Monday, September 24, 2012

When Costs Aren't

From the standpoint of an economist, the logic of global warming is  straightforward. There are costs to letting it happen, there are costs to preventing it, and by comparing the two we decide what, if anything, ought to be done. I am fairly sure, however, that  many of those who are sure we should be doing something about it do not see the question that way. What I see as costs, they see as benefits.

Reduced energy use is a cost if you approve of other people being able to do what they want, which includes choosing to live in the suburbs, drive cars instead of taking mass transit, heat or air condition their homes to what they find a comfortable temperature. But it is a benefit if you believe that you know better than other people how they should best live their lives—know that a European style inner city with a dense population, local stores, local jobs, mass transit instead of private cars, is a better, more human, lifestyle than living in the anonymous suburbs, commuting to work, knowing few of your neighbors. It is an attitude that I associate with an old song about little houses made of ticky-tacky—meaning houses the singer didn't like and was therefore confident that other people shouldn't be living in, occupied by people whose life style she thought she knew and was confident she disapproved of. A very arrogant, and very human, attitude.

There are least three obvious candidates for reducing global warming that do not require a reduction in energy use. One is nuclear power—a well established, if somewhat expensive, technology that produces no CO2 and can be expanded more or less without limit. One is natural gas, which produces considerably less carbon dioxide per unit of power than coal, for which it is the obvious substitute. Fracking has now sharply lowered the price of natural gas, with the result that U.S. output of CO2 has actually fallen. The third and more speculative candidate is geoengineering—one or another of several approaches that have been suggested for cooling earth without reducing CO2 output.

One would expect that someone seriously worried about global warming would take an interest in all three alternatives. Of course, in each case, there are arguments against as well as arguments for. But if one believes that global warming is a very serious problem and alternative solutions are costly, one ought to be biased in favor of each of them, inclined to look for arguments for, not arguments against.

In my experience, that is not how people who campaign against global warming act. They are less likely than others, not more, to support nuclear power, to approve of fracking as a way of producing lots of cheap natural gas, or to be in favor of experiments to see whether one or another version of geoengineering will work. That makes little sense if they see a reduction in power consumption as a cost, but quite a lot of sense if they see it as a benefit.

I have focused on global warming, but the pattern exists in other contexts and across the political spectrum. When 9/11 happened, a lot of the people who insisted that the threat of terrorism now made it unfortunately necessary to restrict individual privacy and civil liberties in a variety of ways were people who were in favor of the same policies before 9/11.

The general approach is perhaps best summed up in a quote attributed to Rahm Emanuel, back when he was working for Obama: 
 You never let a serious crisis go to waste. And what I mean by that it's an opportunity to do things you think you could not do before.
The argument for sharply increasing federal spending and doing it with borrowed money was that it was an emergency measure made necessary by the economic crisis. For Emanuel, and presumably his boss, it was an opportunity to do things they would have wanted to do whether or not there was a crisis. The argument for using regulation or carbon taxes to reduce the output of carbon dioxide is that it is made necessary by the threat of global warming. For many of those who make that argument, it is an opportunity to make other people live the way those people think they should.

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23 Comments:

At 5:36 PM, September 24, 2012, Anonymous Martin said...

David, quick question:

1. Correct me if I am wrong, but it seems that Total Federal Expenditure has remained remarkably constant under Obama, and dropped as a fraction of GDP. Am I missing something here or?

http://research.stlouisfed.org/fredgraph.png?g=b0X


 
At 5:54 PM, September 24, 2012, Anonymous Anonymous said...

As with all your comments, I am again in fervent agreement.

I currently find myself in New Zealand, so I have to make my inferrences from that sample.

Greenpeace in New Zealand (the militant version of the International association), makes the observation that:

"Nuclear power is often cited as a solution to climate change, but it would just result in swapping one environmental nightmare for another. Nuclear is never safe. The deadly legacy of nuclear power will be left for future generations to deal with in the form of radioactive waste that remains dangerous for hundreds of thousands of years. There is still no solution to the nuclear waste threat."

Here:
http://www.greenpeace.org/new-zealand/en/campaigns/nuclear/nuclear-free-nz/

- I can tell you that it is probably the prevailing line of thought in this place;

- Chernobyl is frequently cited (also never forget a disaster, regardless of its relevance?)

So in this part of the Pacific, I fear that there will be continuous campaigns about the "benefits" of being poorer, having less and living like cavemen. This is of course all to respond to a 300 year forward looking forecast run in Excel.

 
At 9:16 PM, September 24, 2012, Blogger Glen Whitman said...

"Correct me if I am wrong, but it seems that Total Federal Expenditure has remained remarkably constant under Obama, and dropped as a fraction of GDP. Am I missing something here or?"

