Social Cost of Carbon | Bob Murphy
If burning fossil fuels produces large net externalities, the sensible way of taking account of them is to include those costs in the price of fuel and let individuals in a market society adjust to them. … [However], global warming on the scale suggested by the IPCC reports, about three degrees Centigrade and a foot or two of sea level rise over a century, is at least as likely to produce net positive effects as net negative, probably more likely. That might not be true if the trend was continued for several more centuries but, given how rapidly technological change is altering the world, I think any predictions more than a century out, probably any predictions even that far out, should be viewed with extreme skepticism.
If burning fossil fuels produces large net externalities, the sensible way of taking account of them is to include those costs in the price of fuel and let individuals in a market society adjust to them. …
[However], global warming on the scale suggested by the IPCC reports, about three degrees Centigrade and a foot or two of sea level rise over a century, is at least as likely to produce net positive effects as net negative, probably more likely. That might not be true if the trend was continued for several more centuries but, given how rapidly technological change is altering the world, I think any predictions more than a century out, probably any predictions even that far out, should be viewed with extreme skepticism.
When there is a profit incentive - either by farming Rhinos or by maintaining a tourist or hunting reserve - an endangered species becomes more secure. This is the same profit motive that kept the bee population strong enough to keep food costs low despite millions upon millions of wild bees dying a few years ago. Counter to the common narrative, private property conserves resources precisely because it becomes in the owners’ best interests to do so.
We find that the San Francisco County [plastic bag] ban is associated with a 46 percent increase in deaths from foodborne illnesses. This implies an increase of 5.5 annual deaths for the county.
"Grocery Bag Bans and Foodborne Illness" study by Jonathan Klick of University of Pennsylvania Law School and the Property and Environment Research Center and Joshua D. Wright of the George Mason University School of Law.
As Bastiat would note: there is the seen and the unseen.
Hey, look - a comic book villain who’s a neo-Malthusian Keynesian, professing the virtues of broken windows.
Federal policies promoting ethanol are inefficient at any time, but they are particularly harmful to consumers in the midst of a severe drought. The EPA’s schedule of minimum targets for ethanol in the nation’s fuel mix, has caused some 40 percent of the nation’s corn harvest to be used for feeding vehicles, not people. Our analysis here is straightforward economics: Paul Krugman himself publicly called for an end to government ethanol support, over a decade ago, when the pressure on food prices wasn’t nearly as intense and we echo his call today.
A recent report from “Connecting the Dots” (an investment publication distributed by Standard Research) shows the startling impact that federal ethanol mandates and subsidies have had on the agricultural sector. We reproduce (with permission) some of the most striking charts below:
Figure 2. Percentage of U.S. Acreage Devoted to Various Crops
As Figure 2 shows, the ethanol mandates (embedded in the Energy Acts of 2005 and 2007) had a significant impact on the decisions of American farmers. Because corn (destined for ethanol) absorbed a much larger fraction of the total acreage, it “crowded out” the farmland available for other crops. Thus, the ethanol mandate contributes to price spikes in wheat, soybeans, and other crops; this isn’t simply an issue of corn.
The effects don’t stop there. Because the price of corn is higher than it otherwise would be (since the mandate gives an artificial demand for corn-based ethanol), the price of cattle feed is driven higher, too. This puts pressure on cattle ranchers, which in turn causes spikes in the price of beef. A similar process occurs for poultry and swine. In short, the massive federal intervention in the corn market ends up rippling throughout the entire food sector.
To get a sense of the size of the distortions introduced into the agricultural markets, look at the value of Illinois farmland—deep in the Corn Belt—with the introduction of the ethanol mandate:
Figure 6. Index of Illinois Farmland Value
Notice that the general collapse of the real estate market didn’t pop the apparent bubble in Illinois farmland; it merely slowed its inflation. By forcing fuel refiners to use far more of a product (corn-based ethanol) than they otherwise would, the federal government gives artificial support to corn prices which in turn bid up farm values in the Corn Belt. As usual, government interventions in one area of the economy cause a cascade of distortions.
