Tuesday, March 20, 2007

Nuclear Power and Global Warming

In an earlier post I suggested that one reason for skepticism about talk of catastrophic global warming was that it was mostly by people who were using global warming as an argument for things they wanted to do anyway, in particular environmentalists with a shiny new argument.

There is a very simple test of this claim. Nuclear power is the one energy source that does not produce greenhouse gases and, using current technology, can be expanded over the next couple of decades to replace many, arguably almost all, uses of fossil fuel. So anyone who believes that the great threat facing us, the threat we should be willing to pay large costs to deal with, is global warming due to greenhouse gases should be strongly inclined to favor nuclear power.

On the other hand, someone who is trumpeting global warming because he likes the policies advocated to deal with it: public transportation instead of automobiles, "smart growth" instead of "urban sprawl," limits to population and the like, has two reasons to oppose nuclear power. The first is that the environmental movement has long regarded nuclear power as a quintessential evil. The second is that if nuclear power makes it possible for us to continue expanding our current lifestyle while avoiding the dangers of global warming, it eliminates the argument he wants to use to persuade us to reform. We get to continue sinning without being sent to (anthropogenic) hell.

I am sure there are people who are both seriously worried about global warming and in favor of nuclear power. But how many of them are there? How many high profile spokesmen or organizations have taken that position?

While I'm telling companies how to run their businesses ...

I have a simple suggestion for airline companies, designed to cut five minutes or so off every trip. Instead of boarding rows 20-40, line up passengers in order of row number. To simplify matters, have the numbers painted on the wall or the floor. Before boarding we all go to the squares with our row numbers on them. Then we file on board in order, everyone gets to his row, and everyone starts putting luggage up, sliding into seats, etc.

There are probably still more efficient versions of this, but the one I have just described seems entirely workable and would result in a significant reduction in the time to load a plane.

Wednesday, March 14, 2007

Global Warming, Carbon Taxes, and Public Choice

In earlier posts I argued that global warming is probably real, probably anthropogenic, and will probably impose real but not catastrophic, costs. This raises an obvious question: What, if anything, should we do about it?

If I were dictator of the world, the answer would be fairly obvious. Impose a tax on activities that create greenhouse gases designed to reflect the marginal cost they create. That's the standard economic solution, due to Pigou, for problems of negative externalities. Since the tax brings in additional revenue, combine it with a corresponding reduction in whatever taxes currently have the largest adverse effects.

I do not, in fact, support such carbon taxes. The reason is that I do not believe that, if imposed, they would fit the pattern described above.

To begin with, they would not be based on a realistic estimate of the marginal costs; insofar as they would be based on anything, judging by the ongoing arguments over Kyoto and similar proposals, they would be based on some target level of emissions. If, as seems likely, the level of taxes needed to substantially slow global warming was much higher than the marginal damage done, the result would be to buy lower temperature at a price much higher than it was worth, making the net situation worse, not better.

I offer as further evidence the arguments I have been having over at Brian's "Backseat Driving" blog with people who are absolutely convinced that global warming would have catastrophic consequences but curiously unwilling to support that conviction with anything more than handwaving arguments. Judging by casual observation, they are the norm, not the outliers, of their movement.

Furthermore, I think it unlikely that income from carbon taxes would be used to reduce other taxes. The clear evidence here is the repeated pattern with regard to wars. New taxes are introduced as an emergency measure for a war, retained long after the war is over; there is always some politically profitable way to spend the money. In the case of carbon taxes, I am confident that they would be used as an additional source of revenue, perhaps with the argument that the money was needed to ameliorate the effects of whatever global warming continued to occur.

Finally, I suspect that widespread acceptance of the catastrophist view of global warming would result in quite a lot more than carbon taxes. It would provide a new justification for politically motivated interferences in a wide range of human activities. Anyone who questioned such policies would be labelled a denialist, accused of wanting Bangladeshis to drown and African children to starve. Again, look at the ongoing exchanges on Brian's blog.

Hence I conclude that serious efforts to combat global warming would have large costs, costs justified only if there were good reason to be confident that not taking such efforts would have catastrophic effects.

For the benefit of Brian and his friends, I think it might be useful to clarify the relevant terminology, as deduced from their and my usage:

Denialist: (1) Someone who refuses to accept the current scientific evidence on the existence and causes of global warming.

Denialist: (2) Someone who refuses to reject the current scientific evidence on the likely future scale of the effects of global warming.

Catastrophist: Someone who rejects the current scientific evidence on the likely future scale of the effects of global warming, preferring to believe that sea level will go up much more than current estimates predict, and that global warming will result in large increases in frequency, violence, or both of hurricanes as well as other large climatic changes, all of them adverse.

The Restaurant Puzzle

A restaurant provides me with two different products: Food and a place to eat it. Both are valuable to me, both are costly to the restaurant. Yet restaurants price only the food. The table is free, however long you use it. Why?

To see the puzzle, consider how a restaurant designed by an economist might operate. At each table there is a clock; it starts running when you sit down and the waiter shows up to take your order. When you get your bill, one of the items is table rental, proportional to the number of seats at the table and the length of time for which you used them.