Yes, total federal expenditures have been fairly constant under Obama -- but at a level notably higher than previous administrations. Spending jumped dramatically in 2009 and then stayed there. At least superficially, this is evidence in favor of David's position that the stimulus consisted of things the administration wanted to fund anyway, and therefore they've continued funding them.

It's also true that federal expenditures fell as a percentage of GDP after Obama's first year; that follows mathematically from more-or-less constant spending (numerator) and a rising GDP (denominator). But all that means is that late-Obama has done slightly better than first-year-Obama, not that Obama has done better than previous administrations. Spending as a percentage of GDP has ranged from 24.1% to 25.2% under Obama. Before Obama, it had hovered around 20% since the 1970s, and the last time it had exceeded 23% was 1983.

Source: Tables 1.1 and 1.2 here: http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/hist.pdf

 
At 11:17 PM, September 24, 2012, OpenID dmorr said...

You talk a lot about what people who are worried about global warming do or don't do in this space. As someone who has some expertise and is involved with people who really are actually working to try to abate global warming, your comments here and in the past seem to me very much like straw man arguments.

People at places like ClimateWorks who are really working on the problem have and are continuing to look into all kinds of solutions. Their conclusion, after tons of work, is that you need to hit all phases of the problem to make real progress. You need cleaner energy production (including nuclear where it makes sense, though it's pricey so it often doesn't), natural gas, and traditional renewables, but you also need greater efficiency from appliances, you need higher gas mileage (even though you give some emissions back due to demand elasticity from more efficient cars), and you need reduced energy consumption from consumers where you can get it.

The environmentalists working on climate warming are distressed at the overreaction to Fukushima, because Japan and now Germany are shutting down perfectly safe nuclear and burning fossil fuels, and mostly not natural gas because outside of the US it's expensive. And I've been present for extensive discussion of fracking and it's various and ramified issues, and the conclusion was that it's here to stay, it's probably a net positive, but that efforts should be made to try to improve the state of the art of fracking technology to fit other environmental goals (e.g. clean water).

It's true that geoengineering, but the potential for unintended consequences seems extraordinarily large, and the fundamental research is quite far from anything useful in the near term.

So in summary, we in the climate world do in fact consider all the issues you talk about, seriously and in depth. Perhaps the problem is that you aren't talking to actual experts in the field, but just people you happen to meet? Or perhaps it seems, when you're not part of the environmental community, to be talking in one incoherent voice, when in fact there are many people and groups with many issues, some of which are in conflict with one another. For instance, for reasons I don't really understand, nuclear is unpopular in the environmentalist crowd. But nuclear is generally thought to be useful for the folks working on climate particularly.

While I think there are probably many interesting criticisms you could make of climate work, complaining that they're not working on a bunch of things that they actually do work on seems to me to be a bit underinformed.

 
At 6:53 AM, September 25, 2012, Anonymous Simon said...

dmorr, David Friedman refers to "people who campaign against global warming." You reply by lauding the evenhanded efforts of "experts in the field." Then you concede that

"...for reasons I don't really understand, nuclear is unpopular in the environmentalist crowd."

Maybe this is part of what David is talking about? I think this post is a contribution towards understanding why, mysteriously, nuclear is unpopular in the environmentalist crowd.

 
At 7:54 AM, September 25, 2012, Anonymous Martin said...

Hey Glen,

thanks for your answer; I was always under the impression that most of the spending increase was due to automatic stabilizers kicking in?

Further the relative increase seems to be mostly due to a denominator effect rather than a numerator effect.

Also if you look at the relative increase, spending under Obama is now lower than under Bush at the end as a fraction of GDP.

As I look at the graph it looks that Obama shrank the relative size of government since Bush.

 
At 7:56 AM, September 25, 2012, Blogger jimbino said...

David,

It never ceases to amaze me that you continue to ignore the most obvious cure to global warming and countless other problems--and one that costs nothing:

STOP THE BREEDING

I'll be damned if I curtail my lifestyle options on account of pollution caused by the continued wanton breeding of others, who are more than doubling their own load on the planet by merely breeding.

I am child-free, having long ago voted not to pollute the planet with my progeny. It may be that you are averse to the realization that curtailing the breeding would solve lots of problems because you've already doubled your own footprint by breeding.

When we run out of food on Everest, we'll eat the fat guy first.

 
At 8:44 AM, September 25, 2012, Anonymous Anonymous said...

In terms of the previous comment, more people means more solutions. Trying to curb population growth through politics is not what we need to do, as long as the responsibilty of paying for children is with those who bear them, and we stop socializing society through nationalized education, health care, transportation, housing, food, work, and everything else. Because if we have to pay for everyone else, population becomes a tradegy of the commons where having fewer kids as compared to your neighbor means that you're paying more to them than they have to pay to you, and so you would lose out.