[I]f private individuals were to own all the lands and resources, then it would be to the owners’ interest to maximize the present value of each resource. Excessive depletion of the resource would lower its capital value on the market. Against the preservation of the capital value of the resource as a whole, the resource owner balances the income to be presently obtained from its use. The balance is decided, ceteris paribus, by the time preference and the other preferences of the market. If private individuals can only use but not own the land, the balance is destroyed, and the government has provided an impetus to excessive present use. Not only is the announced aim of conservation laws—to aid the future at the expense of the present—illegitimate, and the arguments in favor of it invalid, but compulsory conservation would not achieve even this goal. For the future is already provided for through present saving and investment. Conservation laws will indeed coerce greater investment in natural resources: using other resources to maintain renewable resources and forcing a greater inventory of stock in depletable resources. But total investment is determined by the time preferences of individuals, and these will not have changed. Conservation laws, then, do not really increase total provisions for the future; they merely shift investment from capital goods, buildings, etc., to natural resources. They thereby impose an inefficient and distorted investment pattern on the economy.
[I]f private individuals were to own all the lands and resources, then it would be to the owners’ interest to maximize the present value of each resource. Excessive depletion of the resource would lower its capital value on the market. Against the preservation of the capital value of the resource as a whole, the resource owner balances the income to be presently obtained from its use. The balance is decided, ceteris paribus, by the time preference and the other preferences of the market. If private individuals can only use but not own the land, the balance is destroyed, and the government has provided an impetus to excessive present use.
Not only is the announced aim of conservation laws—to aid the future at the expense of the present—illegitimate, and the arguments in favor of it invalid, but compulsory conservation would not achieve even this goal. For the future is already provided for through present saving and investment. Conservation laws will indeed coerce greater investment in natural resources: using other resources to maintain renewable resources and forcing a greater inventory of stock in depletable resources. But total investment is determined by the time preferences of individuals, and these will not have changed. Conservation laws, then, do not really increase total provisions for the future; they merely shift investment from capital goods, buildings, etc., to natural resources. They thereby impose an inefficient and distorted investment pattern on the economy.
Murray Rothbard, Power & Market
The free market conserves resources.
Most conservationist arguments evince almost no familiarity with economics. Many assume that entrepreneurs have no foresight and would blithely use natural resources only to find themselves some day suddenly without any property. Only the wise, providential State can foresee depletion. The absurdity of this argument is evident when we realize that the present value of the entrepreneur’s land is dependent on the expected future rents from his resources. Even if the entrepreneur himself should be unaccountably ignorant, the market will not be, and its valuation (i.e., the valuation of interested experts with money at stake) will tend to reflect its value accurately. In fact, it is the entrepreneur’s business to forecast, and he is rewarded for correct forecasting by profits. Will entrepreneurs on the market have less foresight than bureaucrats comfortably ensconced in their seizure of the taxpayers’ money?
— Murray Rothbard, Power & Market
Undercover reporters posing as “Earth Supply and Renewal” — group dedicated to digging holes and filling them back in, meet with Labor Bosses, NY Legislator, and former NY Assemblyman, who tell them how to secure funding for “Bullshit” Green jobs.
John Hutchings, member of the Broome County legislature, told the undercover reporters posing as “Earth Supply and Renewal” his opinion on taxpayer-funded grant contracts; “You know the Green Jobs — Green NY, between us, a lot of it is bullsh*t”. Anthony Tocci, business manager for Local 601, tells Earth Supply and Renewal “You just wanna(sic) get the money. Then you figure out afterwards” Former NY assemblyman Ron Tocci is also featured laughing about the irony of the company’s services: “One thing about it, it’s shovel ready.”
Behold the unholy convergence of the state’s monopoly on force, government-supported unionism, political corruption, the Keynesian broken-window fallacy, and the public’s willing naiveté about government green energy programs. Here’s the raw footage that’s free of all the obnoxious and unnecessary comedy bits and music in the edited piece above.