The advantage of this approach is that it can be used to give diners the right incentives on both margins. Diners who want to spend an hour and a half in conversation are free to do so, with no dirty looks from the waiters—but they will pay for the privilege. Under current circumstances they are imposing a cost on the restaurant and the patrons waiting to be served and, social pressure aside, have no incentive to take account of that cost in deciding whether or not to move the conversation to some less costly space, perhaps someone's living room.

Since the restaurant is recovering part of its cost from table rentals, the price of its food can be correspondingly lower; patrons will not be discouraged from getting soup or salad by the fact that their price is higher than the actual cost of producing them by the full amount needed to pay the restaurant's fixed costs. Economist readers should be able to fill in the argument for themselves. It is the usual argument in favor of using prices as incentives to make it in the interest of individuals to take proper account of the costs and benefits of their choices.

I have, of course, oversimplified a bit. When a restaurant is half empty, the marginal cost to it of my sitting at the table is essentially zero. So a restaurant run its table clocks only during the hours when it expects to be operating at capacity. That will give diners who like leisurely conversation an incentive to try to fit their conversational meals into the times when they do not impose costs on others.

It's easy to imagine special reasons why a restaurant would not adopt such a policy. Perhaps it almost never operates at capacity. Perhaps the nuisance of keeping track of table time is greater than the gains. Perhaps a clock at the table would interfere with the aesthetic experience of fine dining for its patrons.

Each of these reasons would apply to only some restaurants. So we would expect to observe a world in which some restaurants priced only the food, some priced only the table and gave away the food—all you can eat buffets come close, although they charge a fixed price for the table, not a price per minute—and some priced both. Yet, so far as I know, no restaurant follows what I have just argued is the most natural and obvious pricing strategy, separately pricing food and table rental.

Which is the puzzle.

Physics, Economics, Hurricanes and Mistakes

It recently occurred to me that one small part of the global warming discussion on this blog was interesting because it hinged on an error that I ought to have spotted twice, once as a physicist and once as an economist. In fact, someone else pointed it out.

The context was a discussion of whether global warming increased the frequency of hurricanes. Mike Huben pointed to an argument by a friend of his: that hurricanes were more common at times when sea water temperatures were higher. This was offered as evidence that global warming would increase hurricane frequency, in response to opinions by hurricane experts that there was so far no reason to think it did.

Consider first the physics. A hurricane is a heat engine; it converts thermal energy into work in the form of swirling winds. In principle one could use windmills to turn the hurricane into, say, electrical power, although I doubt it is a practical project. A heat engine that simply turns heat into work is a perpetual motion machine of the second kind, impossible because it violates the second law of thermodynamics. Actual heat engines take heat from a hot source, convert some of it into work, and dump some of it into a colder sink. They run not off the absolute temperature of the source but off the temperature difference between source and sink.

The ocean is a thermal buffer. Because its heat capacity is large it averages out atmospheric temperature changes; that's why San Jose, where I live, has a milder climate than Davis, where my sister lives. Seasons when the ocean is unusually warm are also times when the temperature difference between sea and air is unusually high, which fits the observation that they are when hurricanes are likely to be generated.

Global warming, however, as the second commenter pointed out, affects both air and sea. There is no reason to expect it to change the difference between air and sea temperature, so the evidence that warm seasons generate hurricanes is irrelevant to the question of whether global warming would.

Next consider the economics, where the argument is less rigorous but still suggestive. One of the most famous mistakes in mid-twentieth century economics was the Phillips Curve. A. W. Phillips observed, correctly, that higher rates of inflation historically correlated with lower rates of unemployment. Economists concluded that there existed a tradeoff, that if a country was willing to accept a somewhat higher rate of inflation it could get a somewhat lower rate of unemployment.

The actual relationship was not between inflation and unemployment but between unanticipated inflation and unemployment. For reasons I sketch in one chapter of my price theory text, when inflation is higher than expected unemployment is lower as a result. On average, high inflation correlates with higher than expected inflation, hence Phillips' statistical result. But if a country adopts a constant inflation rate of, say, 5%, pretty soon everyone anticipates a 5% inflation rate and unemployment goes back up to its long run level. Eventually, after observing the theoretical argument confirmed in the form of "stagflation," economists recognized the mistake; it is now generally agreed that the long run Phillips Curve is vertical, that anticipated inflation does not reduce unemployment.

The logic of the economic mistake and of the hurricane argument is identical. An effect that depends on a variable being higher or lower than its usual value is misidentified as an effect of its being absolutely high or low.

Incidentally, readers interested in the dispute over how large the costs of global warming are likely to be may want to take a look at the comments on the Blog "Backseat Driving," where I have been arguing with people. The argument started with a post quoting this blog and responding and went on to an interesting post about the ways in which our views are affected by our political bias. Brian, whose blog it is, seems like a nice fellow, somewhat more reasonable than his allies in the comment section, but none of them, so far, is willing to seriously consider the possibility that he might be wrong.