In terms of energy consumption, the zero sum game between energy and CO2 exists for several reasons. David mentioned the lack of substitutes (non-CO2 producing energy sources), but also, isn't it a legal issue? If the cost of CO2 was internalized through litigation, those who produced it could no longer neglect something (which depending on the legitimacy of the suit) is deleterius to others. Why couldn't a whole group of people who have a lot to lose from global warming (they live on the coast) just get together and sue a corporation with a large carbon footprint on those grounds. The precedent would lead to further reduction in CO2 to the extent it was efficient.

 
At 9:46 AM, September 25, 2012, Blogger Glen Whitman said...

Martin: "thanks for your answer; I was always under the impression that most of the spending increase was due to automatic stabilizers kicking in?"

Auto-stabilizers are surely part of the story, but I don't know how much.

"Further the relative increase seems to be mostly due to a denominator effect rather than a numerator effect."

No, because if you look at total outlays (Table 1.1 in the link I gave), you'll see they rose dramatically in 2009 and pretty much stayed there. So clearly the numerator (outlays) is a big part of the story.

"Also if you look at the relative increase, spending under Obama is now lower than under Bush at the end as a fraction of GDP."

Not true. Look at the actual figures, not the confusing graph. Here they are:

2007: 19.7%
2008: 20.8%
2009: 25.2%
2010: 24.1%
2011: 24.1%

So as a fraction of GDP, federal spending is now more than 3 percentage points higher than at the end of Bush.

"As I look at the graph it looks that Obama shrank the relative size of government since Bush."

The graph you linked can't tell you that, because the graph starts with 2009. To be sure, 2009 reflects aspects of both Bush and Obama. But there's definitely no "pure Bush" in the graph to compare Obama against. For the real story, look at the figures above.

 
At 10:14 AM, September 25, 2012, Anonymous Martin said...

Glen, just for the record, Obama was inaugurated 20th of January 2009. The graph starts 1st of January 2009 and continues to the latest available datapoint.

At the end of Bush therefore you can see that it was above 25,2% and now it is below 25,2%.

As for the denominator and numerator effect, I did a quick google search as I recall Krugman writing something on this in the past: http://krugman.blogs.nytimes.com/2011/04/25/john-taylor-and-the-zombies/

I think though David might have talked about the composition of the stimulus rather than a permanent increase in Federal Expenditure, but I am not entirely sure.



 
At 1:58 PM, September 25, 2012, Blogger jimbino said...

dmorr says:

"People at places like ClimateWorks who are really working on the problem have and are continuing to look into all kinds of solutions."

I'm sorry dmoor, but I can't find where any of your ClimateWorks folks or others have considered the solution that involves putting a stop to the breeding.

 
At 6:12 PM, September 25, 2012, Blogger John David Galt said...

Your first paragraph is way too generous to the perpetrators of the fraud that is the myth of GW/CC.

You need to read Montford's The Hockey Stick Illusion, which spells out who did it, why, and how.

Like the rest of the environmental movement for its entire history, the GW/CC myth is nothing but a front for people who want to destroy the rich world for idiotic religious reasons. Nearly all the "leading lights" of the movement have admitted this agenda; see green-agenda.com for proof.

 
At 7:14 PM, September 25, 2012, Blogger SheetWise said...

The comments on population reminded me of a sobering post by Bryan Caplan --

After the Holocaust, you'd think that anyone muttering, "There are too many people running around," would be an instant pariah. But that's not how things worked out.

 
At 5:34 AM, September 26, 2012, OpenID hudebnik said...

Reduced energy use is a cost if you approve of other people being able to do what they want, which includes choosing to live in the suburbs, drive cars instead of taking mass transit, heat or air condition their homes to what they find a comfortable temperature. But it is a benefit if you believe that you know better than other people how they should best live their lives...

David, you're poisoning the well here, attributing positive motives right up front to people with whose conclusions you agree and negative motives to the others. You're also conflating consumption of energy with consumption of the things that currently consume a lot of energy (cars, houses, etc.)

Hypothetically, if we could drive the same cars to the same houses and spend 10% less energy doing it, nobody would be discomfited in the least, except people in the business of selling energy (whose product would face less demand and therefore be less profitable). So the cost is not associated with reduced energy use, but reduced "material standard of living", which is correlated but not identical.

Now let's look at the other side. There may be a few people who would say reduced material standard of living is a benefit, out of the kind of moralizing impulse you describe, but not many. A few others might say reduced energy consumption is a benefit, for whatever reason. But there's a much stronger argument that reduced consumption of non-renewable and/or polluting sources of energy is a benefit. Consumption of polluting sources of energy (such as nuclear and all fossil fuels, although different sources pollute to different extents and in different ways) carries a massive externalized cost. And consumption of non-renewable energy sources (even if non-polluting) brings society closer to the point of running out of these things, which (if we're addicted to them and don't have alternatives in place) will cause considerable social turmoil and sudden economic distress; reducing the rate of such consumption could be viewed as an externalized benefit by "smoothing the curve" and avoiding that turmoil.