Two days ago, I explained the duplicitousness of politicians who, when faced with budget shortfalls, immediately threaten those services that are most legitimate in the eyes of the public in order to agitate them to support tax increases (see “Make It Hurt”). I was specifically discussing California, which mongered fear about cuts to public safety and education instead of the mile-long list of state agencies and programs that doubtlessly have far less public support.
As if on cue, that very day the California assembly approved funding for the $68 billion boondoggle known as “high speed rail.” Last night the California senate approved the same. (As far as I can tell, the vote breakdown seems to show overwhelming support by Democrats - both houses of the state legislature have Democratic super-majority. This probably has less to do with any ideological purity on the part of Republicans and more to do with being the minority party.). This is despite the fact that most Californians have no interest in more taxes, especially when it comes to the high speed rail boondoggle - most would prefer such a project to proceed using private (see: “non-coerced”) funds. And there’s good reason: “In order to meet its virtually impossible timeline, the project will have to spend $3.5 million per day, seven days a week, over the next five years, a spending rate that will easily make California high-speed rail the costliest per-diem transportation project in the history of the United States." Not to mention that even before these funds were approved, impropriety was well underway as those involved have been busy hiding their behind-the-scenes discussions on the specifics of the project and how the funds would be spent: "There’s nothing to be suspicious about when an agency under intense scrutiny for its unrealistic ridership and operational cost projections, currently under investigation by Congress and the Government Accountability Office and facing lawsuits from train opponents suddenly decides it’s time to purge all these silly old emails. It’s just a process!”
And, truly, it’s quite easy for California’s elected officials to ignore their constituents. For starters, the power-players’ concentrated benefits out-weigh the costs as they’re distributed among the populace. A given project is worth a lot more to a government contractor or union, for example, than it would to the average taxpayer. Therefore, the tax-consumers are more easily mobilized to support it than the taxpayers may be to stop it. In other words, if a project costs the average taxpayer $7/year but gains the tax-consumer $200,000/year - it’s easy to see that many taxpayers may not interrupt their schedules to campaign or vote against such a project if the costs outweigh the $7. The tax-consumer, on the other hand, is heavily incentivized to do what it takes to get the gravy-train, as it were, rolling.
Concerned about possible delays in state funding of high-speed rail, U.S. Transportation Secretary Ray LaHood told California leaders Thursday that the Legislature needs to send a signal that it is committed to the project by including money for it in the state budget to be approved next month.
LaHood traveled to Sacramento for meetings with Gov. Jerry Brown, legislative leaders and some lawmakers who are questioning whether to continue funding for the $68-billion project, for which the federal government has pledged $3.3 billion in matching funds.
"What I have said to them is, ‘We need a strong signal that you are committed to the money for the match, sooner rather than later. We can’t wait until the end of summer,’" LaHood recounted at a news conference following his meeting with state Senate leaders.
LaHood said he was “reassured” by Assembly Speaker John Perez (D-Los Angeles) and Senate President Darrell Steinberg (D-Sacramento) “that they are committed to high-speed rail and they are committed to making sure that California is able to provide the match that is needed.” …
LaHood’s message went beyond the leadership to the skeptics. “I wanted to be sure that I personally deliver the message that President Obama’s administration is committed to high-speed rail in California,” he added. “We have made a commitment of over $3 billion. We want to make sure that our partners here realize what is at stake.”
To a private investor, spending $68 billion you don’t have on a project that is sure to cost well above that to simply gain $3 is not very profitable (meaning, ultimately less valuable to the market/public than the costs to supply it) - but this is just a classic case of how people spend money that is not theirs. As I’ve explained, government spending is not only inefficient, but it is essentially incentivized to be so. After all, the gains to each of these legislators far out-weighs any out-of-pocket costs. To them and their cronies, it’s all up-side. So Obama’s bribe can simply be added to his long list of green energy investment success stories, alongside Solyndra, Beacon Power, Ener1, Solar Trust, Abound Solar, SoloPower, SunPower, Solar Power Project, and Nevada Geothermal Power (to be clear, those were all green energy companies you and I funder courtesy of Obama’s vision and grace, which have all subsequently failed).
