in the top post of the DoE. But great players don’t always make great coaches. It takes more than a mere doctorate (his 2 brothers both have two: PhD/MD; PhD/JD) to run an organization of more than 100k people though. And running the physics department at school doesn’t really give someone the requisite experience. It takes leadership, managerial skills, and an understanding that not everyone you work with is really that smart.

Chu wasn’t built to run the DoE. It’s likely that he is a figurehead of the organization, but if Obama wants a green economy, he needs a manager running the show in the DC offices. A good manager doesn’t need to be an accomplished expert in the field. The traits of a good manager are actually quite universal and transferable. Chu was built to be a consultant to the manager in charge of the Department of Energy, and that’s where he should have been put. Should it be off with his head? Figuratively, yes.

If Obama wants to be reelected he needs to acknowledge mistakes like putting the wrong people in the wrong jobs. He needs to be up front and say that his ideas may have been right, but the execution has been poor. This is across the board from building roads to modifying mortgages. Would Solyndra still have happened? Probably. But would the GOP have so much green fodder for the upcoming campaign? No.

Image: Unhindered by Talent

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Why Aren’t There Urinals In Houses?

The Weakonomist — Fri, 26 Aug 2011 14:55:39 +0000

Boys, everywhere you go you use a urinal to tinkle. I counted yesterday and I used a urinal twice as often as I use a toilet. And it’s only at home when I don’t have access to one. Why is that?

Urinals use a lot less water than toilets, and most people don’t subscribe to the “if it’s yellow let it mellow” phenomenon so we aren’t getting any water conservation that way. And ladies, if you don’t know, they make urinals that don’t use any water now too.

They don’t require too much plumbing, and tons of houses have bidets that so why not have a urinal too? Well some do, but most don’t. It’s about time we get some urinals in the house, but I doubt we’ll ever see it. So I set out to find out why there aren’t.

No website seemed to have a simple consensus, most just do the simple speculation of cost. It’s not cost effective for a builder to put one in or there isn’t enough space. I concede both points but plenty of bathrooms are big enough and the extra cost is minimal. Anyways, builders put them in buildings all the time. The difference of course is that public buildings have separated men’s and women’s restroom whereas private residences have unisex bathrooms. In order to get urinals then, we need a simple solution.

If you live in a household where more than one gender lives and more than one bathroom exists, there is a simple reality: the boys use one bathroom and the girls use another. Sure there’s sharing, maybe amongst kids or spouses, but I’d bet when it’s possible the bathrooms are broken up by gender. So the logical progression to get urinals in the house is the have a separate bathroom for men and women.

This already makes sense. Men and women already prefer separate rooms. Women want to hid the fact that they do indeed have solid waste they must release to gravity’s pull, and men don’t want to clean their thrones nearly as often. We need more houses with men’s and women’s restrooms. If not officially, at least unofficially. If you have a party, this will immediately become important especially if you serve bean dip. Our society still doesn’t like to cross streams with strangers or even acquaintances, so I say we embrace it. We all win. Both genders get dedicated separate bathrooms and since women will rarely go in the men’s room there’s no rush to keep it as clean as a hospital.

Let’s build houses with urinals and install them in existing homes, they’ll be used and save tons of water. Get the government to subsidize it, it’s a good stimulus that I’m sure could get you a green tax credit of some kind. Yes, it may take an act of Congress, but I want my urinal.

Who’s with me?

Photo: GlennFleishman

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Living Green

The Weakonomist — Fri, 08 Jul 2011 14:35:51 +0000

For almost a decade, it’s been increasingly popular to embrace efficiency in our daily lives. We bought compact fluorescent bulbs, the government mandates increased fuel efficiency in cars, and new office buildings go up every day that use less energy and resources. Nowadays we’re all buying hybrids and car companies brag about fuel economy. But true green living is not about subtle changes to normal life, but changing the way we live life.