In other words, where you say reduced energy consumption is obviously a cost to right-thinking people, the actual cost comes from reducing material standard of living instead. Where you say reduced energy consumption is a benefit to nosy dictators-of-other-people's-lives, the actual benefit comes from reducing non-renewable and polluting sources of energy instead. There's a substantial gap between those two poles where people are likely to agree on what's beneficial and what's costly.

 
At 5:51 AM, September 26, 2012, OpenID hudebnik said...

2007: 19.7%
2008: 20.8%
2009: 25.2%
2010: 24.1%
2011: 24.1%

So as a fraction of GDP, federal spending is now more than 3 percentage points higher than at the end of Bush.


Are these January-to-December numbers, or fiscal-year numbers, or what? In either case, I have a hard time calling 2008 "the end of Bush" for purposes of comparison. In December 2008, things were going rapidly downhill. Much of the money actually spent in 2009 (e.g. TARP and some of the other bailouts) was authorized in 2008 under Bush. I'm not going to give Obama all the credit for the economy bottoming out in 2009 and heading back (slowly!) towards health, but neither does he deserve all the blame for economic trends and decisions that were already in place before he took office.

 
At 7:49 AM, September 26, 2012, Blogger neil craig said...

Of course if the costs of fighting CAGW are negative, at least in the view of ecofascists who want to order us about, or government bureaucrats who want to exopand their bureaucracies by ordering is about then it doesn't really matter if the "problem" of CAGW is a non-existent fraud.

Indeed, for those who can be called eco-Nazis because they consider human life disposable, it doesn't really matter if the "cost" of CO2 rise itself, through faster plant growth & more clement temperature, is strongly negative.

I agree with you that nuclear power, being CO2 free, is a good touchstone to differentiate thaose, if any, who actually believe in the warming scare & those who know perfectly well that it is a lie.

 
At 5:17 PM, September 26, 2012, Blogger David Friedman said...

Hudebnik:

1. I'm not claiming that everyone who supports action against global warming has the characteristics I described, but ..

2. Your explanation does not explain the hostility to geoengineering proposals, which has included opposition to experiments to see if such a proposal would work. And even if people are worried about pollution from nuclear reactors, one would expect people seriously worried about global warming to be more friendly to nuclear than people not so worried--the opposite of the pattern I observe.

 
At 12:15 PM, September 29, 2012, Anonymous rowlind said...

im so agree like david said

 
At 9:25 AM, September 30, 2012, OpenID hudebnik said...

Your explanation does not explain the hostility to geoengineering proposals, which has included opposition to experiments to see if such a proposal would work.

You're right, it doesn't. I'm not very familiar with the geoengineering proposals you mention and who's reacted to them how.

And even if people are worried about pollution from nuclear reactors, one would expect people seriously worried about global warming to be more friendly to nuclear than people not so worried--the opposite of the pattern I observe.

Yes, given two people equally worried about nuclear pollution, one would expect the one more worried about global warming to be more favorable to nuclear power. But what if those two concerns were closely correlated in the population? You'd have a hard time finding two people equally worried about nuclear pollution and differently worried about global warming, so you wouldn't see that pattern.

And of course, those two concerns are closely correlated in the population, as we all know.

 
At 5:19 AM, October 02, 2012, Anonymous Simon said...

Another pair of concerns that seem to me correlated in the population are global warming and peak oil. But surely an increased probability of one of the scenarios should mean a lower probability of the other.

 
At 7:25 AM, October 04, 2012, Blogger Jim Oliver said...

There is a 4th alternative that is removal of co2 from the air through biochar, enhanced weathering or other means.

 
At 9:46 AM, October 04, 2012, Anonymous Peter said...

I see your point, but you could argue that environmentalists are simply consistently supporting the best solution for the environment, which is consumption reduction.

To make the point I think you're aiming at, you'd want to look at non-polluting renewables. My gut is they do indeed like power, just not polluting power.

 
At 9:31 AM, October 20, 2012, Blogger Chris Wegener said...

Interesting Points.
I support nuclear power while understanding the issues and drawbacks. Hopefully Nuclear Fusion will address those issues in the future. Geoengineering is one of those classic human "solutions" that will inevitably have undesirable unanticipated consequences we are not smart enough to foresee.
Neither will allow people to continue live in sprawling suburbs and commute long distances in large vehicles. That lifestyle choice is simply not sustainable no matter haow you feel about it.

Regards,
Chris

 

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