California’s too broke to maintain education and public safety without more taxes, but apparently not so broke as to spend over four times the current record-breaking budget deficit on a project almost no one wants and few people will likely ever use.
This amount of money being thrown around is sure to keep countless special interests, corporate cronies, unions, bureaucrats, and politicians swimming in it. The rest of us will just be stuck with the bill.
My east coast vacation continues. And with the downpour outside, it was a perfect opportunity to catch up on internet reading and share some worthy links - there’s something here for everybody.
- With the bicentennial of the War of 1812 upon us, and “commemorations” already under way (I have to admit, there’s some pretty cool “Tall Ships” lined up at Penn’s Landing right now), it’s important to understand the truth about that wholly unnecessary war of imperialism (that led to the White House being torched).
- —> Justin Raimundo on 1812: The War Party’s First Success
- —> Jefferson Morley calls it America’s “first war of choice.” Charles Burris follows up with a few notes of expansion.
- Tom Engelhardt on secret kill lists and an imperial executive.
- Thomas DiLorenzo gives the latest update on the costs of Lincoln’s war.
- Bob Wenzel asks Is Ben Bernanke the New G. William Miller That Will Destroy the U.S Economy? And he follows up with How the Federal Reserve Manipulates Interest Rates and the Money Supply (definitely read this one).
- From Michael Rozeff: Why the FED’s Zero Interest Rate Policy Hurts the Economy. Also from Rozeff: “a great deal of economic hardship and suffering today is directly related to and caused by improper banking practices and a flawed monetary system created by bad government laws.”
- Peter Schiff explains that savings and investment - from individuals, not government - is the key to progress.
- The Obama Auto Bailout was a payoff to Labor Unions - at Taxpayer expense.
- Tom Woods responds to a critic who claims, of all things, that Austrians are shills for bankers.
- David Gordon reviews Krugman’s new book, saves you the trouble.
- Pete Earle on Krugman and Diocletian (thought I had already posted this one once before, but couldn’t find it).
- Jonathan Chait (and Bob Wenzel) on Romney’s Big Fat Wet Kiss to Keynesian Economics.
- The Daily Bell explains that a glut of 40 million unused homes is not a “market failure.”
- “[T]his is not a plutocracy of honest businessmen and women. It is a crony capitalist plutocracy linking politicians, bureaucrats, public union leaders, trial lawyers, Wall Street, and many other government dominated and directed industries. It is a crony capitalism that has been created and defended by the very economic policy ideas which [Keynesians espouse].”
- Cops receive special treatment, even when they commit murder:
Stanley Gibson, a disabled Gulf War veteran, was murdered in a Las Vegas parking lot last December 12. He was shot seven times in the back of the head, without provocation, by a stranger wielding an AR-15 rifle. The killer, 34-year-old Jesus Arevalo, remains at large and is easy to find: He’s an officer with the Las Vegas Metro Police.
Gibson was unarmed. He was not a criminal suspect and posed no threat to anybody. His killing was a clear and unmistakable case of criminal homicide. Yet Arevalo has not been charged with a crime. He is on an extended vacation called “administrative leave,” during which he continues to collect his taxpayer-funded salary and benefits.
- Video Shows Cops Tasing a Restrained Woman In Accordance With a Policy That May Not Exist.
- Dear Police: Please Stop Tazing Pregnant Women.
- Cellphone Video Shows Four Cops Beating Philly Motorist Charged with Aggravated Assault and Resisting Arrest
- There’s no way you won’t be angry after reading this account of an innocent young man being forcefully catheterized.