Take me. I live within walking distance of work. My neighborhood actually has everything I need within walking distance, even a movie theater and bowling. If challenged I could easily spend months living in this one area and never once get in a car. I also share a small amount of space with The Sheconomist so our carbon footprint is actually quite small. That’s green.

What’s the difference between us and many others? Not much other than choices. We didn’t choose our apartment to be green, we chose it out of convenience and value for money. But we are living quite greenly these days. If more people lived like us the carbon footprint of the world would shrink significantly.

So why don’t other people? Because they need more space, or they want a yard, or living close to work is just plain too expensive. So they live in McMansions and commute 20-45 minutes one way which doesn’t include the energy suck of dropping kids off in school in another district because their local one sucks.

People don’t live greenly because they have no incentive to. One major reason is the still very low cost of fuel. But the real reason isn’t an enabling cost of energy, but inhibiting costs elsewhere. People might want to live close to work, but the cost of real estate or rent might be too high. Or taxes even. Part of that is because urban areas are filled lower income housing so demand for proper housing is high. People may want to be closer to work or their social lives but they just can’t afford it compared to the McMansions.

Outside of the city they can get a half acre and 3000 square feet for the same price as a 1500 square feet in the city. If the government really wants us to use less energy, they need to give us incentives to downsize and move closer to work. Part of that comes from improving schools to the point that people are indifferent about zoning. Part of is could come from a tax incentive based on square footage, much like a tax penalty on cars for having poor mileage.

This might sound silly, but Americans already use a lot more energy per person than most other parts of the world. Much of that is due to us enjoying open spaces and all that. So we need to be given a reason to put that behind us. What will come of this? Nothing of course. And odds are that my wife and I will tire of this lifestyle and go in search of our own house out in the hills.

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The Crude Emergency Fund

The Weakonomist — Mon, 27 Jun 2011 14:32:18 +0000

You’re probably on top of your game when it comes to personal finance. You know all the basics and either have a cash hoard for rainy days or are working on one. Most people, and businesses for that matter, do too. So do governments, except one. That’s the federal government which (excluding current battles) can print money and therefore doesn’t need to have extra cash on the side.

But cash is only good if you can buy something with it. And one of the most important things we buy is gas. Since we don’t produce much oil (at least not enough to support our demand) we have to import a large portion of it from other countries like Canada and the OPEC nations. Sometimes that supply gets disrupted. If there is a significant disruption that can cause all kinds of hell all over the world.

So in the 1970s the government set up what is called the Strategic Petroleum Reserve (SPR). Today we have a stockpile of 727 million barrels which would last us about a month. Yes, we burn through that much oil.

But we would never suspect that we would have our entire supply cut off at once, so if a permanent draw down on the reserve was necessary it would probably last us longer. Not unlike collecting unemployment while drawing down your savings.

So when do we actually use this stuff? When there is a sustained supply disruption. This has happened with the wars in Libya. Libyan oil is of a variety that is highly desirable because it’s cheap to refine into gas. We don’t use Libyan oil but many European countries do. When that source dries up they look for other source of the good stuff hence the supply disruption of Libyan like oil in the US.

In what Republicans call a political move, the Obama Administration has agreed to release some 30 million barrels of oil from the SPR. I would only call this a political move if they oil was released when prices were at their peak well into the 100s (something many people wanted). But instead it was released in the lower 90s. Many other countries are also doing a coordinated release at the same time. This has had the short term effect of lowering prices of oil with gas soon to follow. The Administration also says the release is in line with summer demand for gas.

Some argue this isn’t a real emergency and I can’t disagree. But this is a small release because the supply disruption is small. The overall increase in oil in my opinion is not based on the supply disruptions, but that’s not exactly a qualified opinion.

If you want to learn more about the Strategic Petrolium Reserve the government website is here and I’d recommend the history section of the Wikipedia page on it. Also, CS Monitor has a good article on the oil release and the political games being played around it.

Image: DOE

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