- Cop stops motorcyclist without Cause, later arrests him for “obstructed license plate” (which, undoubtedly, is a lie). Helmet cam reveals abundance of assholiness on display, and moreover, the cop actually gives the real reason for the stop: “The reason you’re being pulled over is because I’m gonna take your camera and we’re gonna use it as evidence of the crimes that have been committed by other bikers.” So arrest biker in order to confiscate his video camera, then comb through footage of possible violations of others. Sweet.
- “Informal, corrupt deference to cops accused of criminal misconduct is [bad enough]. But the idea that the government agents in charge of enforcing the law would get an official, codified set of rights above and beyond those afforded to the rest of us is really an affront to everything a democratic society is supposed to represent.”
- Austin Man Facing 10 Years in Prison After Photographing Cops Making Arrest.
- Law Lets New York Cops Keep Their Misconduct Secret.
- Eric Peters on Speeding Praetorians Above the Law.
- NYPD, like every other armed gang like it, employs a strict anti-snitching culture.
- When in Doubt, Handcuff Everybody.
- Seventy-Two Cops Were Shot and Killed in the Entire U.S. in 2011; LA County Cops Alone Shot and Killed 54 Suspects the Same Year.
- Allan Stevo on why it’s important to have A Healthy Disrespect of the Police.
- Surprise, surprise: No Charges for Miami Cop who Shot Unarmed Motorist.
- When even the union-dominated California Senate says enough is enough (regarding police secrecy), there may indeed be reason for optimism.
- Texas Police Chief Accused of Shooting Two Dogs and a House.
- Don Boudreaux: “industrial capitalism is history’s greatest anti-pollutant.”
- Free market environmentalists or enviropreneurs are the environment’s best bet, not government.
- Doug French: Private Property = Preservation.
- “[F]ree trade and innovation could help alleviate the suffering of the third world and improve the environment, if only people could be convinced these “unsexy” ideas were of greater benefit than sorting the glass and plastic in their garbage.”
- The EPA epitomizes stupid, tyrannical bureaucracy.
- Reason actually has a short piece on leftist delusions about Obama, with 4 Positions Obama Supporters Attribute to the President That He Doesn’t Actually Hold. (The four being 1. Barack Obama will end the war on drugs, eventually, 2. Obama’s support for gay marriage is groundbreaking, 3. Barack Obama’s immigration policies are compassionate and humane, and 4. Barack Obama’s foreign policy is not as destructive as George W. Bush’s was (or Mitt Romney’s would be).)
- Karel Beckman on The False Promise of Democracy (Related: my post on The Illegitimacy of Democracy)
- A Modern Timeline of Leftists Claiming That Opposition to Obama = Racism
- Kevin Gutzman on The Myth of ‘Executive Privilege’.
- An interesting poll reveals that pretty much everyone in the Eurozone thinks Germany “works hardest” (except, naturally, the Greeks, who have demonstrated how far up their own asses they like to store their heads) and the “least corrupt.”
- Stephan Kinsella points out some leftist hypocrisy on minimum wage - they understand the argument, but only when it suits them.
- Here’s one business that knows how to cater to customers’ interests: Comcast Refuses to Help Copyright Holders Sue Its Subscribers.
LA Bans The Plastic Bag
Council members stood by the ban, despite being confronted with evidence that bag bans have no discernible effect on the health of the environment and make up less than 1 percent of California’s waste stream. …
Reason contributor Jay Beeber points out that a similar ban in San Francisco failed to reduce the small number of plastic bags actually littering the street.
As the video notes: plastic bags have an 80% re-use rate and are 100% recyclable - credentials every watermelon councilcritter would be proud of. Further, the average consumer was not asking for this ban (or, to be fair, extra charge).
Banning extra large soda containers on one coast, banning plastic bags on this coast - these nanny staters believe societal perfection is only a few laws away…
[I]t is simply not true that military action is necessary to “secure” global oil supplies. Take the worst-case scenario: a foreign, oil-rich regime that is currently a U.S. ally falls into the hands of a group that despises the U.S. government. What happens?
Well, if the hardliners in the new regime want to make a symbolic gesture, they might cut off oil exports to the U.S. (This is what Hugo Chavez threatened to do a few years ago, though note that he didn’t actually follow through.) Yet since oil is a very fungible commodity, all that would end up happening is a rearrangement of global oil shipments. Specifically, the new regime would ship its oil to countries other than the U.S., while other oil producers would shift their own exports away from these neutral destinations, and focus them more heavily on the United States, to make up for the gap. Oil is not perfectly fungible — refineries have to be calibrated to handle different types of crude — but our hypothetical regime wouldn’t be able to inflict too much damage just from embargoing the United States.
If the hypothetical regime really wanted to hurt U.S. motorists, it would have to renounce exports altogether. In this case, the world as a whole would be starved for oil, and crude prices would rise. Yet the pain wouldn’t be isolated in the U.S.; every oil consumer would suffer. More to the point, the most pain would be felt by the unfriendly regime itself. By refusing to sell its oil abroad, the regime would be cutting off its main source of revenue. Think of it this way: what’s the point of taking over the government apparatus in an autocratic oil-rich nation, if not to pocket the oil revenues?
These musings aren’t hypothetical. In the real world, what do the U.S. government and its allies do when they want to punish a Middle Eastern regime? Why, they try to prevent those regimes from selling their oil by imposing sanctions. This proves that, at least from a national-security standpoint, preventing Iran, say, from selling its oil inflicts more harm on the Iranians than it does on Americans.
Don’t misunderstand, I fully concede that multinational oil companies often work hand-in-glove with governments when it comes to military action in the Middle East. But my point is, the “wars over oil” are over who shall pocket the money from oil sales, notwhether it should be sold at all. And of course, the direct result of the various bombing campaigns and so forth is to reduce the world output of oil in the short run, raising prices. Whether it was hostilities with Iraq, Libya, or Iran, Western military operations caused temporary interruptions in exports and led to higher prices.
It is silly to worry about hostile regimes hoarding their oil to spite the Yankees. Yet even if this were a valid fear, the standard solutions make little sense. If indeed American oil consumption is currently being subsidized by U.S. military operations, then the solution is to stop those military operations. Let those foreign regimes cut off their supply of oil to the U.S., so that prices rise and American motorists realize they should switch to electric cars, or natural-gas-powered buses, or whatever the efficient response would be. …
The free market has futures and other derivatives markets to help anticipate supply and price volatility. All things considered, if it really makes more economic sense for Americans to begin a rapid shift away from gasoline-powered vehicles, then market forces will produce that result. If one of the “distortions” in this framework is massive U.S. military expenditures, then the most obvious solution is to cut those expenditures, rather than give the feds even more money and power to intervene in the energy sector.
Seeming public apathy over climate change is often attributed to a deficit in comprehension. The public knows too little science, it is claimed, to understand the evidence or avoid being misled . Widespread limits on technical reasoning aggravate the problem by forcing citizens to use unreliable cognitive heuristics to assess risk . We conducted a study to test this account and found no support for it. Members of the public with the highest degrees of science literacy and technical reasoning capacity were not the most concerned about climate change. Rather, they were the ones among whom cultural polarization was greatest.
This result suggests that public divisions over climate change stem not from the public’s incomprehension of science but from a distinctive conflict of interest: between the personal interest individuals have in forming beliefs in line with those held by others with whom they share close ties and the collective one they all share in making use of the best available science to promote common welfare.
Sounds about right. Signaling, signaling, signaling. A sane analysis of projected climate changes would include potential benefits of such changes (and the potential costs of state interventionism great enough to effectively combat them) and would factor in the epistemic difficulties of prediction and the acknowledge the normative value judgements (e.g. intergenerational utility discounting), so why are economists prettymuch the only people even considering a cost-benefit analysis here? Because [of] signaling. That’s why. (and, of course, vested interests and the perverse incentive structure of state grants for research).